U.S. Medicaid funds ease Md.'s pain Money will help offset dip in state's tax, lottery revenues.

March 11, 1992|By John Frece | John Frece,Annapolis Bureau

ANNAPOLIS -- For the first time in a long time, the state got some modestly good economic news today.

Gov. William Donald Schaefer was told that a new agreement with the federal government will bring in enough federal Medicaid funds to offset most of a continuing decline in sales tax and lottery revenues. The Medicaid money, the state's Board of Revenue Estimates said, will not be enough to prevent another $7 million drop in revenue estimates for this fiscal year, but it is expected to produce a net $13 million revenue increase for the fiscal year that begins July 1.

The announcement marked the first time since December 1989 that the governor has been handed a prediction that revenues might actually be going up.

There are other signs that the economy may be on the verge of the long-awaited recovery, said Marvin Bond, a spokesman for state Comptroller Louis L. Goldstein.

Sales tax revenues for the months of December, January and February, he said, were above the amounts collected during the same months a year ago -- the first time that has happened since October 1990.

That was the good news. The bad news was that the level of sales tax collections still is low -- lower, in fact, than the amount collected by the state two years ago, Mr. Bond said.

But he said at least the trend appears to be up. Also, he said an analysis of sales taxes in February indicates that sales of lumber, steel, large equipment, furniture and appliances appear to be on the rise, a customary precursor of improvement in the state's stalled construction industry.

Most national economists, he added, now are predicting a recovery will begin in the second or third quarter of 1992.

As a variety of state transportation and public works projects expedited by Governor Schaefer get under way, the economy should be further stimulated, Mr. Bond said.

But Governor Schaefer, showing no joy in the latest figures, said the state already has lost about $1 billion in revenue -- and spending -- over the past year and a half.

"We're not $7 million off," he said. "We're not $25 million off. We're a billion dollars off. Let's not kid ourselves." He complained that the state's costly Medicaid program "is out of hand," welfare rolls continue to expand, and new inmates are pouring into the state's prisons at a rate of 100 a month.

The only reason the revenue picture was not worse was an agreement between the federal government and the state Department of Health and Mental Hygiene through which the state is to receive another $28 million this year and $48 million next year to help pay for psychiatric care for the poor.

That infusion of funds nearly offset an additional $25 million drop in sales tax revenue predicted for this year and next, and a $10 million decline in lottery revenue.

"We're balancing the budget on the genius of [Health Secretary Nelson J.] Sabatini," Mr. Schaefer said. "That's a tough way to have to balance the budget."

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