Make no mistake: last week's warning from Gov. William Donald Schaefer's deputy budget chief of a $300 million deficit bTC just one month into the new fiscal year bodes ill for state workers and for state programs. Layoffs seem a near-certainty, as do some painful reductions in services. Higher taxes loom ever-larger on the horizon.
Fred Puddester's bleak revenue-and-spending forecast confirms what was clear earlier in the year. Maryland's spending practices far exceed its incoming revenue. Even worse, Mr. Puddester sees no change in the next few years. The recession continues to shrink tax receipts while it simultaneously increases the need for the state's "safety net" services extended to the growing numbers of citizens who have fallen on hard times. The current budget gap is $300 million, but next year's deficit is already pegged at $675 million.
The governor's department heads have been assigned the unpleasant task of picking the programs that will absorb the bulk of these cuts. This almost definitely will include staff reductions as programs are reduced in scope or eliminated. Regional offices will be shuttered. The state may have to rely on computers and automated equipment to do the work now performed by hundreds of workers.
This sort of downsizing is necessary and long overdue. It is the sort of exercise that is essential for the Schaefer administration to gain credibility with the public and regain credibility with the General Assembly. But squeezing $300 million out of agencies that already were reduced in size by 16 percent in the last budget will be painful. This time, the screams from vested constituencies will be loud and long.
Yet that's only half the story. Nearly 80 percent of state government spending -- aid to public education, Medicaid, welfare, prisons -- is mandated by state or federal law and cannot be cut by the governor. Moreover, expenses in these programs are growing rapidly (15 percent last year alone). With the continuing lag in revenues, the Schaefer administration cannot close the budget gap next year without finding new sources of income.
An expanded sales tax to encompass services now exempt from taxation is a distinct possibility. A higher sales tax levy may also be considered. The General Assembly is studying a wide range of options. But adopting any of these revenue-enhancers isn't feasible until early next year. Until then, the governor will have to roll up his sleeves and start the painful process of shrinking the size of his government. At this stage, there is no other way to bring Maryland's budget back into balance.