State government spending to rise 10% as personal incomes go up only 6.5%

June 21, 1992|By John W. Frece | John W. Frece,Annapolis Bureau

ANNAPOLIS -- State spending this coming year, expanded by a tax increase, will exceed the growth in personal income among Marylanders by 3.5 percentage points, according to a new analysis of the 1993 budget.

That's far above the guidelines the state has followed for the last decade as it attempts to match increases in state spending with taxpayers' ability to pay.

Only once since the "spending affordability" concept was first employed in 1983 has the increase in state government spending exceeded the growth in personal income.

An analysis by the legislature's Department of Fiscal Services, however, shows that spending in fiscal 1993, which begins July 1, will be $823.3 million, or 10 percent higher than the twice-reduced spending level during fiscal 1992.

That 10 percent spending increase compares with a growth in personal income of 6.5 percent.

The $286.6 million difference is nearly the size of the general fund tax increase approved by the 1992 General Assembly.

"It almost correlates with the tax increase," said House Minority Leader Ellen R. Sauerbrey, one of the architects of Maryland's voluntary spending affordability process.

"If we hadn't raised taxes and had stayed within existing revenues, we would have pretty much stayed within our affordability limit," said the Baltimore County Republican.

For the first time since 1983, the state's Spending Affordability Committee did not issue a formal report before the legislative session. Such reports generally tell the governor how much money the legislative leaders think the state can afford to spend.

When the governor's budget has exceeded the limit, the legislature has usually reduced it.

But, because the state faced a projected 1993 deficit -- the result of recession and a sharp drop in revenues -- there appeared to be no way the state could spend at a rate higher than the growth of personal income unless taxes were increased, said Sen. Laurence Levitan, a Montgomery County Democrat who chairs the Budget and Taxation Committee.

Also, because there was no way last fall to predict what kind of tax increase the legislature might approve, the Spending Affordability Committee simply quit meeting and decided not to make a recommendation, Mr. Levitan said.

"Whenever you raise revenues, this is going to happen," he said. He said the high spending ratio is the result of comparing a 1992 budget twice reduced because of falling revenues with a 1993 budget bolstered by a tax increase.

He said it was not as if the General Assembly "spent wildly." Most of the money, he said, went to meet a long-term commitment to education, and to keep pace with expanded Medicaid and prison populations.

While the mechanics of the spending affordability process require a comparison of spending growth with growth in personal income, legislative leaders have freely adjusted the permissible level of spending to reflect current revenue projections or other factors.

In 1984, for example, the spending limit was set at 80 percent of the growth in personal income.

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