Schaefer's surprise

Forum Extra

July 28, 1992|By Ellen R. Sauerbrey

TO THE surprise of virtually no one (except, apparently, Governor Schaefer), Maryland ended the 1992 fiscal year with a deficit of $70 million and opens the books on fiscal year 1993 with a gaping hole predicted to be three times that size. In all, fiscal year 93 expenditures are expected to exceed revenues by some $240 million.

Clearly, the major tax increase passed this year over the unanimous objection of the House Republican Caucus hasn't cured the state's budget problem. The governor thought he would have more money to spend, but folks just aren't paying the taxes he expected to collect. In a July 9 column in the Washington Post, he offered a myriad of excuses.

First, Mr. Schaefer blamed the Board of Revenue Estimates -- which includes his budget secretary -- for providing him with lousy numbers. But can the governor really be surprised that revenues are falling short of projections and that another big deficit is looming? If so, he may be the only elected official in Maryland who didn't know the budget was out of balance from the get-go. Everyone knew that there was no basis for anticipating a rate of personal income growth approaching 6 percent over the next year. Republican county executives refused to follow the state's lead and based their budget assumptions on revenue growth of around 2 percent for fiscal year 1993. Unfortunately, while the national economy is, in fact, expected to grow at a rate of about 2.2 percent this year, Maryland's economy is still in decline -- a decline many of us would argue can be attributed in part to the tax increase.

Second, the governor expressed consternation that the number of jobs lost in Maryland (accompanied by an inevitable reduction in personal income and, therefore, income tax collections) was grossly underestimated. Here, the feds are the culprits, in addition to those "national consultants [who] have been really, really wrong, for two years now." Strange . . . I obtained accurate job loss numbers in a call to the Maryland Chamber of Commerce back in January. Certainly the same information should have been available to Mr. Schaefer's forecasters.

Third, the governor blames the continuing fiscal crisis on increases in mandated spending that are out of his control. I'll concede that we have only limited ability to control cost escalation of federal mandates, like Medicaid, but we can and must control spending dictated by certain self-imposed state mandates. What we mandate, we can unmandate, too.

The fact is that our fiscal problems did not begin just last year. It has been clear for some time that Maryland was facing a structural budget problem where state spending was growing faster than our ability to pay. The gap will continue to plague us, since future spending builds on current commitments. The current baseline budget calls for future annual increases of over 7 percent, outstripping anticipated revenue increases of 5 percent, ensuring continued deficits.

Maryland's celebrated $400 million surplus was only one of the pots of money, large and small, sucked dry to cover the Schaefer administration's budget "deficiencies." Virtually all of the special funds accumulated for various dedicated purposes are gone now. Entitlement programs have been underfunded and revenues over-estimated, all to make the budget balance on paper. The end of each fiscal year requires a juggling act to cover the resulting deficiencies. But whether this year's bills are rolled forward to the next, or tax revenue that should be counted in July is counted in June instead, the effect is to start the next fiscal year with a big hole in the budget.

Governor Schaefer must take the necessary action now to ensure that the 1993 budget is brought into immediate balance, and he can't go back to the taxpayers again! He has awesome emergency power to reduce the state budget unilaterally -- he can cut most of the budget by 25 percent without legislative approval -- and he must use it responsibly. He needs to trim $240 million from a $6 billion general fund budget. And the cuts should not come again out of local government.

As he moves forward with the first round of cuts of $60 million, Mr. Schaefer is requiring locals to absorb $40 million while the entire state agency budget will be hit by only $20 million. For most state agencies the reduction will be slightly under 1 percent. Fifteen filled positions are scheduled for elimination, while 65 positions will remain vacant.

The major local aid cuts will come in non-mandated education, local health and police aid and community colleges. Clearly it is more politically palatable to the governor to let the locals deal with the bulk of the shortfall.

While local aid has been a rapidly growing portion of the state budget, the only answer to our long-term fiscal problem is to get all state spending under control and reduce the tax burden on the private sector. Only by encouraging economic growth and job formation can we get people back to work and back to paying taxes.

Ellen R. Sauerbrey, the House minority leader, represents Baltimore County's 10th District in Annapolis.

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