Md. targets spending to offset deficit Programs to be pared to save $180 million

November 16, 1990|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- Dragged backward by a slowing economy and strained by the cost of providing increased services to the poor, the state of Maryland began the painful task of trimming governmental services yesterday, including some health and housing programs designed to help the poor.

To offset a budget deficit now estimated at $180 million -- but which many in government believe could double if the economy continues to deteriorate -- Gov. William Donald Schaefer and the Board of Public Works agreed to cut spending in the current fiscal year in virtually every state agency.

Among the casualties were programs -- or parts of programs -- that provide prescription drugs to the poor and home health care for the disabled or that reimburse hospitals for caring for Medicaid patients. Housing programs that offer cut-rate mortgages for low-income homebuyers or that help finance construction of apartments for low-income renters also were hit.

"It is our hope -- but not our expectation -- that this crisis will be short-lived," said Charles L. Benton, the secretary of budget and fiscal planning, as he delivered the bad news to the three-member board.

Afterward, Mr. Schaefer predicted there would be at least another round of cuts, the next one much harder for agencies and those who depend on their services to endure.

"The economy is not going to upswing," the governor said.

But in a choreographed, two-hour presentation to the board, complete with charts and detailed handouts, Mr. Schaefer and several of his Cabinet secretaries repeatedly said that the state's budget problems stemmed from national and international events outside their control and could not have been predicted.

Human Resources Secretary Carolyn W. Colvin said that as unemployment has crept up, so has the number of welfare and "general public assistance" recipients, helping to create a $24 million deficit for the department. "The caseload increase is still on the upswing, so we anticipate that figure is going to be greater," she said.

Similar increases in other programs for which the state has no choice but to provide funds -- Medicaid, the care and custody of juvenile delinquents and fringe benefits for public school and community college teachers -- have contributed to $69 million in red ink.

The economic slowdown also has resulted in a $110 million drop in tax revenue, most of it from personal income and sales taxes.

Combined, they left the state facing a deficit of at least $179 million for the current fiscal year.

The General Assembly's budget advisers, however, say that the overall financial crisis is even worse, that the decline in revenue for the fiscal year will be nearly $250 million and the overall budget deficit at least $322 million. The governor's office neither agrees with nor disputes those figures, saying instead that it is waiting for the state's Board of Revenue Estimates to make its official predictions of revenue in early December.

To close the gap, the governor has ordered a hiring freeze and directed that most vehicle and equipment purchases be stopped and out-of-state travel curtailed.

Those belt-tightening techniques combined with the program cuts enabled the administration to cover $127 million of the deficit.

Big departments, such as the Department of Health and Mental Hygiene, had to trim programs as well. Among the department's savings:

* $11 million by reducing the share the state pays hospitals for Medicaid patients from 60 percent to 50 percent.

* $3 million by suspending for three months -- from April 1 to June 30 -- a state program that pays for prescription drugs for about 14,000 people who are poor, but not eligible for Medicaid.

* $2.9 million by eliminating a 33-year-old program that provides treatment and drugs for about 3,700 kidney disease patients, most of whom the state believes can be transferred to the Medicaid program.

* $2.9 million by eliminating home health-care services for about 3,260 disabled people, leaving intact only the portion that provides care for about 320 of the most severely disabled.

Mr. Benton said that when health-care providers were told of the reductions, it was "a bitter pill for them to swallow."

The budget secretary said the state covered the balance of the deficit by finding several unexpected pools of money, including: $20 million that had built up as a reserve in the state's Injured Workers Insurance Fund, but that was no longer needed because of a new state self-insurance program; and $16 million it mistakenly thought it had spent to cover the increased cost of state employee health insurance.

Another $10.3 million was found from savings achieved in building various capital projects for less than the amount budgeted, and $5 million was unappropriated in the budget.

The governor said he had even written "a polite" letter to the General Assembly and the state's judicial branch, asking that they "be part of the solution." Neither the legislative nor the judicial budget is subject to reductions by the governor.

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