Tax Revenues Are Drying Up

February 06, 1991|By Jon Morganand William Thompson | Jon Morganand William Thompson,Evening Sun Staff

Last year's un-merry Christmas for retailers and other economic troubles have left Maryland's tax receipts so far below estimates that officials may be forced into yet another round of painful budget cuts.

Figures released yesterday by Maryland Comptroller Louis L. Goldstein for the current fiscal year show the state's two largest sources of revenue, sales and income taxes, running more than $26 million below the revised estimates made by budget planners in December.

Fiscal 1991 is only eight months old and the state budget has had to be revised twice to make up for tax shortfalls. Nearly $430 million was slashed from planned spending.

December's lottery proceeds and money from certain fees are to be calculated in the next few weeks, but they would have to be very rich to make up the $26 million difference.

Which means that, unless the final months of the fiscal year are unexpectedly robust -- despite the Persian Gulf war's breaking out in January -- Gov. William Donald Schaefer could be forced into a third round of budget cuts.

State and local income tax revenues in January totaled $387.8 million, about 1 percent less than the same month a year earlier. Sales taxes for January, based on December spending, were $163.8 million, or nearly 4 percent less than a year earlier. It was the fourth month in a row that sales taxes have fallen below the prior year's level.

For the first six months of fiscal 1991, income tax revenues of $2.3 billion are up 2.4 percent over the same period a year before, but the amount dedicated to the state's general fund is about 1 percent below estimates.

Sales tax revenues of $817.6 million for the first half of the fiscal year are about 1 percent below the level they were last year at this time and are 1.6 percent below official estimates.

The tax figures also seem to dispel any doubts that Schaefer's 1992 budget proposal is based on faulty estimates and will have to be cut back -- possibly through layoffs of state workers.

Legislators already have been warned by their fiscal experts that Schaefer's $11.6 billion spending plan for fiscal 1992 is based on overly rosy revenue projections. Lawmakers say they could be forced to reduce that budget by as much as $135 million within the next few weeks.

"I think layoffs are going to be a reality in the near future," Senate President Thomas V. Mike Miller Jr., D-Prince George's, said yesterday as the bad budget news grew worse.

"This is so much worse than anybody realizes. This is a true crisis," said Sen. Barbara A. Hoffman, D-City, vice chairwoman of the Senate's Budget and Taxation Committee.

Schaefer said yesterday that he had not had time to review the figures and decide on a course of action. His budget secretary, Charles L. Benton, said through a spokesman last night that he, too, was still studying the figures.

Under Maryland's Constitution, the governor must balance the budget each year. But he has wide latitude in deciding what revenue estimates to use.

Recent governors have taken the advice of a committee known as the Board of Revenue Estimates, made up of the budget secretary, the state treasurer and the comptroller. That board is expected to revise its estimates in the next few weeks.

As recently as a few weeks ago, Goldstein was standing by the board's December estimates. But he said yesterday that the estimates were based on an "uncertain war situation" and were always subject to revision.

William S. Ratchford 2nd, the legislature's top fiscal adviser, said consumer spending in December was hampered by fears of war and recession. January probably will not be much better for sales tax because the war kept many people indoors, watching television, he said.

In the face of massive cuts to an already haggard budget, lawmakers are left with a handful of unappealing options -- raising taxes, cutting services, eliminating programs and jobs or a combination of all choices.

Lawmakers on both sides of the General Assembly are searching for ways to improve the fiscal outlook, but they have expressed strong opposition to a Schaefer administration proposal to implement the so-called Linowes Commission tax plan. That plan would raise about $800 million in taxes and fees.

One new idea making the rounds in Annapolis is a one-time-only surcharge of 5 percent or 10 percent on individual state income taxes.

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