Forecast for state deficit now raised to $199 million

September 28, 1990|By Eileen Canzian

State budget officials now estimate that Maryland is running a budget deficit of at least $199 million and say the figure could reach $270 million if the state's economy enters a recession.

The latest projections by the Department of Budget and Fiscal Planning are even gloomier than a month ago, when the department estimated the budget shortfall at $150 million. The earlier projection prompted Gov. William Donald Schaefer to impose a statewide hiring freeze and to order state agencies to develop plans for further spending cuts.

While the budget department's current best guess is that the shortfall will be more than $150 million, it is recommending that Mr. Schaefer wait at least a month before deciding whether to order even deeper cuts, according to James B. Rowland, an assistant to Budget Secretary Charles L. Benton Jr.

"As of this moment, our most optimistic forecast would be $199 million," Mr. Rowland said. "But we're going to take another look in about a month. The numbers could change. Maybe we'll be lucky."

The department's deficit figures are predictions of the shortfall the state would face when the fiscal year ends June 30 if budgetary action -- either spending cuts or tax increases -- isn't taken by then. The latest deficit projections were first reported in The Evening Sun yesterday.

Mr. Rowland said the department revised its projections because it appears that a worsening state economy will produce even smaller revenues than forecast a month ago.

The state's $11.6 billion budget was prepared with an assumption that those revenues would rise by 8 percent. Last month, budget officials said the growth probably would be just 7 percent. The latest estimate is "somewhere between 6 and 7 percent," Mr. Rowland said.

On the spending side, the department continues to estimate that state agencies face roughly $90 million in expenses not foreseen in the budget plan approved by the General Assembly.

Despite the budgetary problems, Mr. Rowland said the budget department is not recommending that Mr. Schaefer seek a tax increase. He noted that the budget includes a $125 million "rainy day fund," which was designed as a cushion against severe economic downturn.

"We don't see how we could go to the legislature and the people and ask for a tax increase when you have the rainy day fund," Mr. Rowland said.

Governor Schaefer's press secretary, Paul Schurick, said that Mr. Schaefer was aware of the revised deficit figures. "Beyond that, for the time being, we have no further comment," he said.

Mr. Schaefer's Republican opponent in the November election, William S. Shepard, said voters should hold Mr. Schaefer responsible for the current budget crunch. He accused Mr. Schaefer of basing his spending plan on "the most optimistic projections of economic forecasting."

But state Sen. Laurence Levitan, the Montgomery County Democrat who chairs the Senate budget committee, argued that "prudent" spending policies have left Maryland in a much better financial position than many other states.

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