Md. now faces deficit topping $400 million Schaefer foresees no tax increase, but 'painful' alternative

December 06, 1990|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- The state budget deficit has reached more than $400 million, the product of an economic crisis so sudden and severe that Gov. William Donald Schaefer said yesterday that the stark numbers "will stagger you."

The governor declined to discuss specific figures, but sources familiar with what the state's Board of Revenue Estimates will announce today said the overall deficit for the current fiscal year's budget might be pegged as high as $440 million.

Most of the deficit reflects a sharp, across-the-board drop in almost all forms of state tax revenue, which in turn reflects the abrupt slowdown of the state and national economies.

The latest revenue estimates were reported in The Evening Sun yesterday.

"No one can remember the economy [taking a] downturn like this this fast," Mr. Schaefer said yesterday. "There was no way anyone could have predicted it."

The governor and his budget advisers have been meeting day and night for weeks in anticipation of more bad financial news, trying to figure out how they will balancethe budget with even greater losses.

It took them most of the summer and fall to figure out how to trim $179 million from the budget,and now it appears that more than twice that amount will have tobe cut to bring the budget into balance.

Moreover, reductions in this year's budget and the continuing economic problems will affect Mr. Schaefer's fiscal year 1992 budget, which he is now attempting to ready for submission to the legislature next month.

The governor said he has no intention of proposing a tax increase to balance the budget, saying it was clear during this year's political campaigns that voters were tired of government spending.

"The people have spoken: no more taxes and no more expenditures," he said. "But the alternative is going to be extremely painful."

The governor declined to answer when asked if he might be forced to propose layoffs of state employees, something that he has repeatedly said would be done only as a last resort.

He said every source of state tax revenue except the state-run lottery has shown a decline, including sales tax, personal and corporate income taxes, and motor fuel taxes and fees.

As the economy has worsened, he said, "Welfare rolls [are] just overwhelming us. They're [growing] at [such] a rate, we just can't keep up with the amount of people going on welfare."

He said the drop in sales tax revenue has been particularly worrisome. In two separate months in 1990, sales tax collections have been lower than the same months in the previous year, the first time that has ever occurred.

On a recent Sunday, Mr. Schaefer said, he visited a store he had visited during the Christmas shopping season a year ago and found the state's present economic troubles reflected in the scarcity of customers.

"I couldn't get in last year. But this year, I looked in and I thought it was closed," he said.

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