Md. deficit continues to grow '92 budget shortfall up by $149 million

October 30, 1991|By John W. Frece | John W. Frece,General Assembly's Department of Fiscal ServicesAnnapolis Bureau of The Sun James Bock of The Sun's metropolitan staff contributed to this article.

ANNAPOLIS CVB — ANNAPOLIS -- With the ink barely dry on a $446.5 million deficit-reduction plan put into effect just one week ago, state budget advisers delivered the grim but expected news yesterday that Maryland already faces a new deficit pegged at $149.5 million.

The announcement means that Gov. William Donald Schaefer and the General Assembly will have to find a way to cut state spending for the sixth time in a little more than a year and for the second time since the current fiscal year's budget went into effect four months ago.

Mr. Schaefer, on a daylong Eastern Shore tour, said in Salisbury: "This time it'll be more money from local government and more money from people programs. It's serious."

This latest flood of red ink means that the "October solution" -- a politically distasteful array of 1,500 layoffs, sharp reductions in state programs and deep cuts in state aid programs for local jurisdictions -- is already obsolete even before the month is out, one legislative budget analyst observed.

"This is exactly what the taxpayers said they wanted -- cut government, state employees, reduce expenditures, no tax increase," Mr. Schaefer said. But he said the public has not yet felt the effects of the last round of cuts, which do not take effect until Nov. 5, and predicted there would be no public outcry for taxes until citizens feel they are suffering.

William S. Ratchford II, director of the legislature's Department of Fiscal Services, attributed $130.6 million of this latest deficit to a continuing decline in state tax revenues. The balance, he said, stems from spiraling state Medicaid costs, for a higher-than-expected cost to turn over to private operators the Charles H. Hickey Jr. School for juvenile delinquents, and a higher-than-budgeted cost for educational placements for handicapped children.

If there was any good news in the figures, Mr. Ratchford said, it was that state revenues no longer appeared to be in a "free fall," but rather appeared to be bottoming out. Nevertheless, he told legislative committees yesterday that his budget analysts have not yet seen "any evidence of an upturn" in the economy.

Charles L. Benton Jr., Governor Schaefer's budget secretary, said his department's most recent forecast is almost identical to Mr. Ratchford's and said he intended to begin working with legislators within the next 30 days or so to develop yet another budget balancing plan. The governor indicated a new plan probably will not be unveiled until the state's Board of Revenue Estimates gives its official forecast in early December.

"To cut the budget by $150 million without the assistance of the legislature would be very, very drastic, though not impossible," Mr. Benton said.

Sen. Laurence Levitan, D-Montgomery, reiterated his call for a tax increase, and suggested it might be easier to corral the simple majority required to pass such a proposal in a special legislative session than to wait for the regular 1992 General Assembly session to begin in January, when a three-fifths vote would be required for an emergency bill.

The tax question will clearly be a central issue in that fast-approaching session, when lawmakers must deal with a fiscal year 1993 budget that Mr. Ratchford said yesterday is already out of balance by an estimated $699 million.

But under questioning from Senate Minority Leader John A. Cade, R-Anne Arundel, Mr. Ratchford conceded the $699 million deficit assumes spending in 1993 at a "business-as-usual" pace, including $83 million for state employees' raises, a continuation of welfare grants at current levels, a scheduled large increase in state aid for education, and "normal" inflationary increases in government across-the-board.

"I understand you have to make some kinds of assumptions," Mr. Cade complained, "but I wouldn't make an assumption of a general [salary] increase while we're still in a recession."

Even as legislators were being briefed on the latest budget problems, various special-interest groups hurt by the budget reductions were encouraging lawmakers to raise taxes.

Budget problems in fiscal 1992

Maryland's estimated additional shortfall this year, in addition to $446.5 million cut Oct. 23:

Revenues down $130.6 million

Agency spending up 18.9 million

(Primarily Medicaid)

Total new deficit $149.5 million

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