Maryland finished its financial year in remarkably good shape with a $117 million surplus that is the largest in a decade, officials said yesterday.
During the fiscal year that ended June 30, state revenues by far exceeded projections, chiefly because of higher-than-expected income tax collections generated by Maryland's robust economy.
Gov. Parris N. Glendening called it "very good news," and said if re-elected, he would seek to devote a significant portion of the surplus to renovating and building schools. He also did not rule out further tax cuts.
"We'll do the same thing we did last time," he said. "We'll first meet our needs like education. In a very responsible way, we'll continue to reduce the tax burden for all Marylanders."
His chief Republican rival, Ellen R. Sauerbrey, said the state's first priority should be lowering the income tax rate, as long as economic conditions permit. But like Glendening, Sauerbrey said she would spend some of the surplus on improving public schools.
"If I were making that decision," she said, "I would divide it between tax relief and dedicating some of the money to one-time expenditures -- most logically school construction."
Much of the unexpectedly large surplus came from income tax collections, both because of high employment levels and capital gains from the stock market that soared until recent days. Lottery revenues exceeded predictions, while taxes paid by utilities were down after the warm winter.
Under a new state law, all but $10 million of the extra $117 million will go into a reserve fund. The state -- which has a $16.5 billion budget for the coming year -- had $671 million in reserve as of June 30.
Lawmakers will decide what to do with the additional funds when the General Assembly reconvenes in January.
Key Republicans said they would push for additional income tax cuts, including Sauerbrey's proposal to benefit retirees, unless there is a significant economic downturn. Democratic leaders favored using the surplus for school construction or similar one-time projects.
"We need to cut taxes, and the sooner, the better," said Del. Robert L. Flanagan, the House Republican whip. "I don't think we can be oblivious to the economy, but we've got to move forward."
But Senate President Thomas V. Mike Miller, a Prince George's Democrat, cautioned that lawmakers would first have to determine just how much they could afford.
"If the surplus continues, we'll address unmet needs, particularly in the education area, and also look at tax relief," he said. "But anyone who has looked at the stock market in the last few days knows how fragile the situation is. It's too early to tell."
In the last legislative session, the governor and General Assembly agreed to devote part of the existing surplus to construction projects, including schools. They decided to accelerate the 10 percent income tax cut that had been enacted the previous year, which will take some $185 million out of the reserve account.
Pub Date: 9/02/98