Md. deficit projection up sharply Revised estimate $73 million higher

October 24, 1990|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- Over the past three weeks, Maryland's projected budget deficit grew from $249 million to $322 million, the General Assembly's chief budget adviser told a special legislative panel yesterday.

William S. Ratchford II, director of the Department of Fiscal Services, attributed the bad news to higher oil prices and the flagging national economy.

His revised estimate for fiscal year 1991, the current budget year, is $142 million higher than the $180 million figure Gov. William Donald Schaefer's budget advisers say they are using in preparing their fiscal year 1992 budget.

Mr. Ratchford blamed the entire $73 million increase in red ink on a projected across-the-board drop in tax revenues, which he said is already being felt as inflation and worry about the future has cooled off consumer spending.

Actual revenues in July, August and September grew by only 2 percent, so sluggish that they would have to grow by 8.2 percent for the last three quarters of the fiscal year just to balance the budget without reducing spending, he said.

"It's hard to disagree with [Mr. Ratchford], but that doesn't imply I agree with him," said Charles L. Benton Jr., the governor's budget secretary. "No two people will agree when it comes to estimating revenues."

On the campaign trail this election year, gubernatorial candidate Schaefer has been minimizing the state's financial problems. Other Eastern states face much larger, more serious budget deficits, he tells campaign audiences. When he talks about Maryland's deficit at all, he usually refers to it as the "$150 million deficit," pressing the impression that state officials have already figured out how to eliminate such a piddling amount.

Mr. Benton said yesterday that he agrees with Mr. Ratchford that the economy is worsening, but he said he intends to stick with the $180 million figure until the state's Board of Revenue Estimates makes its official forecast in mid-December.

The board's estimate is the one traditionally used by governors in preparing the budget they must submit to the General Assembly each January. "In putting together the '92 budget, you just can't every week, or every month, or whatever, keep revising your numbers. You have to pick a number and go with it," Mr. Benton said.

The sharpest change between Mr. Ratchford's Oct. 2 and Oct. 23 forecasts involved how much revenue the state can anticipate. In the earlier forecast, he told members of the legislature's special Spending Affordability Committee that individual income tax revenue would be $52 million below estimates; retail sales taxes would be off by $55 million; and corporate income taxes off by $17 million. Now he has revised those figures to show individual income taxes dropping nearly $108 million below estimates; sales taxes off by $75 million; and corporate income taxes dipping $33 million below what was expected.

The economy in the Northeast, he said yesterday, "is going at a slower pace than the nation as a whole. We see less of a growth pattern and more of a recession pattern, and some of that is coming down the coast."

Instead of revenues coming in $156 million below estimates, as he predicted in September, Mr. Ratchford said they now are likely to be nearly $250 million below estimates. His estimate also anticipates at least $77 million in spending beyond what was budgeted for this year, two-thirds of it directly tied to health care and welfare benefits the state is required to provide for the poor.

The spillover effect, Mr. Ratchford said, could be a budget shortfall in fiscal year 1992 of $374 million ---- up $136 million from the September estimate.

When he made his predictions a month ago, Mr. Ratchford was criticized by Schaefer administration officials for being overly pessimistic.

Baltimore banker F. Furlong Baldwin, chairman of Mercantile Bankshares Corp. and a citizen member of the Spending Affordability Committee, called yesterday's revision "closer" because it was based on actual first quarter revenues that he said could not be ignored. "There is certainly nothing going on in the second quarter to show a lot of optimism," he added.

But Mr. Benton demurred, saying the administration is "determined not to make any other public forecasts" until December. He also said the plan to cover the current year's deficit will not be revealed until "early November," possibly not until after the Nov. 6 general election.

As early as June, the Schaefer administration directed state agencies to slow spending and begin developing plans to cover anticipated deficits. The governor subsequently ordered an across-the-board hiring freeze, restrictions on travel and vehicle purchases, and other actions intended to save enough to cover any shortfall. Each department and agency has submitted its cost containment plan, but final decisions have not been reached.

In one area, higher education, however, Mr. Schaefer served notice yesterday that he will "veto" any effort by the state's 13 four-year colleges and universities to cover budget cuts with increases in tuition or fees during the current school year. "I do not want you to jeopardize any student's opportunity to continue their education," he said in letters to the boards that oversee the schools.

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