As Maryland continues to struggle out of the recession, legislators returning to Annapolis this week face the prospect of doling out yet more budgetary pain, including potential hikes in the taxes Marylanders pay to consume gasoline and water.

In addition, Gov. Martin O’Malley and legislative leaders will seek to continue an effort they began this year to eliminate by fiscal 2014 the state’s structural deficit, which now stands at roughly $1.1 billion. They hope to cut roughly one-third of the funding gap during each of the three years.

The General Assembly’s Spending Affordability Committee has recommended that officials reduce the deficit by half in the coming fiscal year.

The chairmen of the legislature’s budget committees said last week that such an effort will have to involve spending cuts and some new taxes or fees that have yet to be tagged.

“There is nothing there right now that I see that you could cut with that magnitude,” said Sen. Edward Kasemeyer (D-Howard), chairman of the Budget and Taxation Committee. “At some point in time, whether it’s this year or next, you’re going to need some revenues.”

All of this will occur during a year in which Maryland will make a sluggish climb out of the 2007 recession, according to the Spending Affordability Committee.

Job and revenue growth will “remain stagnant at best and are projected to recover slowly” during fiscal 2013, the committee’s annual report to the governor and legislature states.

It recommends that officials hold the line on new operating spending and that any new capital spending be aimed at “job-producing investment in infrastructure construction, particularly for roads, public schools, addressing capital maintenance backlogs and environmental protection.”

In the meantime, the main story line of this year’s budget season could turn out to be a tale of two taxes.

O’Malley (D) is prepared to potentially seek hikes in Maryland’s 23.5-cent-per-gallon gas tax — with an eye toward shoring up the state’s highway infrastructure and to pay for new projects, including mass transit — and the state’s “flush tax” on water and sewer bills, which pays for Chesapeake Bay cleanup.

Separate commissions studying the issues last fall recommended that O’Malley seek such hikes.

“Perhaps,” O’Malley told reporters earlier this month in answer to the question of whether he would seek to raise the gas tax or other levies in the coming fiscal year. The governor’s definitive answers will come when he submits his proposed fiscal 2013 budget to the General Assembly later this month, his spokeswoman, Raquel Guillory, said last week.

Several legislators said they are girding for the political battle that will result if O’Malley proposes to raise taxes on a citizenry that continues to struggle in a down economy.

“In the worst economy in 75 years, it’s the absolute worst time to raise taxes on the citizens,” said House Minority Leader Anthony J. O’Donnell (R-Calvert, St. Mary’s), who opposes hiking the taxes.

“Marylanders can’t afford it,” O’Donnell said. “Where is the money going to come from?”

A hike in the gas tax is necessary for the state to repair and expand its transportation system, said Kasemeyer, adding that he believes the increase would spur the creation of construction-related jobs.

This fall, a commission studying Maryland’s transportation funding recommended that officials hike the tax by 5 cents annually over the next three fiscal years. Such a boost, along with proposed increases in other transportation fees, would raise $870 million a year, according to the commission, which also recommended that officials stop the practice of transferring money from the transportation fund and into the general fund as a way to plug budget deficits.

“I think we have to do something,” Kasemeyer said. “We have to get to that 15 cents in some way.”

If O’Malley proposes to raise the gas tax, the governor’s task will become to convince a majority of legislators that the increase would create new jobs and investment, despite the hit on constituents’ pocketbooks, Kasemeyer said, adding that a gas tax hike is “in the cards.”

House Appropriations Committee Chairman Del. Norman Conway (D-Lower Shore) said a bump in the tax would hit rural Marylanders, who are dependent on cars, particularly hard.

“I think we all recognize the significance that the economy has placed on us,” he said.

He added, however, that Maryland’s transportation system provides an important boost to business and must be maintained and expanded.

Officials of the Maryland Chamber of Commerce have said they support a hike in the tax as long as it comes with a guarantee that the revenue be used only for transportation projects.

Lawmakers will have to phase in a gas tax hike over several years, rather than in a single year, if they expect it to pass, Conway said, adding that he was not ready to say specifically how that phase-in should occur.

Hiking the gas tax is “widely unpopular” in southern Maryland, said Del. John L. Bohanan Jr. (D-St. Mary’s), adding that many in the region commute by car to jobs in the Washington, D.C., metro area.

Traffic on the region’s aging Gov. Thomas Johnson Bridge, which connects Calvert and St. Mary’s counties, has become badly congested as officials await state funding for a proposed $1 billion project to increase its capacity, said Bohanan, the House chairman of the Spending Affordability Committee.

Although he stopped short of saying that he would support a gas tax increase, Bohanan added that he was uncertain how the state otherwise would raise the money to pay for the bridge project.

O’Donnell said the transportation fund wouldn’t be in such bad shape if O’Malley and other governors hadn’t raided it to erase the state’s red ink.

Meanwhile, a task force O’Malley named to study septic systems has recommended regulatory measures to stem their proliferation in Maryland. The septic systems add nutrient pollution to the Bay, according to the group’s report.

The panel also recommended raising the annual “flush tax” on homes from $30 to $60 in 2013 and $90 in 2015 to upgrade treatment plants so they could more effectively remove nutrients from wastewater.

Last week, O’Malley said he would like to see the flush tax amended to give “relief” to those who consume less water, although he provided no specifics on how such a proposal would work.

Sen. David Brinkley, who served on the Task Force on Sustainable Growth and Wastewater Disposal, said he voted against raising the flush tax because it would unfairly impact rural and suburban communities that depend on septic systems.

O’Malley and the General Assembly have not taken a serious enough look at cutting spending before they rush to raise taxes, added Brinkley (R-Carroll, Frederick), who serves on the Budget and Taxation Committee.

“Everything has to be on the table,” he said. “There can be no sacred cows.”

skelly@gazette.net