Restocking the State's Cupboards

May 26, 1991|By BARRY RASCOVAR | BARRY RASCOVAR,Barry Rascovar is deputy editor of the editorial pages of The Sun.

Now that the state's fiscal shelves have been stripped of all edible goods, will elected leaders get serious about preparing the fields so Annapolis can weather its next revenue drought?

So far, everyone in Annapolis has studiously avoided the basiproblem: Maryland's appetite for spending far outstrips its revenue.

This led to a cumulative $660 million shortfall this fiscal year, ana projected shortage of $150 million next year. Someone has seriously miscalculated.

Both the governor and legislators are to blame.

Legislators have displayed the most cowardice and timidity. Gov. William Donald Schaefer at least had the courage to propose Draconian steps in December to mitigate future budget deficits. He laid out a scenario for lopping anywhere from 1,800 jobs to 12,800 state jobs.

Had this course been followed, the state's baseline budget now would be shrinking and Annapolis would have few financial concerns.

But legislators -- especially Sen. Laurence Levitan and House Speaker R. Clayton Mitchell -- said no. They rejected large-scale layoffs. Instead, they imposed a nickel-and-dime approach to cuts.

All that still wasn't enough -- even using inflated revenue figures. Finally, a Band-Aid tax package was grudgingly approved last month. The budget was balanced. Or was it?

The thin veneer of fiscal legitimacy crumbled when income-tax revenues came in far below estimates two weeks ago. A new $109 million gap appeared. More pasting and cutting will ensure that revenues equal expenses when the books close June 30, but the state is left without a safety net.

The failure of legislators to attack the state's basic structural imbalance puts Annapolis in a terrible bind. If the recession persists into the winter, that $150 million deficit could double or triple.

Worse yet, there's no financial umbrella to get Annapolis through another rainy day. Meanwhile, the cost of running mandated programs -- Medicaid, prisons, welfare -- continues to soar.

There are three options available, though legislators would rather ignore them: 1) cut the state payroll; 2) cut programs, and 3) raise taxes.

When private businesses face deficits, they do not hesitate to swallow these bitter pills. They have learned how to survive bad times.

The marketplace is a demanding taskmaster. If CEOs fail to act decisively to make sweeping changes, they are out the door. The law of survival gives CEOs backbone.

When MNC, the parent company of Maryland National Bank, faced huge losses, it sold off subsidiaries, eliminated far-flung operations, returned to its basic banking business, raised fees and cut staff. MNC now is eliminating 1,000 jobs, about 11 percent of its work force.

USF&G is doing much the same thing -- shutting money-losing divisions, lopping off 2,000 jobs and downsizing the company.

Debt-plagued Black and Decker also took this route -- selling its least profitable divisions, eliminating jobs and improving margins.

Legislators, meanwhile, continue to resist such actions. They are adamantly opposed to raising taxes. They are vocal about preserving existing programs. They are strident about averting layoffs.

If they acted this way as private-sector CEOs, they'd have been canned long ago.

Are no state programs expendable? Are all agencies so vital we cannot do without them?

Why is it that CEOs can find programs to cut but the governor and General Assembly leaders cannot?

Why is it that even in a period of recession, the governor is unable -- or unwilling -- to cut the size of his 109-member staff? Gov. Harry Hughes operated with a staff of 70.

Why is it that the General Assembly is unable -- or unwilling -- to cut its own budget?

And why is it that the state's massive public relations apparatus cannot be sacrificed (including the governor's own PR office -- one of the largest in the nation)?

Mr. Schaefer, Speaker Mitchell and Senate President Thomas V. Mike Miller have evaded these questions. It is politically risky to cut jobs, sever programs or raise taxes.

When the governor endorsed the Linowes tax package, legislators shouted, "No way!" When the governor said he would lay off 1,800 workers, legislators shouted, "No." When the governor tried to cut social service expenses, advocacy groups screamed so loud he backed down.

State House leaders keep looking for painless solutions to this fiscal crisis. There aren't any.

Circumstances may yet force the governor and legislators to make business-like decisions. The cuts so far have been relatively easy -- yet they haven't changed the bleak outlook. Deficits will continue to plague Maryland, endangering its sacred triple-A bond rating, until elected officials start acting like leaders.

The work force has to be reduced (it grew a whopping 7,000 in Mr. Schaefer's first term). A 4 percent cut (less than half of the Schaefer-era growth) would yield a permanent savings of $100 million a year.

Agencies have to be merged to reduce overlap and size, improve efficiency and cut red tape.

Programs identified as expendable have to be phased out -- despite public pressure.

And the state's taxes have to be made sensible and progressive enough to meet revenue needs for the next decade.

Without such steps, Maryland will continue to stagger from one fiscal crisis to the next. The state will continue to deliver services inefficiently. And political leaders will refuse to act decisively for fear of offending voters -- even if the state's fiscal well-being is at stake.

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