State reveals $109 million deficit for '91 Purchases halted in scramble to end shortfall in 45 days

May 15, 1991|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- A grim-faced cadre of top state officials announced yesterday that Maryland faced yet another multimillion-dollar budget deficit, the wrenching product of a recession that refuses to die and a recovery that will not begin.

The latest shortfall -- $109 million -- has to be balanced in a fiscal year that ends in 45 days.

The Schaefer administration immediately suspended all new state purchases of supplies or equipment, except for essential commodities such as food, and pledged to work with legislators to figure out what to do next. They said they hoped to develop a plan within a week.

In addition to the anticipated $109 million shortfall in the budget year that ends June 30, administration officials calculated at least another $150 million deficit in the new budget year that begins July 1 -- a problem that has developed since the General Assembly went home in early April, state officials said.

Comptroller Louis L. Goldstein attributed the bulk of the latest deficit to a $58 million decline in individual income tax receipts and a $32.2 million drop in sales tax revenues -- much of the latter the result of a crash in the home construction industry and the ripple effect that has had on the purchase of related merchandise.

"Banks aren't making loans to builders, so people aren't buying lumber, carpet, appliances or furniture," Mr. Goldstein said. "We've never seen anything like this in the history of the sales tax since 1947. This is very unusual."

Gov. William Donald Schaefer said the state's economic problems had been compounded by the General Assembly's postponement of an increase in the state gas tax, a decision that he said had dried up money the state would have poured into the economy through the highway construction industry.

The latest bad news marks the fourth time this fiscal year that Governor Schaefer and the General Assembly have been forced to figure out how to cover huge deficits.

Once the state has devised a way to cover the latest deficit of $109 million, it will have cut spending or transferred funds to cover a total deficit this fiscal year of $660 million. That is equal to 10 percent of the state-funded portion of the budget, said Charles L. Benton Jr., the governor's budget secretary.

Mr. Benton said the administration had frozen purchases, at least through July 1, of everything from fuel to postage, paper, pencils and computers. No one would give a sure estimate of how much money that would save, but Mr. Benton's aides said it could be in the range of $20 million to $25 million.

Beyond that, however, neither administration officials nor legislators could say how this latest budget crisis would be addressed. But they pledged to cooperate, a departure from the rocky relationship the governor and legislative leaders have had over the past five years.

House Speaker R. Clayton Mitchell Jr., D-Kent, said everything was up for discussion, but he noted that with only six weeks left in the current fiscal year, there was little room to maneuver. New higher taxes, for instance, could not be enacted fast enough, and layoffs for such a short period of time probably would not raise enough money to help.

Several legislators suggested they might have to turn again to some of the same state programs hit hard in the first three rounds of budget cuts: possibly siphoning more away from the state's emergency "Rainy Day Fund," its economic development "Sunny Day Fund," the parkland acquisition program or whatever is left in other pots of money.

Mr. Benton said he and the legislature's chief budget adviser, William S. Ratchford II, would be meeting with Mr. Goldstein and state Treasurer Lucille Maurer over the next week to formulate a list of options for the governor and legislative leaders to consider.

Governor Schaefer said he was disturbed that the state had not done a better job forecasting the decline, but Mr. Goldstein said the unusual combination of growing unemployment, a mammoth federal budget deficit and widespread failure of banks and savings and loan associations had made forecasts unreliable.

Mrs. Maurer said state officials relied upon predictions that consumer spending would rebound after the Persian Gulf War ended. She observed, "That has not materialized."

She said the sluggish economy was particularly evident in the decline in sales tax revenue. Initial predictions, she said, were that monthly sales tax revenue would come in about $2 million below last year, a figure later revised to a decline of $3 million a month. But for the past two months, she said, the figure has been closer to a $9 million decline.

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