Happy Fiscal New Year Pay $250 Million

BARRY RASCOVAR

July 05, 1992|By BARRY RASCOVAR

What a way to begin the new year! Even before the clock struck midnight last Wednesday and state legislators could flip the calendar to Day One of Fiscal 1993, their chief fiscal adviser dropped a bombshell on them: Maryland starts off a quarter-billion-dollars in debt.

That news is enough to make Gov. William Donald Schaefer gag on his oatmeal. It's enough to make House Speaker R. Clayton Mitchell pine even more fervently for a cushy sinecure as state treasurer. It's enough to make Senate President Thomas V. Mike Miller thankful his eyes glaze over when confronted with fiscal figures.

It even might be enough to make Comptroller Louis L. Goldstein cringe.

Mr. Goldstein, after all, is one of the chief culprits in this latest revenue blunder. He helped set the state's income-tax projections way too high. But, say, what's a quarter-billion dollars in a $6 billion general-fund budget?

By now, all of us are used to reading about nine-figure deficits in Annapolis. No matter how hard officials try to mask it, Maryland still faces a severe structural imbalance between its revenues and its spending. Even the patchwork tax package passed last spring could not close the gap. In fact, the gap is likely to widen considerably in the years ahead.

Government still hasn't recognized that it must shrink itself to be affordable. The governor -- and legislative leaders, too -- just don't want to confront the painful truth that programs have to be abolished and jobs eliminated. If you don't have the income to pay the rent, you've got to move to a smaller apartment.

We've yet to adjust to a less-affluent form of government. Citizens have to get used to the idea of paying fees for more services. The social contract between Annapolis and the average Marylander won't cover as much as in the past.

But those are longer-range developments. For the moment, state officials have this $240 million black hole. How will they eliminate it?

Step No. 1 is simple: Raid the "rainy day fund." Legislators put $50 million into an emergency kitty, knowing full well their "balanced" budget was a sham. They were right, and now it's raining again. Bye-bye, rainy-day fund.

Step No. 2 is equally straightforward: Freeze government spending in its tracks -- NOW! Every day wasted makes it that much harder to close the deficit gap.

If the governor acts immediately to freeze vacant positions and forbid discretionary spending in state agencies, he'd have to save $20 million a month to offset the red ink. But if he waits until the fall to rein in spending, he'd have to save $30 million per month. And if he decides to delay until the legislature returns in January, the monthly savings would have to equal $40 million.

Step No. 3 is clear but unpopular: Cut heavily into aid to local governments. County and city officials are expecting it.

They figured out almost immediately last spring that the governor and legislators were telling white lies about the state's rosy revenue projections. So most local governments built into their own budgets a fudge factor, just in case the state sought a give-back for the second year in a row.

A give-back is necessary because the state has no control over much of the general-fund money it allocates. More than half of the money goes to someone else to spend, and one-third of all funds goes to local government.

Will these steps be enough to erase the deficit? They had better be.

No one in Annapolis is in a mood to raise taxes any time soon. Certainly not House Speaker Mitchell, who would rather sell off ,, just about every government enterprise and building to the private sector (perhaps even the State House) to avoid infuriating the anti-tax crowd again.

Nor is the governor eager to take up the tax issue again. That severely limits his options. It could mean more layoffs before this latest round is over.

It's not a joyous way to kick off Fiscal 1993. Where's that much-anticipated economic recovery? Maryland is still feeling the effects of the recession.

All those laid-off white-collar workers at Westinghouse, for instance, will be paying far less in state income taxes next year. They won't be buying new TV sets or VCRs or refrigerators that bring the state hefty sales-tax receipts, either. Nor will they be eating out once a week or ordering up lawn-care service. So, income-tax receipts and sales-tax receipts will continue to suffer.

Eventually, state tax revenues will pick up steam. Eventually, most of those laid-off workers will be employed once again. But the Maryland economy may never regain the vibrancy it had during the boom years of the 1980s.

How government officials in Annapolis and in the counties respond to this sharp change in fiscal realities is one of the great unresolved issues of the decade.

Barry Rascovar is editorial-page director of The Sun. His column on Maryland politics appears here each week.

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