‘Houston...’

There’s even the potential of a ‘‘perfect storm” developing if voters in November reject O’Malley’s referendum for slot machines at select locations. Without that extra revenue — $650 million or more — the governor’s fiscal predicament would turn perilous.

It isn’t a pretty picture. Holding together O’Malley’s progressive agenda could get dicey. By the time legislators chop $300 million, $400 million, $500 million or even $600 million from his proposed budget, O’Malley might have to backtrack on his health, education and environmental commitments.

This country’s economic recession could be far more severe than expected, leading to a prolonged plunge in Maryland’s tax revenues, particularly the state’s second-biggest income generator — the sales tax.

Consumer sales tax collections, a key indicator, have declined for two straight months — 6.6 percent in December and 3.5 percent in January. A drop-off like this hasn’t occurred in 17 years. That’s not a good sign.

Continuing convulsions in the nations’ credit markets threaten to put many more people in danger of defaulting on their mortgages and loans.

A record percentage of loans now are past due or in foreclosure. Housing prices are sinking just about everywhere, which is bad news for Maryland, which tends to enter recessions later than the rest of the country.

Meanwhile, the Federal Reserve reported that nearly a third of the homes purchased in 2005 and 2006 are worth less than their current re-sale value. The ratio of an owner’s equity to the actual worth of that home fell below 50 percent for the first time ever.

Folks, we’ve got a heap of trouble here.

Democrats in the General Assembly would be wise to heed the advice of Republican colleagues arguing for Draconian cuts in the O’Malley budget as a way to anticipate wave after wave of revenue declines in coming months.

Legislators may have to start identifying which programs are essential and which can be shrunken or eliminated.

For instance, the notion of creating a Department of Information Technology may have to be scrubbed. The current IT agency within the state budget department can suffice: It can be nearly as effective at a fraction of the cost of establishing a brand new, cabinet-level bureaucracy that is sure to grow like Topsy.

O’Malley’s determination to give schools in high-cost regions, especially in the Washington suburbs, additional, on-going support may have to be revised and delayed to reflect the state’s fiscal bind.

Other local aid programs may have to be reduced as well. The counties will have to share the pain.

Instead of phasing in a $50 million general fund commitment to a Chesapeake Bay cleanup fund, lawmakers may have to pay for the initiative by issuing bonds or increasing the state’s ‘‘flush tax” paid by homeowners.

Buying new Medevac helicopters at a cost of $60 million may have to be accomplished through bond proceeds rather than general funds.

A sweeping ‘‘economy and efficiency” review of state government by a panel of business leaders may have to be initiated so legislators have a handle on what can be curtailed, reduced or revamped to save money without harming vital services.

Complicating matters for lawmakers is the growing demand to repeal last November’s foolish vote to tax computer services. Unless legislators act this session, the line of IT companies fleeing Maryland might resemble the biblical exodus from Egypt.

Yet the only sensible way to fix November’s mistake is to repeal the computer services tax entirely, thus creating a new $200 million budget hole. Consensus seems to be building around a substitute tax, a temporary levy on high-income earners.

You can expect howls of protests from angry Marylanders in the line of fire, especially from wealthy enclaves in Montgomery County, but lawmakers must make difficult trade-offs.

For O’Malley, it could be a painful readjustment. He was elected as a liberal Democrat who promised to expand the social safety net and government support for public schools, colleges, health care, mass transit and the environment. But in recessionary times, governors must be tight-fisted penny-pinchers. That won’t help O’Malley’s already low job approval rating.

Yet unless the governor reins in years of unsustainable spending growth, and also persuades voters to approve his slots referendum, he could face a nightmarish situation in which he must raise taxes again as the 2010 election campaign nears. That’s a situation he needs to avoid at all costs.

Barry Rascovar is a longtime State House columnist and a communications consultant in the Baltimore area. He can be reached at brascovar@hotmail.com.