Surplus-busting budget

State House: $21 billion blueprint fails to provide enough cushion for economic downturn.

April 03, 2001

AS LONG AS the economy doesn't turn sour, there will be lots to gloat about in the $21 billion budget Maryland legislators approved last night:

A big increase in state support for public colleges and universities; another giant chunk of K-12 school-construction cash; an important early-education initiative; the first installment of a $500 million mass-transit plan; a major expansion of Maryland's Smart Growth program; and a catch-up effort to reduce the state's unpaid bills owed to community mental health providers.

It's a generous budget that spends down the state's accumulated surplus, which stood at close to $1 billion a couple of years ago. There's still $500 million sitting in a separate "rainy day" account in case of economic calamities, but the governor drained most of the other reserves that might be needed if revenue projections come up short over the next 15 months.

Given the bad economic news of late, that's a distinct possibility. Slower sales-tax receipts already forced a $50 million cutback in collection estimates. And the impact of massive corporate layoffs could crimp local consumer spending habits later this year.

Income-tax returns could surprise forecasters, too, since the run-up in capital-gains profits of recent years may vanish, thanks to the plunging stock markets.

Gov. Parris N. Glendening ought to adopt a go-slow spending approach. Unless agencies hold down expenses and delay hiring, his administration could face major budget woes within six months.

One encouraging aspect of the new budget is that legislators succeeded in getting the governor to postpone $160 million in "pay-as-you-go" construction until December. Those projects may wind up back on the shelf unless there's an economic rebound by then.

Lawmakers also forced the governor to set aside $90 million in cash in this budget -- just in case. In light of the hard times many corporations are experiencing, that's a wise move. Economic uncertainty calls for caution by the governor in the months ahead.

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