Md. faces revenue shortfall of $20M Unemployment rate blamed for income tax revenue drop.

May 13, 1991|By William Thompson | William Thompson,Evening Sun Staff

Despite faint signs of an economic recovery, the state's 1991 budget woes continue with the latest bad news coming from a projected shortfall of more than $20 million in income tax revenues.

Based on the latest review of income tax reports, Schaefer administration budget analysts now say the state may not get the full $2.97 billion they had counted on from taxes on wages and other earnings.

While $20 million-plus in an overall $11.6 billion state budget would be less significant in healthier economic times, the unexpected shortfall could pose serious new threats to the fiscal 1991 spending plan, which Gov. William Donald Schaefer already has cut by about $554 million to keep the budget balanced.

Schaefer's fiscal experts said that, although the projected shortfall is troublesome, there is no reason to tumble into a financial funk.

"We always have contingency plans to deal with these things," said Frederick W. Puddester, deputy secretary of the Department of Budget and Fiscal Planning.

Puddester noted that the latest economic information remains uncertain.

"As you start to get hard data, you react to it," he said. "You don't panic until you know the full magnitude. We have our hands on the wheel."

Puddester brushed aside speculation in Annapolis circles that the latest shortfall could lead to immediate layoffs of state employees.

With the fiscal year ending June 30 and with a requirement that employees be given notice before they can be laid off, the state could not save enough money by implementing across-the-board layoffs, he said.

The state still has about $25 million in its "rainy day fund," a special budget set up for emergencies. Although that is enough to cover the latest projected shortfall, lawmakers are not likely to approve the transfer, according to Del. Charles J. Ryan, D-Prince George's, who chairs the House Appropriations Committee.

Ryan said he suspects the Schaefer administration may be forced to "roll over" several state agency budget deficits into the 1992 fiscal year, an unpopular but unavoidable budget decision lawmakers will have to deal with when they meet in full session.

Once again, the recession gets the blame for the projected shortfall. State officials said Maryland's unemployment rate of 6 percent in March -- which has affected both blue-collar and high-income wage earners -- is the latest culprit. In March 1990, the state's unemployment rate was only 3.7 percent.

April's state unemployment figures are not out yet.

With an unusually high proportion of the state's 2.5 million workers now jobless, revenues from income taxes are down, said Marvin A. Bond, spokesman for the state comptroller's office.

Bond also said income from capital gains taxes is down because individuals have been waiting to liquidate certain property until the federal government offers its expected tax breaks on capital holdings.

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