Gov. William Donald Schaefer today proposed a menu of options for solving the state's growing budget shortfall, including massive layoffs of state workers, a new round of spending cuts and a raid on the state's savings account.
Schaefer said the plan he favors would put 1,800 employees out of work and cut agency spending by $33.9 million. That plan would require legislative approval for shifting some money from the state's $126 million "rainy day fund" as well as from budgets containing corporate income tax receipts and other state revenues.
The most dramatic of the five options Schaefer outlined calls for $242.6 million in state agency budget cuts, which would require laying off an estimated 12,800 state workers.
Another plan calls for no layoffs but includes taking $126 million from the rainy day fund and diverting certain tax receipts away from transportation projects and into general spending accounts.
None of the options -- prepared by Charles L. Benton Jr., the governor's chief budget expert, and his staff -- would require new taxes, said the governor. Schaefer said he is not counting on implementing any recommendations by the Linowes Commission -- a controversial strategy to raise $800 million a year in new taxes -- to bail the state out of its fiscal crisis.
Schaefer said he is prepared to issue the order that would put 1,800 employees out of work beginning Jan. 1, if legislative leaders agree.
He said the layoffs would affect all state departments, but that Cabinet secretaries would have to decide who would lose jobs in their agencies.
Asked if the layoffs would be temporary, the governor replied: "They're layoffs, people who possibly will not be back to state service."
The only way the positions would be reinstated would be if the governor allocated money for the jobs in his proposed budget for the upcoming fiscal year. That is unlikely, though, because the current revenue shortfall is expected to be repeated next year.
Benton said that even if the national economy recovers within the next year, Maryland's budget woes will not fade until personal income increases sharply.
A gloomy Schaefer outlined the possibilities to reporters this morning after a private meeting with legislative leaders. One lawmaker said the meeting produced no consensus on how to balance the budget.
The state Board of Revenue Estimates, chaired by Comptroller Louis L. Goldstein, officially announced today that revenues for the current budget year are $353 million below projections, due to drastically reduced tax collections. Coupled with $70 million in cost overruns in programs such as welfare and Medicaid, the state is facing a potential deficit of about $423 million. Schaefer last month implemented $176 million in budget cuts, leaving a revised deficit of $247 million.
The total state budget is $11.7 billion.
Among the five scenarios Schaefer outlined for balancing the budget was one plan that would take $126 million from the rainy day fund, divert $44.4 million from corporate income tax collections that normally go to the Transportation Trust Fund, halt $40 million worth of park projects through Program Open Space, and raise another $36 million through relatively minor actions. This plan would balance the budget without laying off any workers or cutting any basic state programs.
Another plan would cut various agencies' spending by 8.7 percent, requiring an estimated 12,800 layoffs. Schaefer's first round of budget cuts, enacted last month, cut the affected agencies' budgets by 4.3 percent but produced no layoffs.
Three other options described by Benton contemplate layoffs of 1,800 to 6,400. Those three options also include cuts in Program Open Space, as well as cuts of $32.9 million in aid to local governments.
In addition to problems with the current year's budget, Schaefer faces potentially harder choices for next year's budget, which he will outline for the General Assembly in January.