Spending Limit Straitjacket

March 09, 1994

Two fiscal committees in Annapolis find themselves in a straitjacket of their own making. Unless these legislators show flexibility, damaging cuts to government programs may be inevitable.

The problem is that the "spending affordability limit" set late last year by a committee of legislators and businessmen is roughly $160 million lower than the budget submitted by Gov. William Donald Schaefer. Yet economic indicators suggest the legislature's voluntary spending limit is too conservative: state revenue is likely to be more in line with the governor's 6 percent growth forecast than the committee's 5 percent estimate.

But the legislature has no mechanism for adjusting the committee's spending ceiling. It is stuck with that outdated figure. So $160 million will have to be cut from the governor's budget, though the "action list" in front of lawmakers calls for some distasteful and fiscally irresponsible reductions.

For instance, the list calls for deferring pay increases by three months for veteran state workers to save $8 million; abandoning the 3 percent salary raise for state college employees for a flat-rate adjustment ($5.7 million); reneging on the bailout terms for the Peabody Institute; cutting back on admittedly critical maintenance projects, and juggling the Medicaid books to save $20 million -- but creating a $20 million hole next year. In fact, there are a total of $40 million in one-time cuts that will have to be paid by the next legislature. That's an irresponsible way to balance a budget. Legislators on the fiscal committees know better.

There is even talk of an across-the-board management cut in all agencies -- an especially harmful notion rejected in past years -- or a much bigger cut in Medicaid payments, which would simply leave a deeper deficit for 1995.

None of these moves makes sense. Far wiser would be a retreat by budgeteers: Three times in the past 12 years, the spending affordability limit has been set aside. There is ample rationale for doing so again this year. There seems to be enough revenue to support the governor's proposed budget. Legislators may want to reshape portions of this spending document, but the bottom-line seems to leave more than enough in reserve.

Our suggestion to lawmakers: shelve the spending affordability straitjacket and set a more realistic ceiling for this year. Flexibility in budgeting is essential. Let's not get carried away with chopping good programs in order to meet an arbitrary numerical goal that no longer seems to make sense.

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