GBC’s Fry: Deficit drama

Don Fry Commentary on WYPR

Maryland’s process of dealing with a projected $1.4 billion budget deficit can be both overwhelming and confusing to many.

On one front, elected leaders are eying ways to increase revenue to close the state’s General Fund deficit. Options they are considering include slots legislation, increasing or expanding sales taxes, increasing personal and corporate income taxes, or some combination of the above.

On another front, state experts have issued a so-called “Doomsday” budget – a scenario for erasing the deficit without any tax increases. It includes a long list of spending cuts, with $645 million in reductions to local government aid being the largest category, followed by $435 million in state agency program cuts, and $246 million in cuts to the state employee workforce.

Recently Governor O’Malley announced $213 million in cuts, leaving more than a billion dollars in savings still to be identified if tax increases are to be avoided.

Predictably, the governor’s early cuts have drawn fire. State employees’ unions argue that the cuts will unreasonably diminish state services. Fiscal conservatives counter that the modest cuts are a token effort to provide political cover for tax increases.

Meanwhile, in addition to the General Fund deficit, experts report that Maryland’s transportation fund requires up to $600 million more revenue annually to fund new highways, transit and other transportation projects needed to accommodate Maryland’s economic growth. This is a core issue for the Greater Baltimore Committee and other business advocates.

It’s a lot to digest. But if, like me, you are concerned with maintaining a strong business climate, this summertime deficit-related drama is worth paying attention to. It’s how policy makers gauge constituent appetites and the political climate for various options to increase revenue or reduce spending.

One thing is certain. The deficit will be dealt with, either in a special session this fall or during the 2008 General Assembly session.

Since the specifics of the solution will affect us all, it would be much better to be informed and involved than to be surprised.

For the Regional Business Report, this is Don Fry, President and CEO of the Greater Baltimore Committee, for 88.1 WYPR, your NPR news station.

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