Schaefer sets priorities for cash squeeze Deficit could cost local governments at least $150 million

September 16, 1992|By John W. Frece and Marina Sarris | John W. Frece and Marina Sarris,Staff Writers

ANNAPOLIS -- Gov. William Donald Schaefer and legislative leaders tentatively agreed yesterday that at least $150 million of the state's half-billion-dollar budget deficit will have to be squeezed from local governments.

During a series of closed briefings with lawmakers, Mr. Schaefer also said he will probably propose a new state lottery game designed to raise $50 million to help offset the deficit.

The rest of the money -- about $300 million -- would come from broad reductions in spending by all state agencies, Mr. Schaefer told legislators.

Such deep cuts almost certainly would mean layoffs of state employees, but no one yesterday ventured a guess at how many or who.

Mr. Schaefer's proposed reductions include:

* About $240 million from state programs, including $54 million from higher education; keeping welfare benefits for families at 1989 levels; and cutting $30 million from the Transportation Department.

* About $50 million more in indirect cuts to local governments by trimming back state health and social services programs.

* And $10 million in savings by adopting recommendations of the governor's task force on government efficiency and through some modest fee increases.

Mr. Schaefer has scheduled a news conference for tomorrow to announce details of his plan, the state's eighth budget reduction in slightly more than two years.

Although the state is not quite three months into its fiscal year, it finds itself an estimated $500 million in the hole primarily because the budget was based on overly optimistic projections about the state's economy and the amount of tax revenue that it would generate.

Officials who met with Mr. Schaefer yesterday said there is general agreement that state agencies must lose $250 million to $300 million, as the governor proposes, though lawmakers may want to negotiate about just which programs will be cut.

Legislative leaders also agree that most of the rest of the money should come from cuts in aid to local governments. But some said they are already worried whether rank-and-file lawmakers -- who grudgingly voted for taxes earlier this year -- can be persuaded to cut school, police, community college or other local programs they had hoped would be protected by virtue of higher taxes.

General Assembly approval of such a large reduction in local aid would be needed, either in a special session or by waiting until the 1993 session in January. Officials warned that if no action is taken now, the problem will only worsen. But no one at yesterday's meetings talked about raising state taxes again.

The governor made clear, first to senators and delegates and later to the mayor of Baltimore and the executives of several of the state's most populous counties, that if the reduction in direct state aid to local governments does not reach $150 million, his only alternative will be drastic cuts in health, public safety and social services programs.

Even with $150 million in cuts to local governments, Mr. Schaefer said the following spending reductions still may be necessary:

* Slashing $54 million more from the University of Maryland system and other state colleges, which would cut funding to near the 1989 level when the state declared it would make the state university system one of the nation's best. If the local aid reduction is less, the higher education cut could be as high as $100 million, Mr. Schaefer said.

* Some optional health-care programs for the poor could be eliminated, although the governor specifically said he would protect a kidney dialysis program from the cuts.

* An increase in welfare benefits for a family of three from $377 a month to $401, scheduled to go into effect Jan. 1, would be postponed indefinitely no matter what.

* Benefit levels for the General Public Assistance program for single, disabled adults would be rolled back to fiscal 1988 levels. Absent the full local aid cut, the governor said the entire program would be axed, leaving its 24,000 destitute recipients to fend for themselves.

* Approximately 140 to 150 jobs in the state police would remain vacant, and new prisons may not have enough staff to open.

Mr. Schaefer asked Baltimore Mayor Kurt L. Schmoke and the county executives to try to decide by Oct. 1 which local programs should be cut and by how much -- a task some said may prove impossible given the financial, political and other differences between jurisdictions. Smaller counties were not even invited to yesterday's briefing.

Five counties have already been forced to raise their piggyback income taxes because of cuts in state aid in the past two years, and Mr. Schmoke conceded yesterday that the city may have to follow suit.

"It's a tremendous amount of money," said Baltimore County Executive Roger B. Hayden. He said he did not know how much his county will end up losing, but said it could be as much as $30 million.

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