Despite projections of steady economic and revenue growth, Maryland legislators continue to grapple with a projected long-term structural deficit. Ongoing general fund revenues are expected to grow 25 percent between fiscal years (FY) 2006 and 2011 while ongoing spending will grow 41 percent over the same period. Despite an estimated $1.3 billion surplus in FY 2006, annual deficits loom in the near future and will grow rapidly, approaching 10 percent of general fund revenue by FY 2011. The cumulative gap between revenues and spending will exceed $5 billion over the next five years.

With current revenue collections exceeding projections, lawmakers may perceive an opportunity for the state to “grow” out of its structural imbalance and thus avoid any politically unpopular policy decisions. Given current levels of taxation, Maryland total personal income would have to grow more than 9 percent per year initially to close the structural gap—nearly double the current forecast.

Maryland can point to three unique factors that perpetuate its fiscal woes:  

1.  A revenue structure that fails to keep pace with economic growth
2.  The pursuit of generous entitlement policies
3.  A leadership deficit

The full version of this report appeared in the Maryland Public Policy Institute's publication, Maryland: A Guide to the Issues.

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