Tough budget times (cont'd)

October 19, 1993

Gov. William Donald Schaefer, who would like to end his eight years in Annapolis on an uplifting note, received a setback last week when fiscal analysts agreed that Maryland's economy continues to perform below the national average. That means little, if any, extra money to pay for new or enlarged programs. The governor's final-year budget could well be another hold-the-line document.

Short of proposing higher taxes or eliminating existing programs to free up new money, the governor probably won't have the cash he'd like to pay for a dramatic reform of the welfare system being drafted by a task force or an equally dramatic enhancement of the state's school-aid formula that another gubernatorial panel is considering. Maryland's economy is just too feeble to sustain a bigger state budget.

There is some good news, though. Receipts from the income tax and the sales tax are modestly higher than forecasted -- by a total of nearly $44 million. But that is offset by a giant plunge in anticipated lottery receipts: Net income will be off anywhere from $84 million to $95 million. This could create a fiscal hole not only for the current budget year, but for next year's budget, too.

It now appears that Mr. Schaefer had been counting too heavily on a boom in lottery sales as a result of the implementation of the fast-paced keno video game. To put it mildly, keno has fizzled. Instead of receipts of $130 million this year, the game is expected to take in only $55 million. That's a 58 percent drop in revenue. And keno has siphoned millions away from other lottery games, too.

Legislative analysts suggested last week the governor could avoid deficit problems by holding down state spending right away. With eight-and-a-half months left in the fiscal year, a freeze now might wipe out the keno shortfall with little pain. But if the governor waits to take action, he could be staring at a big deficit that can only be erased through quick -- and harsh -- budgetary cutbacks.

Maryland's next governor could also be faced with the same slow-growth situation. Some experts see a troubled state economy for at least the next two years. That would put a big crimp on all the grandiose plans gubernatorial candidates are sure to promote on the campaign trail. There could be a silver lining, though: The weak economy might force candidates to focus next year's campaign on ways to improve and streamline existing government programs rather than focusing their rhetoric tTC on new programs we can't afford.

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