For the first time in Maryland's summer-fall budget crisis, Gov. William Donald Schaefer has uttered the dreaded "T" (for Tax) word. "It's now time to face realism," he said yesterday after receiving more gloomy news on sagging state revenues. He is staring at an 18-month deficit that exceeds one and a quarter billion dollars.
Such an enormous gap cannot be closed without adopting a combination of deep program cuts and higher taxes. That was the governor's message as he pledged to continue squeezing government programs for more savings while also opening the door to possible tax hikes. He singled out one likely target, a higher sales tax, which he said would make sense only if Maryland's numerous special-interest exemptions are removed and the tax is broadened to include more services.
Yet the "T" word remains a sensitive political utterance. While the governor was careful to say he'd "look at" a "revised sales tax," someone else will have to take the lead in proposing the tax. He's gun-shy after being pounded -- quite unfairly in our view -- for championing suggestions of the Linowes tax-reform commission.
Legislators ought to pick up on the governor's broad hint. Earlier this fall, Sen. Laurence Levitan, the influential budget committee chairman, proposed raising the sales tax. Now Mr. Levitan and other responsible statesmen should pursue that option, along with other revenue suggestions made by legislative study groups and the Linowes panel.
At the same time, simply raising taxes isn't enough to end this fiscal crunch. Mr. Schaefer is working on yet another budget-cutting plan, this time to the tune of $220 million. That is the new gap for this year as projected by the Board of Revenue Estimates. The panel's view of the state economy is troubling. Sales tax and income tax receipts are anemic. And in an alarming trend, total employment has been dropping. There are fewer Marylanders working now than in 1989. The board's prediction for next year: a weak recovery, forcing the state to continue its retrenchment.
Come January, the governor will take the unusual step of offering two budgets -- one with Draconian cuts but no tax increase, and a second budget that preserves most programs but only if additional taxes are approved. This will put legislators in an awkward situation.
There is another option. By Christmas, Mr. Schaefer and lawmakers hope to hammer out a plan for closing this year's $220 million budget gap. They also should seek an early agreement on erasing next year's $1 billion deficit. That's the best way to restore public confidence in government's ability to deal with this continuing crisis.