Agencies may die, Schaefer warns He says budget woes may shrink state government.

November 14, 1991|By William Thompson | William Thompson,Evening Sun Staff

Gov. William Donald Schaefer is warning Cabinet heads that Maryland's fiscal crisis is so severe there could be only enough money next year to keep afloat a portion of the dozens of departments and agencies that make up state government.

Schaefer's admonition -- although characterized as a worst-case scenario -- is the darkest pronouncement in a year-long litany of bleak budget news. The governor made the comments to some Cabinet and agency heads at informal budget meetings this week.

Without new taxes or changes in the laws that require him to spend large amounts of money for specific programs, Schaefer said, he could be forced to assemble a budget for the next fiscal year that drains state funding from all departments but those that lawmakers call "the big five" -- health, welfare, higher education, public safety and juvenile services.

Aides and lawmakers aware of the governor's statements said it is nearly impossible to imagine the effect of such a budget. Under the governor's bleak budget picture, Maryland could be without services now routinely offered by a gamut of agencies ranging from the Office on Aging to the Veterans Commission.

"I don't think any of us know what would happen," said House Speaker R. Clayton Mitchell Jr., D-Eastern Shore. He said he believes Schaefer is "very serious" about his budget predictions.

"I think he's living up to what he said, that there won't be any more money," said Mitchell.

Mitchell's sentiments were supported by top Schaefer aides, who said there may be no other way to draft a budget without increasing so-called discretionary spending in the state's $11.5 billion budget.

"He's dead serious," said Paul E. Schurick, Schaefer's chief of staff. "There is no indication that there is going to be any new money to spend. Anybody that thinks this is a game is foolish. If anybody thinks this is a ploy [to raise taxes, then he] doesn't understand the demands on government."

Schaefer said yesterday that when he proposed the possibility to one agency head that general funds may not be available, the reaction was "startling."

The governor is required by state law to submit a balanced budget to the General Assembly, which will convene in Annapolis in January.

After a bitter defeat in a legislative battle last session over his plan to raise $800 million in new revenues, Schaefer has said repeatedly he will leave it up to the General Assembly to push for new taxes next year. However, Schaefer complains frequently that state spending mandates take away his flexibility over the budget and make it harder for him to keep the budget balanced.

Because fiscal experts are predicting a revenue deficit of anywhere between $700 million and $900 million next year, the governor is telling his Cabinet that the general fund may not have enough money to keep the government bureaucracy intact, according to his aides.

The transportation department, which gets most of its funding through special gasoline taxes and motor vehicle fees, would not be as adversely affected under Schaefer's dire prediction.

"You almost have to delete the rest of state government" to fund the five largest departments, said Frederick Puddester, Schaefer's deputy budget chief. And, even with the $650 million in general funds that could be shifted from all other agencies, said Puddester, the "big five" would be funded at levels below current departmental budgets.

"It's stark reality," said Del. Charles J. Ryan, D-Prince George's, who chairs the House Appropriations Committee. But, he continued, "Nobody wants it to get to that."

One way to avert such a budget would be for the legislature to relax laws mandating specific levels of spending earmarked for such programs and services as medical assistance, education, police protection, libraries and scholarships.

At a meeting yesterday of the Spending Affordability Committee, an advisory group that recommends limits on state spending, H. Furlong Baldwin, chairman of the board of Mercantile-Safe Deposit and Trust Co., said lawmakers have "a God-given opportunity to reconstruct the way government is managed."

Baldwin said the legislature could redirect $500 million by relaxing statutory- and entitlement-spending mandates.

The state's mandated expenditures will increase spending by $500 million next year, said Warren Deschenaux, a fiscal analyst.

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