When fiscal experts inform you that your budget outlook is the worst in two decades, you are wise to take notice. And this is exactly what happened Tuesday as Maryland’s elected leaders were told that the state faces a potential $2.7 billion shortfall — a deficit that reflects, as most imbalanced budgets do, too little anticipated revenue versus too much planned spending. It doesn’t require a rocket scientist to recognize what must be done next. Gov. Wes Moore and members of the Maryland General Assembly must reduce spending and/or raise taxes and fees to put the state’s affairs back in order. Oh, and there’s also a third option. They could also draw from the so-called Rainy Day Fund, money set aside to cover unanticipated economic crises, but doing that alone would be shortsighted (for reasons we’ll get to in a moment).

Adding to the worry is how the election of Donald Trump is likely to reduce federal spending. Maryland could lose federal jobs as well if President Trump actually fulfills his pledge to cut the bureaucracy (and, on a more immediate level, nixes plans to relocate the FBI headquarters to Prince George’s County). And absent any dramatic growth in private sector spending — Greater Baltimore isn’t expected to become the next ground zero for AI research — it’s best to assume a soft economy (and that’s not even mentioning the possibility of an economic recession).

All of which points to only one practical remedy: an “all of the above” strategy. It isn’t a question of whether to trim or tax. Maryland is going to have to do both. And in doing so, the governor and lawmakers are going to have to move cautiously. The Rainy Day Fund? That savings account will probably have to be tapped (it’s definitely raining) but not exhausted. This isn’t a matter of politics but of practicality. Even Republicans understand this with Senate Minority Leader Stephen S. Hershey already warning that cuts alone won’t get the job done. Of course, they might also stick a pin in the mythology that Larry Hogan left office with a $5 billion state surplus, a number that requires a bit of creative accounting (not mentioning how short-term federal COVID relief goosed those numbers or how it counts the Rainy Day Fund as largesse instead of contingency).

That’s not to suggest this will be easy. Before now, we’d hoped that the Blueprint for Maryland’s Future, the much-needed boost in K-12 spending, could be spared from the budgetary squeeze. Clearly, that’s no longer the case, particularly given local governments are facing budget woes, too. The speed at which Maryland public school systems expand their teaching ranks may have to be slowed. Other previously sacrosanct line items, including Medicaid, housing and child care, will face slower growth. Also expect more capital spending for things like infrastructure, transportation or construction to be based on borrowing and not pay-as-you-go cash outlays.

On the revenue side, don’t be surprised if Annapolis moves to raise income taxes on high earners. Today, the top rate of 5.75% applies to incomes above $250,000 (or $300,000 for couples filing jointly). That’s relatively low compared with nearby Washington, D.C., (10.75%) or top-ranked California (14.4%). Why not an 8% or higher rate for those earning $1 million or more? We’d also expect to hear more from lawmakers about “combined reporting,” a corporate income tax method that would restrict businesses from sidestepping obligations through subsidiaries. And don’t be surprised if there’s yet another attempt to broaden the state sales tax so that it applies not just to stuff but to services (taxing the mechanic’s work and not just those replacement auto parts, for example).

Raising taxes probably won’t make anyone involved more popular. Nor will cuts that cause low-income Marylanders real pain. That’s why these are tough decisions. But that’s an insufficient reason for delay. Better to be guided by long-term ramifications for Marylanders than by short-term political consequences for the governing class. If left unaddressed, deficits tend to get bigger. Indeed, a major share of this imbalance is a product of a legislative failure to attach a new funding source to cover $3.8 billion in annual Blueprint spending. Remember all that talk about how there was a “high bar” for raising taxes in the State House? Well, at $2.7 billion, that height has been met. The real question is whether Gov. Moore and legislative leaders are willing to flex their political muscles to truly meet the challenge.