Democrats would delay budget cuts Their plan to slash income taxes by 7% raises deficit worries

'Huge mistake' feared

Proposal would rely on drawing millions from reserve fund

March 06, 1997|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF staff writer Michael Dresser contributed to this article.

The income tax cut being pushed by Democratic leaders in the House of Delegates would deliver the good news of tax relief to Marylanders in the next two years but delay most painful budget cuts until after the 1998 election.

As House Democrats tried yesterday to digest the proposed 7 percent cut in income taxes -- phased in over two years -- some said they were worried about creating a major gap in the budget in the future.

"Nobody's talking about the out-years around here," said Del. Leon G. Billings, a Montgomery County Democrat who is strongly opposed to any tax cuts. "If you don't focus on the out-years, you're making a huge mistake."

The Democratic plan relies heavily in the short term on a $500 million reserve fund that the governor and the General Assembly, anticipating that they might want to cut taxes, have been putting money into for two years.

The Democratic plan calls for drawing down $190 million from the fund beginning next year, which would provide a large chunk of the revenue lost to a tax cut.

But three years from now, House leaders acknowledge, the governor and General Assembly would be left to identify about $300 million in cuts in a general fund budget of roughly $8 billion.

Depending on who is asked, cutting that much from the budget -- and waiting to do it -- is irresponsible or highly manageable.

Billings predicted that he and 30 to 40 other Democrats would vote against a tax cut in the 141-member House of Delegates, largely because of the implications such a reduction could have for social programs.

House Democratic leaders took a more relaxed view of the budget cuts looming down the road.

"You've got to remind yourself that we leave here every year with some out-year deficits projected," said Del. John Adams Hurson, a Montgomery County Democrat who is the House majority leader. "Every year you have to balance the budget."

The Democratic plan for dealing with reduced revenue resembles in some ways the plan for cutting income taxes that was advanced by Gov. Parris N. Glendening. That proposal also projected major but unspecified budget cuts in the years after the 1998 election.

And, as Glendening has done for months, some Democratic legislators said the whole exercise of projecting long-range deficits is inexact to begin with.

"When you start to put together a budget for four years out, you're really playing with crystal balls," said House Speaker Casper R. Taylor Jr., the chief architect of the House's tax-cut plan. "This is a slightly less fuzzy crystal ball" than the governor's, he said.

Meanwhile, House Republicans took a rare turn on Annapolis' center stage yesterday, outlining about $148 million in budget cuts they have proposed to make room for their proposed 6 percent income tax cut.

The Republicans want to implement that cut in one year and pay for it with major budget cuts immediately.

At a House Appropriations Committee hearing yesterday evening, GOP delegates outlined cuts that would fall especially hard on economic-development programs and government programs they deem inessential.

House Minority Leader Robert H. Kittleman said the time had come to rein in the growth of state government.

"Government has a way of growing like an organism," the Howard County Republican said. "Sooner or later it has to be pruned back."

Del. Robert L. Flanagan, also a Howard Republican and the House minority whip, said the administration was allocating too much money to "slush funds," his term for the state's reserve accounts.

The GOP proposals ran into a torrent of opposition from representatives of the Glendening administration and advocates for the programs they have identified for cuts.

James T. Brady, the state's secretary of business and economic development, labeled the proposed economic-development cuts "insane."

As it does every year, the assembly, controlled by Democrats, is expected to cut the governor's proposed budget. Democrats on the Appropriations Committee are looking at about $60 million in budget cuts for the coming fiscal year.

They have targeted some of the programs the Republicans have. For instance, committee members are looking at cuts to the state's Sunny Day business recruitment fund. But they are looking at cutting the $27 million fund by $7 million, not by the $22 million proposed by the GOP.

A day after they abandoned their plan to raise some taxes to help pay for the income tax cut, some Democratic legislators criticized one of the GOP's proposed budget items.

The Republicans favor extending the state tax on insurance premiums to policies issued by the quasi-public Injured Workers Insurance Fund, which probably would raise the cost of insurance policies for many state businesses.

"I'm interested that the Republicans are proposing a tax increase after all the grief they gave us on taxes," Taylor said.

Pub Date: 3/06/97

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