Look for another budget crisis

Frank A. DeFilippo

June 25, 1992|By Frank A. DeFilippo

In my last column I incorrectly identified Baltimore City as tied for 26th in a list of the nation's 50 largest financially stable subdivisions. I was wrong. That honor goes to Baltimore County.

Frank DeFilippo writes every other week on Maryland politics.

THE SCHAEFER administration is quietly preparing to concede that it cooked the books to artificially inflate the 1992 budget and create a rosier view of Maryland's economy.

FOR THE RECORD - CORRECTION

Now, with a new fiscal year about to begin and the economy still dragging, Governor Schaefer is staring at the double-barreled prospect of another special session of the General Assembly and a new round of budget cuts or new taxes or both.

He does so against a backdrop of a half-billion dollars in new taxes that went into effect this spring and another series of bookkeeping adjustments (taxes) that begin with the new fiscal year next Wednesday. Moreover, several counties, among them Baltimore, Montgomery and Prince George's, took advantage of new taxing authority awarded to them by the legislature to increase their local piggyback taxes.

Ironically, Baltimore City did not. To avert budget deficits, the city received direct hardship grants to prop up its budget. As a result, the respected Crane's annual financial report on the nation's top subdivisions last week ranked Baltimore City in better financial shape than the state's wealthiest counties!

Using criteria such as financial stability and year-end budget status, Crane's had Baltimore City tied at 26th, Anne Arundel and Montgomery counties tied at 32nd and Prince George's County ranked all alone in 49th place.

To achieve the numbers he wanted and the programs he demanded, Mr. Schaefer projected a sunny-side-up annual growth rate in Maryland's economy of 6.8 percent. The $l unrealistically high figure created a pool of funny money and bloated the amount that Mr. Schaefer could spend.

During the General Assembly session last winter, legislative leaders privately disagreed with the governor, contending that the actual growth rate would be more in the 2 to 3 percent range. But Democratic lawmakers became part of the conspiracy by playing Mr. Schaefer's numbers game and going along with the high rate despite their suspicions.

Moreover, several county executives rejected Mr. Schaefer's upbeat forecast and during their own budget-making season created rainy-day funds to offset any future cuts in state aid to local governments that the inflated figure might produce.

Comes now the news from Comptroller Louis L. Goldstein that income tax collections are down by $68 million and sales taxes are off by $6 million -- a total tax drain of $74 million.

As if that weren't bad enough, the legislature's redoubtable director of fiscal services, William Ratchford 3rd, agrees with Mr. Goldstein on the $74 million shortfall for the current fiscal year. But Mr. Ratchford stretches the numbers a step farther and presages a deficit of $137 million in the 1993 fiscal year beginning July 1.

Now the Schaefer administration is trying to play catch-up. And it appears that more bad news is on the way. Mr. Schaefer's numbers crunchers are attempting to reconcile the differences between their own figures and the deficit projected by Mr. Ratchford. According to insiders, they are ready to admit that Mr. Ratchford's numbers appear more believable than Mr. Schaefer's -- mainly because of the governor's high-gloss 6.8 percent growth prediction.

The new revenue shortfall comes after a tetchy General Assembly session that required an extension beyond the 90-day adjournment deadline for the first time. And House Speaker R. Clayton Mitchell Jr., D-Kent, who initially opposed any new taxes, threatened to strip delegates of their leadership positions unless they supported the tax package that he ultimately helped design. The 25 House Republicans voted bloc-solid against the tax package.

There is no sense of what the next direction will be in Annapolis. Following the assembly's April adjournment, Mr. Mitchell ordered cooling-off period to restore calm and camaraderie among House members. He issued an edict saying no House committees could meet for the 2 1/2 months following the session, until after July 1. As a result, there has been no consideration of approaches to deal with the looming deficit.

In addition, the legislature enacted a budget reconciliation act that gives the assembly new flexibility to deal with revenue shortfalls and other budgetary matters.

The bitterness and lack of consensus during the last session leaves little sentiment among legislators to return so soon for still another fiscal showdown. Besides, a return engagement would give Republicans the political edge, another chance to say I-told-you-so.

With polls in hand and taxpayers in an unforgiving mood, Mr. Schaefer and legislative leaders might conclude that the best place to be this summer is anywhere but Annapolis.

But in the whoopee-cushion politics of Annapolis, the last laugh's on us. Maryland may be the only state in the nation where the governor and the General Assembly deliberately conspired to create inflation.

Frank A. DeFilippo writes a biweekly column on Maryland politics.

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