State economy has rosy glow in new forecast

December 18, 1993|By John W. Frece | John W. Frece,Staff Writer

Economic trend lines are up, the Christmas buying season is expected to be big, and housing sales are on the rise, state tax collector Louis L. Goldstein said yesterday as he delivered Maryland's most upbeat economic prediction in about four years.

"In our opinion, the worst of the recession is clearly behind us," Mr. Goldstein said as the state's Board of Revenue Estimates made its annual financial predictions for the next 18 months.

Based on improving economic indicators, including a late-year boost in employment, the board now estimates that before this fiscal year ends on June 30, 1994, the state will bring in $115 million more than expected from taxes on personal income, sales, franchises, tobacco, alcoholic beverages and other sources.

Almost all of that increase, however, was wiped out by a long-expected drop in lottery revenues, which fell a whopping $106 million below the official estimate. Last year at this time, the board predicted revenues for this fiscal year would be $421 million. Yesterday, they revised that figure to $315 million.

Once the drop in lottery receipts and other revenue changes are factored in, the board said the bottom line for Gov. William Donald Schaefer is that he will have about $4 million more to

spend in the budget he is preparing for next year than he had expected.

In the context of an overall spending plan well in excess of $12 billion, that's enough extra money to keep government operations going for about three hours.

William F. Rochford, director of the State Lottery Agency, said the reason the lottery revenues were so far off is that the governor asked him to inflate the original estimate was originally made.

He said that when he presented the governor with plans for the lottery's new Keno game in December 1992, he told the governor it would generate $100 million in gross sales in a full year, but that Mr. Schaefer ordered that the $100 million figure reflect anticipated revenues.

"We were asked to generate that much money," he said. "The governor asked me to do it. That's what we tried to do."

Such an explanation, however, is contrary to virtually every public presentation the Schaefer administration and the Lottery Agency itself have made regarding Keno since plans for the game were first unveiled.

William S. Ratchford II, the General Assembly's chief budget adviser, said that when he first heard Mr. Rochford's explanation, "I thought it was a joke."

Paul E. Schurick, the governor's chief of staff, was so outraged by the lottery director's allegation that his face flushed when he heard it.

"The good news is that what he is saying is so preposterous, so absurd, that nobody will believe him," Mr. Schurick said. "He is badly mistaken. He is in error. Obviously, the pressure has gotten to him. He's under a great deal of pressure, and it has obviously affected his recollection."

"It didn't happen," he said.

A startled Page W. Boinest, the governor's press secretary, said, "There was no question about that figure."

She said that the governor and his budget advisers obviously know the difference between revenues and gross sales and that the Lottery Agency's prediction was clearly for $100 million in new revenues.

"I've heard a number of other reasons [for the lottery's lower revenues], but not this one," she said. "I'm sure Mr. Rochford is experiencing frustration that the lottery hasn't performed to expected levels."

Actually, Mr. Rochford said he was proud of the lottery's performance, saying Maryland's Keno game had outperformed the same game as it is played in five other states and that other games were doing relatively well despite the recent recession.

If Keno's sales figures had not been "translated" into a revenue forecast, he said, the lottery's overall performance would look much better.

"We were given a very, very high number to work against, and we worked very hard to meet it," he said. "We seem to be tagged with losing, but we're anything but."

The lottery shortfall and the dispute with Mr. Rochford nearly obscured an otherwise rosy forecast in which personal income for Marylanders was predicted to rise 4.7 percent this year, 5.5 percent next year and 5.3 percent in 1995.

Accordingly, the amount of revenue the state government takes in is expected to rise by 4.5 percent in fiscal 1994 and 4.7 percent in fiscal 1995.

State Treasurer Lucille Maurer, who serves on the Board of Revenue Estimates along with Mr. Goldstein and Budget Secretary Charles L. Benton Jr., noted that surveys of consumer confidence have been going up and down the past couple of years.

L "What we're seeing here is a general movement up," she said.

"It may be slow, it may be modest, it may be different from one sector to another, but all the indicators are pretty much up, or have turned around."

She said the revenue forecast was not only "a hopeful report," but conservative as well.

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