More red ink is on the way New deficit estimate could mean another round of cuts.

October 30, 1991|By Marina Sarris | Marina Sarris,Evening Sun Staff William Thompson contributed to this story.

Maryland faces another $150 million budget deficit this year, even after a sweeping plan for $450 million in cuts and 1,500 layoffs takes effect in November, legislative and administration analysts say.

The newest deficit estimate could mean yet another round of reductions in aid to local governments, schools and social programs and more employee firings, depending on how state officials decide to balance the budget, still plagued by recession.

"The problem is severe," said Charles L. Benton Jr., the governor's secretary of budget and fiscal planning.

He attended a briefing yesterday by the legislature's budget analysts to the Spending Affordability Committee.

Benton later said he generally agreed with the analysts' $150 million deficit estimate.

The administration of Gov. William Donald Schaefer hopes to work with state lawmakers to solve the latest problem during the next month or two, Benton said.

Without the legislature's help, the administration would have to present a list of "severe" budget cuts in December, Benton said.

Some budget cuts require legislative approval, as do all tax increases.

Budget cuts or taxes, or both, could be used to erase the $150 million deficit this year, along with a projected shortfall next fiscal year that could be as high as $700 million.

One possible solution, which could be accomplished without legislative approval, would be to fire 2,000 more government workers this winter, furlough employees by eight days, reduce workers' salaries by 1 to 2 percent and cut deeper into state agencies, according to legislative analysts.

"We're not recommending this plan," cautioned William S. Ratchford II, the lawmakers' chief fiscal adviser.

Gov. Schaefer, who received news of Ratchford's briefing while he was touring the Eastern Shore yesterday, said he believes it is unfair to lean heavily upon state government workers to balance the budget.

Employees did not receive scheduled pay raises this year. At least 1,500 of them will be without jobs in November, when the $450 million budget-slashing plan approved this month takes effect.

But it may be impossible to make another, almost-certain round of cuts in the state's general fund without affecting state jobs and paychecks, Schaefer conceded. "It may boil down to that."

Offering only generalities about where the cuts may be made, the governor said they likely will be "repetitions" of previous reductions.

Although he has little doubt that more cuts are in store, Schaefer said, he will wait for the state Board of Revenue Estimates to provide its deficit projections before he makes a budget proposal.

The board, which consists of Benton, the state comptroller and treasurer, usually meets in December. It could meet earlier at the governor's request.

Schaefer railed against his favorite fiscal bogyman -- mandated spending. State and federal laws require Maryland to spend up to 80 cents of each tax dollar received for particular purposes, such as education, health care and welfare, he said.

With little discretionary spending allowed within the state budget, he continued, lawmakers' hands are tied when it comes time to make cuts -- unless they change the law.

Faced with declining revenues caused by the recession, Maryland already has had to cut its budget five times in more than a year. All together, the state has chopped about $1 billion from its budget since last fall.

State officials had hoped the economy would have improved by now, but so far, Ratchford said, the end is not in sight.

Revenues from taxes dropped during the recession, while the ranks of the unemployed swelled, fueling the demand for state-funded welfare, medical aid and other assistance programs.

"We haven't seen evidence of a turning point yet," Ratchford said. "We may be turning up, but we don't see it in the data we have."

He explained that the most up-to-date economic statistics reflect what happened about a month or more ago.

The news gets worse for the next budget year, which begins July 1.

The state faces a $700 million deficit during that year, although it could erase some of the shortfall by firing thousands of government workers, reducing scheduled increases in aid to schools, local governments and welfare recipients, and eliminating scheduled pay raises for employees, legislative analysts said. They did not, however, recommend those actions or any others.

A tax increase, which some say could help the budget problem, remains a hot topic in Annapolis. A legislative study group yesterday outlined potential tax reforms and increases but stopped sort of advocating a tax increase.

The Joint Study Group on Revenues, which consists of senators and delegates from fiscal committees, said lawmakers should consider increasing sales and business taxes and licensing fees, rather than income taxes, if they decide to raise taxes.

The group also said the state should re-examine a provision of the law that allows local governments to adopt caps in taxable property assessments lower than the state cap of 10 percent.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.