Economic ills may mean cuts, layoffs, Md. officials warn

November 28, 1990|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- Top state officials underscored the growing seriousness of Maryland's financial troubles yesterday, as legislative leaders cinched the belt on future state spending and the governor warned of program cuts and possible layoffs.

Gov. William Donald Schaefer reflected on the condition of the economy and the impact on his treasury yesterday after being asked whether state employees could expect a pay raise this coming year: "My answer is, we're all lucky to have a job."

The governor said times are so tough that those who have looked to the state or federal governments for health care or other assistance in the past had better start looking to themselves.

"The general public has said to us: 'We want all the services. We want pay raises. We want you to take care of everyone, but we don't want to spend any money to do it.' And I don't think we can do it that way," he said.

The governor said unspecified programs were sure to be cut, causing "anguish and cries" from the special-interest groups that support them.

For instance, he said there is no money available for the state to take over operation of Baltimore's jail or court system, ideas that have been floated as ways for the state to prop up the financially troubled city.

He even warned of possible furloughs or layoffs, despite adamant denials before the Nov. 6 general election that such actions were being contemplated.

"If the economic trend continues, we may have to think about it," he said, adding that one alternative might be to push some longtime state employees into early retirement. But putting employees out of work, he said, is "the last thing I've tried to do."

Despite diminishing revenue, legislators made clear that they have no intention of approving a general tax increase to balance next year's state budget, and Charles L. Benton, the governor's budget secretary, said his boss has no intention of asking for one.

However, Mr. Schaefer left open the possibility that he would separately recommend one or more of the tax increase proposals contained in the report of his Commission on State Taxes and Tax Structure, which is due to be officially released today.

That commission is expected to recommend a broad restructuring of Maryland's tax system, including new taxes and changes in existing taxes, that together could raise an estimated $800 million in new revenue next year alone.

But members of the legislature's special joint Spending Affordability Committee, which sets a limit for government spending each budget year, said voters in this year's elections made clear that they oppose any additional taxes.

"I don't think the election results give anyone a mandate to raise taxes," said Sen. Laurence Levitan, D-Montgomery, chairman of

the Senate's Budget and Taxation Committee.

In an effort to stave off a tax increase, the Spending Affordability Committee recommended that the governor limit new spending in the budget year that begins July 1, 1991, to a growth rate of 5.1 percent. That translates to an increase in spending of $424.5 million in the portion of the budget financed by state taxpayers. By way of comparison, the current year's budget was approved with a growth rate of nearly 9 percent.

For the first time since he became governor, however, Mr. Schaefer may not have the money available to spend even at the level of 5.1 percent, which represents 60 percent of the growth in personal income in Maryland, a standard traditionally used in setting spending limits. Legislative budget advisers say state revenue is dropping so swiftly that additional fiscal 1992 revenue will only amount to $279.5 million, short of the mark by $145 million.

Mr. Benton said he did not believe the governor would have much, if any, discretionary funds for new programs, although Mr. Schaefer said he has already ordered his budget advisers to find about $46 million to finance a series of education programs recommended by state school Superintendent Joseph L. Shilling.

The programs include making kindergarten available statewide, expanding from 111 to 256 the number of schools offering prekindergarten programs for disadvantaged students, and establishing regional math and science centers for gifted elementary school students. The most expensive part of the initiative, costing $31 million, is a "challenge grant program" designed to provide financial incentives for schools that improve their performance to meet state standards.

But the Spending Affordability Committee was more interested in reductions than expenditures. It recommended that the Schaefer administration curtail capital construction projects that are paid for in cash, and that it simply forget a plan to borrow $200 million to build a new state office complex in Baltimore.

It also said the state should not hire any new employees next year except those needed to staff new facilities or to provide teachers at state colleges and universities that are experiencing high enrollment.

What the report means, said Senator Levitan, is that finances "have gotten tighter, the economy is bad, individuals are having trouble making it, and so is the state. It is not the time to think about expansion of government -- it's a time to think about contraction."

Mr. Benton said the administration generally concurred with the committee's recommendations regarding capital projects and new state positions.

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