Tax-or-trim time looms again with projected deficit Md. faces major tax or major changes

October 27, 1991|By C. Fraser Smith | C. Fraser Smith,Annapolis Bureau of The Sun

ANNAPOLIS -- The ever-widening chasm between state spending and state revenue leaves Gov. William Donald Schaefer and legislative leaders on the brink of a major tax increase or radical changes in the shape of government in Maryland.

The 1992 legislative session is more than two months away, but reports that the state must cope with another massive deficit by the end of this budget year make the period of reckoning almost inevitable.

No firm figures were available last week, but Schaefer administration sources said current estimates of the gap range from $40 million to $220 million.

"There's a hairy monster of some size out there," an administration official said.

Governor Schaefer has said repeatedly that another round of budget cuts is inevitable, but he has provided few details. The administration is caught between its desire to impress upon Marylanders the seriousness of the situation and the risk of fueling the view that it simply wants to raise taxes.

After five rounds of spending cuts in which a total of more than $1 billion was axed and 1,548 state workers were fired, the state could find itself looking at another $900 million shortage: the $200 million or so that may be needed this fiscal year and a projected shortfall of $700 million next year.

Since his call for a restructuring and an increase of taxes was rebuffed by the legislature last year, Mr. Schaefer has refused to discuss raising taxes. But few doubt that he would rather do that than cut more deeply into state help for the poor, for local government and for higher education.

Mr. Schaefer has been waging a public education program, asserting that people have not fully grasped the severity of their situation. He says that Marylanders do not realize how much money the state provides to local governments and that they will eventually cry, "Enough!," when the cuts are made visible.

The governor sides with those such as state Sen. Laurence Levitan, D-Montgomery, who says, "We can't cut our way out of this problem." Mr. Levitan wants to raise the 5 percent sales tax by one percentage point, an action that would raise about $300 )) million if the new money were collected over the course of a year. The more time that passes without a sales tax increase, he observes, the less money will be collected this budget year.

rTC Others such as Delegate Ellen R. Sauerbrey, R-Baltimore County, say just as vociferously, "We can't tax our way out of this problem." Her view is that Marylanders, when they see the scope of the problem, will want to solve it by making government smaller.

"I don't want the public bamboozled into thinking there aren't other ways," she said.

Some legislators believe the solution will be a combination of more taxes and radical cutting. Budget Secretary Charles L. Benton says, "The question is whether the legislature will look at an adjustment of our revenue structure."

In other words, will the Assembly approve a tax increase?

The answer, says House Speaker R. Clayton Mitchell Jr., D-Kent, cannot be given until a summerlong study of state spending is completed, possibly next week. Mr. Mitchell and other fiscal leaders, following their instincts as well as the dictates of the voters, have argued that fundamental changes may be needed, not just in the tax structure but in the structure of Maryland government itself.

For example, Mr. Mitchell proposes to shift the responsibility for education and health care to the wealthier and healthier counties -- while providing state aid to the poorer ones. Such a shift would lighten the state budget load considerably.

If those changes were made, counties and their residents would see how much aid the state has been providing and each county could decide how much it wanted to spend on services such as schools.

Other cuts might also be considered, Mr. Mitchell says, as the governor and the legislature explore how much smaller government can and should be.

Mr. Mitchell proposes a series of town meetings -- to be held in Annapolis, probably, in the interests of saving money -- to find out what people want. Until all the data is in hand, the speaker says, raising taxes would be "very, very dangerous" -- dangerous to the orderly processes of government.

Dangerous, also, for practical and political reasons. Delegate Timothy F. Maloney, D-Prince George's, observed during the recent legislative session that the state works with an undetermined but limited taxing power -- a limit imposed as much by politics as by ability to pay.

If the state must have more revenue, the legislative leadership can make a more rational case when it knows the dimensions of the deficit -- the actual size of the "hairy monster out there."

When the revenue picture is clearer, when the General Assembly has more carefully contemplated the pluses and minuses of downsizing -- and when it assesses the will of the taxpayers -- the leadership will have a better fix on the problem.

Finally, if legislators must vote to raise taxes, they only want to do so once -- and hope the solution they settle upon will hold at least through the next election in 1994.

The Assembly leadership reckons it will have a better chance of getting the votes it needs during the regular 1992 session when senators and delegates are worried about how legislative redistricting will affect them -- something the leadership will be able to control to some extent.

Arm-twisting in the redistricting context will bring the sharpest pain during the toughest choices: Back me on taxes, the leadership will say, and I will try to keep you in a district where you can be re-elected.

Voting for taxes will be tougher than ever, of course, because in many districts voting for more taxes could render a representative unelectable.

7/8

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