'Plain vanilla' budget year

April 27, 1993

At last state governments are crawling out of that giganti budget hole created by the recession. While blue skies aren't yet on the fiscal horizon, the dark storm clouds of recent years are dissipating, providing states with enough economic good news to balance their budgets without too much belt-tightening this year.

"It's a down-to-business, plain vanilla kind of budget year," said an official of the National Conference of State Legislatures. And plain vanilla is what most states are serving on their budgetary platters. There are few ambitious undertakings, but some of the most devastating cuts in social programs are being slowly restored. Conservative budgeting remains the order of the day.

Maryland's experience is typical. Growth this year is projected at 2.5 percent, a meager amount but enough to let Gov. William Donald Schaefer compensate local governments for the sharp aid cutbacks of recent years and also embark on low-cost prevention programs. By keeping new spending down, Maryland balanced its budget and still had enough to set aside $50 million for a rainy day.

Not all states, though, are starting their economic recoveries. The Far West continues in the doldrums. California, in particular, is hurting. That state is looking at a potential $8.6 billion budget gap and the local economy remains depressed. Revenues are also coming in below original projections in Louisiana, Oklahoma, Michigan, South Carolina, Kansas, Kentucky and Nebraska.

Elsewhere, the budget crisis is finally easing. Most states are using cautious economic projections, which helps them hit their revenue targets. This means spending has to be kept on a short rein. That has been made easier by the painful downsizing of government most states undertook during the recession. Government expenses are now more in line with actual tax receipts.

Trouble spots remain. In Maryland, long-term revenues aren't keeping pace with the growth of costly mandated programs. This structural imbalance means that the Department of Fiscal Services is already predicting a $82 million shortfall for 1994 and a $148 million shortage for 1995.

Fueling this imbalance are the money-gobblers confronting all states: big jumps in health-care expenses for the poor, welfare expenses, prison expenses and the constant pressure for more and more education money -- both for kindergarten through 12th grade and public colleges.

The majority of states have at last gotten the immediate situation under control. But governors and legislatures are looking to Washington to help them solve some of their biggest long-term fiscal worries, especially the soaring cost of medical care. Unless Washington comes up with a way to ease the fiscal strain on the states in this area, local governments may find themselves once again fending off big deficits a few years from now.

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