More State Budget Woes

February 26, 1991

As Maryland's fiscal situation continues to deteriorate, options available to the Schaefer administration narrow. Yesterday's dose of bad news from the Board of Revenue Estimates put new pressure on officials trying to balance the state's books without resorting to a general tax increase. That may not be possible unless the administration gets serious about downsizing government.

This year's total deficit is now pegged at over $500 million, all of which will be covered through one-time savings, cuts in higher education, eliminating 1,600 vacant jobs and shifting money from reserve accounts. Next year's new revenue gap -- $115 million -- will be closed by yanking money away from the city and counties, under the governor's weekend proposal to legislators.

That may not prove politically acceptable. The counties already face deficits of their own. Forcing them to absorb the brunt of these financial blows is unwise and unfair. Other ways have to be found to bring revenues in line with expenditures.

The governor and legislators ought to pursue two promising approaches. One is to dissect the recommendations of the Linowes commission on tax reform and cull from it portions that make the most sense. This would include broadening the sales tax base and truly graduating the income tax schedule so that high-income filers pay a greater percentage than middle-income filers. These steps would make the state's tax system more equitable and would soften the recession's impact on government services.

But a second course must be followed simultaneously: a serious effort to reduce the size of government by eliminating programs deemed expendable. This is not an easy assignment, yet failure to do so could lead to even bigger budget problems next year.

The bulk of Mr. Schaefer's cost-cutting moves involve one-time savings. That could pose dangers in 1992 if a prolonged recession leaves Maryland with still-flagging revenues and still-expanding government expenses. The best way to avoid such an unpleasant scenario would be to make appreciable cuts in on-going programs this year.

A combination of these two steps would place Maryland in an enviable position as it plays host later this week to representatives of bond-rating houses. These moves would demonstrate that the state is serious about addressing its long-term financial problem by attacking both the revenue and the expenditure sides of the equation. Now is the time for decisive action. Are the governor and legislators up to the task?

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