ANNAPOLIS -- In the quiet of a fourth-floor conference room in the House Office Building last week, a group of legislators and their staffs played the opening moves of a political game that could change the face of state government.
Tentatively at first, and then warming to the task, the lawmakers circled the issue they know they must come to grips with over the next five months:
Can Maryland's budget problems be resolved by cutting back on what state government does, or will that prove impossible, making a tax increase inevitable?
Many of the hardest and most critical decisions that will determine how that question is answered must be made in the next six weeks.
The choices will be wrenching: Which programs will get squeezed? Which will get cut entirely? Who will lose their jobs?
If taxes become inescapable, which ones will be raised? By how much? And what will be the political price for doing that in the midst of a recession?
The first to tackle this problem will be a work group of 13 delegates and 13 senators, already dubbed "the Gang of 26." The options they choose from probably will be drawn from lists prepared by two key budget advisers, Frederick W. Puddester, the deputy budget secretary to Gov. William Donald Schaefer, and William S. Ratchford II, director of the legislature's Department of Fiscal Services.
"I personally believe we can't get through this next year without some form of tax increase," said Senate President Thomas V. Mike Miller Jr., D-Prince George's, as members of the work group staked out their initial positions.
House Speaker R. Clayton Mitchell Jr., D-Kent, immediately disagreed.
"I think the people believe the system is broke and needs fixing, but I don't think they say it needs fixing by adding more tax dollars," he said.
At the speaker's request, banker H. Furlong Baldwin, chairman of Mercantile Bankshares Corp., gave the group his version of what the private sector sees and expects.
"This is a time to readdress what we're doing," he said. "You all have a God-given opportunity to restructure state government. As the governor said, 'Business as usual is over.' "
Mr. Baldwin's message was that legislators who have always wanted to streamline government now have the best excuse in the world to do it: There is no money.
It is a point that Mr. Schaefer seemed to embrace when asked about deep spending cuts ordered recently by Baltimore Mayor Kurt L. Schmoke. Among the mayor's measures was the closing of several firehouses. Mr. Schaefer said, almost enviously, that when he was mayor he wanted to close some city firehouses. The problem was that there always was enough money to keep them open.
Mr. Baldwin urged the lawmakers to turn this crisis to their advantage, to seize the opportunity to make drastic changes otherwise unthinkable. If 15 executive departments were appropriate in the high-growth 1980s, maybe consolidation to a smaller number makes more sense in the slow-growth 1990s, he said.
Maybe duplicative functions, such as personnel offices or public information offices, could be consolidated or even eliminated, he suggested. The trick, he said, is to cut out the cost of delivering services without cutting into the services themselves.
"You can do it, and without a dollar less going to a nursing home or a classroom," he said .
It was a theme that seemed to strike a responsive chord with many legislators, who are well aware that many of their constituents are pinching pennies to make ends meet and do not want to pay higher taxes.
Budget advisers to the General Assembly and the governor agree that a "structural imbalance" has developed in the relationship between revenues and expenditures. Put another way, the money the state obtains in taxes will never catch up with the state's current rate of spending.
The reasons behind this are complex, but they have to do with bTC changes at both the money-in and the money-out sides of the equation. Maryland no longer enjoys the fruits of a manufacturing economy, but instead has developed a less productive service economy. At the same time, programs expanded during the go-go '80s, and legally mandated cost escalators in the budget keep the price of government going up even as the revenues are going down.
Spending has to be permanently cut, more revenue has to be permanently raised, or some combination of the two is needed, Mr. Ratchford said. Anything else is merely a temporary fix, he said.
Over the next 18 months, the problem is a big one: The state faces a deficit of at least $150 million and possibly as much as $225 million in the current fiscal year (even with $446 million already cut from spending in October), plus a projected deficit of $700 million in fiscal year 1993.
The problem is so serious that Mr. Schaefer and the legislature have, at least temporarily, shoved aside their long-standing antagonism and begun to work together.