Revenue predictions take long-awaited turn upward Medicaid funds make the difference

March 12, 1992|By John W. Frece | John W. Frece,Annapolis Bureau

ANNAPOLIS -- Something happened in the State House yesterday that hasn't happened for a long time: The governor got some good economic news.

For the first time since December 1989, Gov. William Donald Schaefer was told that state revenues might actually go up next year.

The state's Board of Revenue Estimates said 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 board 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 fiscal 1993, which begins July 1.

Legislative leaders, who have been laboring for months to get both this year's and next year's budgets in balance, had feared much worse news.

Earlier this week, members of the Senate's budget committee predicted the Board of Revenue Estimates would say that revenues this fiscal year are down by as much as $50 million more and down for next year by as much as $100 million.

They were worried that they might not cut spending enough, or raise enough new taxes, to cover another large shortfall.

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.

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.

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

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.

l 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.

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.

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