Economic growth is expected to slow this year to 4.2 percent and next year to a meager 2.8 percent -- a much slower rate than officials expected, Franchot said.
"Given this extraordinary degree of economic volatility and given the growing likelihood that conditions will worsen before they begin to turn around, I would strongly encourage our state's leaders to proceed with the highest possible degree of caution," he said.
Overall, officials expect to bring in $14.1 billion in revenues this year and $14.5 billion next year. State officials have said they anticipate a $1 billion shortfall in fiscal 2013. Comptroller's office spokeswoman Christine Feldmann said Wednesday that hasn't changed.
Franchot attributed the slowed growth in part to the federal payroll tax cut, which is set to expire at the end of this fiscal year and will affect individuals' personal income. As a result, officials are adjusting revenue estimates for 2013 to reflect a decrease in sales tax and corporate income tax revenues.
Maryland residents also lost 2,500 jobs in August, Franchot said, indicating that the unemployment rate, though better than the national, grew to 7.3 percent in August. One of every four Maryland homeowners was also behind on mortgage payments at the end of fiscal 2011, Franchot said, and foreclosures are likely to grow.
"These folks aren't going to be heading out to buy new washing machines, deck hardware or hardwood floors anytime soon," he said.
Lawmakers have already begun looking at increasing taxes to make up the budget gap, The Washington Examiner reported last week. And because debt service payments cannot exceed property tax revenues by law, the General Assembly will have to raise the tax in fiscal 2013.
But state officials may have a hard time predicting what fiscal 2013 will look like before they know what actions the federal government might take, said state Treasurer Nancy Kopp.
"We are all going to be seriously impacted by what they do or don't do, whether they enact a balanced program that creates jobs or not," she said.