Dry Well in Annapolis

April 03, 1991

Faced with a precipitous plunge in tax revenues and rising social service costs, state legislators Monday chose to sidestep fundamental tax-and-spending questions in favor of a wobbly, jerry-built budget-balancing act that could leave the state a half-billion dollars in debt in 1992.

The $11.6 billion budget approved by the General Assembly gets the government through the next 12 months -- barely -- by draining the state's reserve funds, tinkering with a handful of minor taxes, denying pay increases to state workers and keeping overall program spending increases to near-zero. But this merely postpones government's underlying problems: Annapolis doesn't have sufficient revenues to keep pace with expenses.

Already, budget analysts for the governor are predicting a $365 million shortage next year, while the legislature's chief fiscal adviser predicts a $471 million gap. The longer the state's recession persists, the more these figures will grow. A special session later this year may be necessary to prop up the state's finances.

The basic problem is that legislators, and the governor, failed to reduce the size of government. Experts estimated the baseline state budget needed to be trimmed by $200 million. It never happened. As House Minority Leader Ellen R. Sauerbrey noted, "We're building a spending level that will not be sustainable without tax increases" -- unless legislators attack what she called "the structural deficit."

Top lawmakers spent much of this General Assembly session adamantly resisting the governor's efforts to reform the state's inequitable tax structure. Yet when it came time to make major program cuts, legislators proved equally obstructionist. Only by agreeing to higher cigarette taxes, a sales tax on snack foods and a phase-out of the capital-gains tax exclusion did lawmakers patch together a balanced budget.

What emerged from the General Assembly was a hold-the-line spending blueprint with no pay raises, virtually no program enhancements, big cuts in higher education and large monetary increases for welfare programs and local schools. Local governments came away with slight help in balancing their own budgets, including an extra $10 million to assist hard-strapped Baltimore City.

"We won't be able to do this next year," said House budget leader Charles J. Ryan. All the fiscal gimmicks and reserve funds have been exhausted. Or as legislative analyst William S. Ratchford II put it, "The well's pretty dry."

Legislators and the governor now must take a long, hard look at the state's fiscal requirements over the near-term and come up with a tax plan that meets these needs and also makes Maryland's tax structure fairer. At the same time, they have to get serious about shrinking government services that are deemed least essential. The well has, indeed, run dry. Legislators won't be able to paper over the state's financial woes next time.

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