Gloomy money picture for state Legislature's spending study details need for revenue.

August 27, 1991|By William Thompson | William Thompson,Evening Sun Staff

The gap between Maryland's income and expenses could stretch to nearly $2 billion by the year 2000 if lawmakers don't make significant changes in the budget and tax system, according to a sobering economic forecast by legislative fiscal experts.

Despite predictions of a mild but sustained recovery from the recession, Maryland's long-term money woes could worsen because mandated programs will cost more and the

state's taxpayer base is shrinking, according to William S. Ratchford II, head of the General Assembly's fiscal services department.

Ratchford's projections came yesterday as lawmakers concluded the first half of a summer-long study of state expenditures and revenues, an exercise they had vowed to undertake last spring when they killed a Schaefer administration effort to raise about $800 million annually in new taxes and fees.

The legislature's four money committees spent most of the afternoon reviewing how the state spends its money and how much current programs will cost over the next 10 years if no changes in state services are made.

For example, budget experts said, if current trends in crime and punishment continue, by the end of the decade the state will spend $1.4 billion a year on its prisons and court system, about $100 million more than it will spend on its colleges and universities.

Most General Assembly leaders yesterday stopped short of calling for higher taxes, although one prominent lawmaker acknowledged that the prospect is possible.

"The groundwork's being laid," said Sen. Laurence Levitan, D-Montgomery, chairman of the powerful Budget and Taxation Committee. "Whether you get it or not, I don't know."

At the summer meeting of the Maryland Association of Counties in Ocean City this past weekend, Levitan told reporters he believed the legislature should meet in a special session this fall to raise taxes.

But yesterday, in keeping with the sentiment of other legislative leaders to hold off until their revenue study is completed, Levitan was more circumspect.

Not until lawmakers, business executives and voters have a chance to go over findings of the two-part study will he know for sure if a special tax session is needed, he said.

"You don't need a lot of people out there grandstanding," Levitan said. "You need them cooperating."

The revenue portion of the study is under way and should be made public in October, said House Appropriations Chairman Charles J. Ryan, D-Prince George's.

"When we're done with that, we'll put both halves together and decide where we'll go from there," Ryan said.

Barely two months into the 1992 fiscal year, the state already is facing a $365 million deficit in its overall $11.5 billion budget. Gov. William Donald Schaefer has ordered

Cabinet secretaries and agency heads to come up with budget cuts by the end of the month.

But deep cuts will balance the books only temporarily, according to budget experts. Without additional revenues, the state will face a deficit of about $605 million in fiscal 1993.

Economic forecasts compiled by Ratchford's staff showed that the state's baseline budget will continue to grow to accommodate increased spending on such mandated programs as health care and education. But without new revenue sources, the disparity between what the state gets and what it spends will become more serious. By the 1996 fiscal year, the gap will be about $1.3 billion, according to Ratchford. And by the year 2000, it will widen to about $2 billion.

Yesterday's gloom got even gloomier when Ratchford announced that the entire $125 million cut approved by the General Assembly during a special session would be needed to balance the 1991 budget.

Lawmakers had hoped that only about $110 million in cuts would be necessary, but they approved the extra money in case the state's economic condition proved to be worse than anticipated. If the extra money were not needed to balance the budget, the funds would have been returned to a special Project Open Space budget set aside to help local governments buy and preserve open land.

Although Maryland has not been hit as hard by the recession as have many other states, its recovery is not expected to duplicate the "robust economy" of the 1980s, Ratchford said.

The health of the state budget will be affected by several factors. They include the following, Ratchford said:

* Housing starts are rising, but there are still high vacancy rates in new apartments, office buildings and malls because of over-optimistic building.

* Personal income, which averaged 8 percent annual growth during most of the 1980s, is expected to grow at a rate slightly below 7 percent through the year 2000.

* Revenue from tobacco taxes is expected to decline while alcohol taxes should remain stable.

* The two fastest-growing segments of the state's population are those under age 17 and over 65 years old. The two segments receive more state services than any other age groups but pay the least in taxes.

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