State deficit snowballs Revenues plummet

program cuts loom

September 14, 1991|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- Maryland's economy is not rebounding, and the state's budget deficit is growing from large to massive, fueling talk by legislators of large tax increases, deep cuts in government programs and fear that the state's prized triple-A bond rating could be lost.

The latest wave of bad news came this week in a memorandum to General Assembly leaders from their chief budget adviser, William S. Ratchford II. He warned that the current budget year deficit previously estimated at $350 million appears to be approaching $450 million.

He blamed the still sluggish economy for most of the problem, saying that tax revenue -- mostly from personal income and sales taxes -- now is expected to be $215 million below budget estimates.

Frederick W. Puddester, deputy budget secretary to Gov. William Donald Schaefer, said that the administration was seeing "the same continuing deterioration in revenues." However, without providing details, he said his office's forecast was slightly more optimistic than Mr. Ratchford's.

Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee, reiterated his call for a special legislative session in November to raise the state's 5 percent sales tax to 6 percent, effective Jan. 1. Such an increase could raise an estimated $150 million over the final six months of the fiscal year, he said.

"The sooner we get it in place, the better off we'll be in '92," he said.

His more cautious House counterpart, Appropriations Committee Chairman Charles J. Ryan Jr., D-Prince George's, said that it was clear government spending must be cut. But he said that it was premature to speculate on higher taxes until legislative leaders sit down with Governor Schaefer to decide jointly about how much should be spent on major state education, health-care and social programs.

The problem, he and Mr. Levitan agreed, is that the governor and the presiding officers of the two houses are barely on speaking terms. It was that chasm in communication that prompted Mr. Ratchford to suggest the bond rating could be in jeopardy.

"The consensus and cooperation in Maryland has been a positive aspect in the rating agencies' perceptions of the state's overall financial management," he said in his Sept. 9 memo, first made public in The Evening Sun. "While it is likely the state will not be downgraded [before its scheduled Oct. 9 bond sale] if positive action appears to be in the offing, a solution will have to be developed by the February bond sale."

Mr. Ryan insisted that the two sides can work together, but when asked about relations between the branches, he replied: "They're not any better."

Senator Levitan said that he did not believe a consensus for a tax increase will begin to build until legislators put congressional redistricting behind them, and special interest groups and county officials begin to feel the brunt of broad budget cutbacks the Schaefer administration is expected to announce, possibly as early as next week. "It is safe to say [the reductions] will be devastating," Mr. Puddester said, but he declined to provide specifics.

The cuts are expected to include at least $114 million from executive department budgets, possibly including scores of state employee layoffs.

In addition, Mr. Ratchford said that another $103 million is expected to be trimmed from state aid to local governments, boards of education and community colleges; and $13 million more in grants to private colleges, the University of Maryland Medical System and other entities.

Those reductions, combined with a plan to defer up to $70 million in Medicaid costs into the fiscal year 1993 budget, would eliminate a deficit of about $300 million, Mr. Ratchford said. But if the $450 million figure is accurate, the balance "can only be eliminated" by cutting more spending, increasing revenues, or both, he said.

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