Cautious use of surplus funds Cut debt: State's one-time bonanza can't support a tax cut but could lower interest payments.

September 20, 1998

SURPLUSES don't last forever. That's why state officials should take great care in apportioning the $117 million in extra cash announced by the state on Sept. 1.

Those calling for a tax cut are misleading voters when they recommend using surplus funds for that purpose. This $117 million may help pay for a tax cut next year, but what about in

2000, when the surplus funds are gone? How do you pay for a tax cut then?

That's why state leaders should use surplus funds only for one-time, nonrecurring projects.

Gov. Parris N. Glendening apparently concurs. He said it wants to devote this money to expanding the state's school construction program. Republican Ellen R. Sauerbrey says her first priority for the surplus would be a tax cut. That would be the wrong step.

Ms. Sauerbrey should borrow a page from the Calvert Institute, a think tank composed of her most ardent and fiscally conservative supporters. The group has made a detailed proposal that centers, in part, on cutting state debt.

One of the best ways to do that is to pay cash for new buildings -- such as schools -- instead of issuing bonds.

If Maryland were to follow that suggestion, the annual school construction program could be fully funded through surplus funds for many years to come. This would lower the state's overall debt obligation immediately and reduce annual interest payments during the next 15 years by tens of millions of dollars. Future taxpayers would benefit; so would today's taxpayers.

It is a good way to slowly shrink government expenses. Using surpluses on a regular basis in place of bonds would have a positive, cumulative effect.

We'd still be spending on voters' top priority -- schools -- but doing it more wisely.

Pub Date: 9/20/98

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