Squeezed by keno

December 22, 1993

Had it not been for the disastrous performance of Maryland's keno lottery game, Gov. William Donald Schaefer would be sitting on a cushy $110 million surplus. As it is, he's got a mere $4 million excess to see him through the last six months of the fiscal year that ends June 30.

We have said all along that governments should not rely on gambling revenue. It is too unpredictable. In the case of keno, it was clear from the outset that keno was a killer: It killed off interest in traditional lottery games and failed to ignite much excitement on its own. In fact, lottery officials have had a hard time selling keno machines to businesses. That's why hundreds are in storage.

For the current fiscal year, state officials are now estimating that lottery receipts will come in $106 million below expectation. That's a whopping 25 percent plunge. Governor Schaefer set an unrealistic goal for lottery officials, and now he is paying the price for his impetuous keno plunge.

Maryland's economy finally has started to show signs of new vitality. But the uptick is still very modest. For the next fiscal year, a 4.7 percent growth in general fund revenues is predicted -- about half the rate during good times. That translates to about $300 million in new cash. This sounds like a lot, but not when you consider:

* Mandatory Medicaid health-care expenses are expected to rise by roughly $100 million next year.

* Statutory aid programs to local governments will rise by $100 million next year.

* Increased expenses in state prisons, juvenile services programs and other areas beyond the control of government officials will total $50 million.

* A modest 3 percent pay raise for state workers -- the first across-the-board increase in four years -- will cost $50 million or .. more.

That leaves the governor with no new money for other programs. How will he find money to increase aid to local schools? How will he find money to implement a welfare reform program? How will he find extra money for anything?

We feel confident that the governor's legendary fiscal magician, Charles L. Benton, will find a way. It certainly would have been nice, though, to have an extra $110 million in the state's coffers for new programs next year. Keno is imposing a crushing burden on Mr. Benton and on the governor.

While Maryland's economy is showing improvement -- the construction industry's slump has bottomed out; home sales are edging upward; pent-up demand for appliances and furniture is being felt, and holiday sales look very bright -- the state continues to lag behind most other states in its recovery. It will take time to recoup the 122,000 jobs lost over the past three years in the recession.

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