Scary Ride on the Budget Roller Coaster

BARRY RASCOVAR

January 31, 1993|By BARRY RASCOVAR

Get ready for another spine-tingling ride on Maryland's budget roller coaster. This year's model has been put on the tracks and is starting its wild tobaggan ride into the harrowing loops and hairpin turns of legislative review.

The legislature is ready once more to chip away at Gov. William Donald Schaefer's spending plan. Judging from recent local economic events, it may have no choice.

As one of the governor's budget documents notes, "Maryland's economy is still not in good shape."

For proof, look at recent developments: Armco is firing 450 local workers; B. Green & Co. is selling its wholesale division, with a loss here of 400 well-paying jobs; Westinghouse is preparing to cut another 500 white-collar jobs; and USF&G is laying off 110 more people.

That translates into millions in tax dollars lost to Annapolis and more costly demands for assistance from many of the people thrown out of a job. It also means that the governor's projected general fund revenue growth for the coming fiscal year of 2.3 percent might be optimistic.

Already, this recession has proved far deeper and far more intractable than other downturns.

For instance, the 1981-82 recession cost Maryland 54,000 jobs, but 18 months after the last month of that recession, the state had added 77,000 new jobs. A strong bounce-back had begun.

But this time, the 1990-1991 recession cost Maryland 63,000 jobs and yet 18 months after the official "end" of the recession, this state is still losing jobs -- an additional 70,000 so far.

This is a troubling economic situation. There is a turnaround in hTC many sectors of the local economy, but every time things look rosy (merchants had an excellent holiday season, for instance), Maryland receives another setback, such as last week's layoff announcements.

Equally troubling is the way the governor has constructed his budget this year. If his revenue predictions hold up, he's got just enough money to pay for all current programs and required increases in education aid, local aid, Medicaid, prisons and juvenile services.

But he's also budgeted a whopping $296 million for extras. Some $150 million is paid for with money that the state no longer needs to give to local governments for teacher Social Security contributions. Another $100 million comes from Maryland's gamble on keno. And $42 million comes from various fee increases and other collections.

There's a sense the governor wants to ignore the fact that a recessionary relapse remains a distinct possibility.

Just two months after Mr. Schaefer chopped nearly $150 million in aid from local governments, he wants to give them back all of it, plus another $36 million. Has Maryland's economic situation changed so dramatically in just 60 days?

Compounding this situation is the governor's plan to use money from keno to pay for new initiatives. This is an unpredictable revenue source. While early keno figures are above expectations, there's no telling what will happen in July when the Lottery Agency can't inflate its numbers by adding more outlets every week and when the bloom wears off this basically boring -- but potentially addictive -- wagering game.

(It's interesting to note the governor claimed he had to initiate keno because there was a fiscal "emergency," that he couldn't balance the coming year's budget without keno. Hogwash. Kill keno and not a single on-going program loses a dime of funding. It's only areas of new spending that would suffer.)

So legislators may have to make some unpopular choices. They clearly will have to trim back the thicket of new local aid. It's just too much in such an uncertain economic climate. Restoring all the local aid cut so recently is a wonderful idea, but a more gradual, two-year restoration program might be more sensible.

Some of the governor's prevention programs fall into that same category, too.

These are good initiatives, designed to avert problems before they cost big bucks. Health-care for kids now can avoid big hospital bills later; helping troubled adolescents now can avoid delinquency later. But does Maryland have the resources in these uncertain times to pay for all these programs right away?

For the tough-minded, there's a simple solution. Kill keno. Pare -- new aid programs to the bone. Set aside a really big pot of money to handle other recessionary surprises. In other words, keep government spending at a no-growth level, except where increases are required by law.

But legislators aren't eager for such an undertaking. So don't be surprised if lawmakers go along with most of Mr. Schaefer's budget. That could set the stage for another shortfall this summer and for one more round of emergency cuts and special legislative sessions.

=1 Annapolis sure does like its roller coasters.

Barry Rascovar is editorial-page director for The Sun.

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