Doing more with less Governor's dilemma: Request for 7-percent budget cuts could trim state's structural deficit.

August 18, 1996

THIS IS NOT a bountiful time in state government. Taxes revenues are sluggishly positive. Spending continues to overwhelm incoming receipts. The outlook is for continued slow growth in Maryland, leaving the governor with two choices -- raise taxes or keep cutting back.

No wonder the governor's budget secretary, Fred W. Puddester, told most department officials to submit budget requests for next year that envision two scenarios -- a no-growth spending plan and a cut of seven percent. There just isn't enough new money rolling in. The state's structural deficit is roughly $200 million, and Mr. Puddester is trying to narrow that gap.

There are a few encouraging signs pointing to brighter economic days. The unemployment rate fell from 5 percent to 4.7 percent and Maryland created jobs at a faster clip than neighboring Virginia. If those trends continue -- fueled by two big stadium construction projects and a number of plant expansions -- it could boost tax receipts above expectations.

Federal downsizing seems to have ebbed, which helps. Meanwhile, Gov. Parris Glendening's strong economic development push is paying off, though results aren't immediate.

State officials are also hoping for a modest windfall from an early retirement program and from savings in switching Medicaid recipients to managed care. But now Mr. Puddester is asking health managers to propose more options for reining in Medicaid spending.

Health-care and school costs are the main culprits in Maryland's chronic budget shortfall. While state revenues are growing about 3.25 percent a year, mandated aid to schools is rising at about 5.5 percent; Medicaid, even with managed-care reforms, is rising at 7.5 percent.

Complicating the budget situation is a sketchy offer to pump $182 million into the Baltimore City schools over five years. Finding that amount of money will take considerable skill.

The governor has ruled out tax increases or higher user fees. Expanded gambling wouldn't help, either, given the likelihood such a move would be petitioned to referendum. That leaves good old-fashioned budget reductions. As one respected state official put it, "We've got to cut programs we cannot afford any more."

Pub Date: 8/18/96

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