New State Budget Projections Sure to Frighten Counties

Maryland's Board of Revenue Estimates projected today that the state would take in $330 million less in revenue than originally forecasted. This is sure to trigger alarm bells in every county government in Maryland.

The Post and the Sun reported that the Board of Revenue Estimates, a panel comprised of Comptroller Peter Franchot, Treasurer Nancy Kopp and Budget Secretary Eloise Foster, said that the state's weakening economy was causing shortfalls in income and sales taxes. According to the Sun:

"The hard numbers that have been presented here today speak for themselves," state Comptroller Peter Franchot, who sits on the state's Board of Revenue Estimates, which reviews revenue forecasts, said Thursday.

"They merely confirm that the collapse of the U.S. subprime mortgage industry has taken a profound toll on consumer confidence and, for that matter, virtually every aspect of our nation's economy, and that the state of Maryland is not immune to these trends."

Franchot warned that the "storm clouds" were not receding: "The conditions are likely to get worse before they improve."

The Senate has already approved cuts of $280 million to the Governor's budget but the House has yet to act. Furthermore, no one is yet taking account of the Keynesian effect of spending cuts: their tendency to cause additional reductions of aggregate demand in the state's economy. Montgomery County's economy, for example, is already close to recession.

Anxiety in county governments was high prior to this announcement. MoCo faces a $297 million deficit. Prince George's County is projecting a $100 million deficit. Several counties expressed their worries to the Sun last week about possible cuts to state aid. MoCo's union leaders are becoming uneasy about whether the county will honor employee contracts. And these issues are sure to affect MoCo's County Council District 4 race, which is already contentious.

The only people who can take comfort from this situation are the politicians who lost back in 2006. They don't have to deal with these problems. As a matter of fact, many will probably blame the incumbents for them when they run again in 2010.