State Facing $600+ Million Structural Deficit

The Spending Affordability Committee, composed of members of the General Assembly and three public members, was joined by the Senate Budget and Taxation Committee and the House Appropriations and Ways and Means Committees yesterday for a briefing on the State’s fiscal 2014 budget picture.   This was the first of three meetings to be held by the Committee, which will result in a fiscal policy recommendation to the Governor and General Assembly for the fiscal 2014 State budget.

Although higher than expected revenues from the closeout of fiscal 2012 and projected revenues for fiscal 2013 would be sufficient to close the $247 million shortfall between fiscal 2013 and 2014, a structural deficit of $638 million stills exists.  As reported by the

Revenues are expected to increase, but “it appears we’re losing a little ground in our effort to resolve our structural deficit,” said Warren G. Deschenaux, director of policy analysts for DLS.

Overall, the state’s budget is expected to grow about 4 percent over fiscal 2013, with total expenditures topping out at $37.1 billion, according to DLS.

The $638 million structural deficit was a bit more than analysts had been expecting, Deschenaux said. Eliminating that deficit in fiscal 2014 would require limiting the increase in general fund growth to 1.3 percent, he said.

Also putting pressure on the State’s budget is the “fiscal cliff.”  As reported by the Baltimore Sun:

The “fiscal cliff” would be reached if Congress and the president can’t strike a deal by Jan. 1 to avert a series of budget cuts put in place by lawmakers and the Obama administration last year to resolve a standoff over the nation’s debt ceiling that threatened to put the nation into default. Through a process known as “sequestration,” automatic reductions would take effect — cutting both military and domestic spending. 

The Department of Legislative Services projects that Maryland would lose$117.6 million in Federal Funds if sequestration takes effect.  The economic impact would be much greater.

The Department of Legislative Services warned that if the scenario known as going over the “fiscal cliff” plays out, Maryland could lose 53,500 jobs during the budget year ending June 30 and 60,200 more next year.

The lawmakers briefed Wednesday expressed concern that the federal problems could throw the state’s plans into reverse at a time when the state economy seems to be improving and Maryland is coming tantalizingly close to closing a long-term revenue shortfall.

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