Grim deficit estimate on the money Budget shortfall put at $446 million

September 09, 1992|By John W. Frece | John W. Frece,Annapolis Bureau

ANNAPOLIS -- When the governor announced three weeks ago that Maryland faces another half-billion-dollar budget deficit, some legislative leaders said the situation couldn't possibly be that bad.

But yesterday, the General Assembly's own budget adviser delivered the grim news that the governor's estimate is pretty much on the mark.

Fiscal Services' director William S. Ratchford II, in a briefing for the legislature's three budget and tax committees, pegged the deficit that has developed since the current fiscal year began two months ago at $446 million.

He blamed most of the problem, $357 million, on a continuing free fall in tax revenue. The rest stems from the federal government's refusal to pay Maryland nearly $79 million the state says it is owed as a result of a Medicaid tax levied on physicians two years ago, and about $10 million in overspending by various state agencies.

Dr. Mahlon R. Straszheim, the University of Maryland economics professor who now is advising Gov. William Donald Schaefer on revenue trends, earlier put the shortfall in tax collections at $499 million. Although the Board of Public Works eliminated $56 million of that amount through spending cuts ordered in July, Dr. Straszheim insists the state still must make permanent cuts of roughly $500 million this year to avoid another deficit next year.

Next week, Governor Schaefer is expected to unveil his plan to eliminate this year's deficit -- a plan that is likely to depend heavily on deep cuts in spending by state agencies and about $40 million in cuts in state aid to local governments.

But legislative leaders say they intend to work with Mr. Schaefer to develop a joint plan that probably would give the governor legal authority to cut more deeply into the state programs that aid local governments -- perhaps by as much as $150 million -- or other spending that is mandated by law.

After a private meeting with Mr. Schaefer after yesterday's briefing, House Speaker R. Clayton Mitchell Jr., a Kent Democrat, said, "He is going to stick to his time schedule. But that's not to say he's not open to suggestions. This is just a starting point -- a place to say, 'Let's talk about it.' "

Some lawmakers are fearful that if Mr. Schaefer unveils his own unilateral plan to trim $450 million in spending, it will unnecessarily cause alarm that certain programs might be cut when, through a subsequent agreement with the legislature, they might be saved.

Mr. Mitchell has already called for a major and permanent restructuring of state government to achieve the needed savings, a call that yesterday received the backing of the legislature's Republican minority.

Legislators say they want this next round of cuts -- the eighth in a little more than two years -- to be the last. Stung repeatedly by optimistic revenue estimates, lawmakers questioned Mr. Ratchford about why he is predicting slightly higher growth in jobs and personal income than Dr. Straszheim.

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