Red Ink in the State House

September 20, 1991

Bad news continues to dog Maryland's fiscal leaders. Now the state's current-year deficit is pegged at somewhere between $395 million and $450 million. That's on top of next year's predicted shortfall of nearly $800 million. Yet there still is no agreement on how to close this $1.25 billion budget gap, or when.

It will take a combination of drastic program cuts, layoffs and higher taxes to put Maryland's state budget back in balance. The longer legislative leaders wait before acting, the higher the deficit -- and the shorter the fiscal time-frame to make meaningful spending cuts or tax changes.

That's why House Speaker R. Clayton Mitchell ought to re-think his refusal to consider a special legislative session this fall to raise state taxes. One-third of the current-year deficit ($150 million) could be eliminated, for instance, by upping the state's 5 percent sales tax to 6 percent, effective Jan. 1. But if such a tax decision is put off until the spring, it will take Draconian budget cuts to close this fiscal gap in just a few short months.

Most imperiled, it appears, is aid to local subdivisions. Gov. William Donald Schaefer probably will impose a 25 percent cut in county and city assistance next month -- and a far bigger cut next year. This will hit hard at local school programs and force county officials to implement their own round of program reductions and layoffs. But the state's deficit is so immense that such chain reactions may be unavoidable this year and next.

One thing State House officials must avoid is jeopardizing Maryland's triple-A bond rating. This is the reason the silly personal feuding between the governor and legislative leaders has to end -- for good. The governor and legislative leaders have no choice but to reestablish lines of communication. A joint plan of action must be formulated to end Maryland's budget problems before the New York bond houses start getting nervous.

The first unpleasant task must be handled by the governor, who has to take the lead in cutting on-going state programs, imposing layoffs and reducing local aid. But the next move will be up to Speaker Mitchell and Senate President Thomas V. Mike Miller. They cannot dawdle until next March -- vainly awaiting an economic revival -- to formulate their revenue package. By then, it may be too late to salvage the state's triple-A rating.

If State House leaders are truly concerned about retaining Maryland's record for fiscal integrity and economic stability, they must act this fall to implement both deep spending cuts and higher taxes. Nothing will be gained by waiting -- except that the deficit may grow even more ominous. Regardless of the consequences, Messrs. Schaefer, Mitchell and Miller should -Z move expeditiously to eliminate Maryland's enormous vat of red ink.

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