But some of the fault may be ours Yes, Schaefer's a big spender

Frank A. DeFilippo

August 15, 1991|By Frank A. DeFilippo

GOVERNOR Schaefer is being bum-rapped on the tax-and-spend issue.

Oh, he's a big spender, all right. But most of the money he throws around is on eye-boggling construction projects and not the touchy-feely programs he cherishes.

Schaefer believes that in Annapolis pork is power. The General Assembly agrees. And that's the underlying reason for the governor's protocol standoff with legislators over responsibility for building projects in their districts.

The capital budget is an instrument of patronage, the system of rewards and punishments that makes government tick. Gathering votes in the General Assembly often requires trading off tangible objects in legislators' districts, objects like historic preservation projects, public parks, duck decoy museums.

This year the barrel of pork passed out to lawmakers is costing taxpayers $329 million in general obligation bonds. Nobody ever said democracy in action comes cheap.

But Schaefer's being blamed unfairly for the huge deficits in the state budget and the prospect of higher sales and income taxes next year, as well as another nickel on the gas tax.

One pot of money has nothing to do with the other. The capital budget pays for building projects through the sale of bonds, which in turn are defrayed by the state property tax. It hasn't gone above 21 cents in nearly 20 years.

The state operating budget of people programs is supported by state revenue sources such as the income and sales taxes and lottery proceeds, to name the three largest, as well as federal and special funds in certain categories.

But most people don't know the difference and probably don't care. To them, money is money and that's that. However, in the wonderful world of loose ends called government, all money is not the same. And therein lies not only the unintended consequence of Schaefer's big-spender image problem but the great maw of the budget deficit as well.

To begin with, the economy's a mess. Recreational dollars are scarce. Unemployment's up, consumer spending is down, dual scourges that throw both the income and the sales taxes out of whack.

For the first time since the sales tax was instituted in Maryland in 1946, the fiscal year just ended produced a negative cash flow -- $31 million less than the previous year's receipts. Housing starts are down dramatically, for example, and each new house that's built adds between $2,500 and $5,000 to sales tax collections.

Revenues from the state income tax are expected to be down by nearly $80 million from last year because of layoffs. Many of the unemployed are middle- and upper-level managers in high income brackets who will be forced to re-enter the work force at lower salaries, a double drain on income tax revenues.

Still, that's not the real bugaboo in the $11.6 billion budget that's already fallen short by $300 million since the new fiscal year began on July 1. The budget's as taut as an open umbrella, with less than one percent growth, the lowest rate of increase in the last quarter-century.

Fully 80 percent of the state's operating budget is made up of mandated programs -- programs approved by the General Assembly or federal programs that require state contributions according to fixed formulas.

Within that 80 percent, 30 percent of the state budget goes to federally mandated programs such as welfare and Medicaid. In fact, about half of the projected $300 million deficit is due to increased spending on Medicaid because of the number of Marylanders mugged by the recession. Because Medicaid is a federally mandated program, neither Schaefer nor the General Assembly has any control over its cost.

Another third of the budget is returned to local governments through various grants and aid programs. Baltimore city is by far the largest recipient of state dollars, an alms-giving industry that thrived, interestingly, when Schaefer was mayor and Marvin Mandel was governor.

Another 10 percent of the budget is devoted to education, a politically sensitive area where making cuts is a capital crime against the children of Maryland and a death wish that'll invoke the wrath of the teachers' unions.

Still another 10 percent of the budget supports the state's judiciary system and public safety programs. With the increase in crime in general and drug-related crimes in particular, the criminal justice system is a voracious gobbler of public dollars -- more criminals, more law enforcement officials, more judges, more prison space, more prison personnel. Depending on the level of security, housing a single prisoner costs $40,000 to $50,000 a year -- double the cost of sending a student to Harvard.

Maryland is a progressive state, a well-managed state. Many of the programs in effect in Maryland are the results of pressure from self-interest groups in the reform-minded '60s and '70s and were fleshed out in the high-flying junk bond euphoria of the '80s.

Schaefer's a big spender, all right. But it's not all his fault. Maybe some of it's ours.

Frank A. DeFilippo writes a biweekly column on Maryland politics.

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