Sluggish earnings cause state to lower revenue estimates

But terrorist attacks aren't reflected in revision

September 20, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

In a further sign of a slowing local economy, state officials have lowered their revenue estimates for the current budget year by $40.2 million to reflect sluggish sales and corporate earnings in July and August.

Comptroller William Donald Schaefer said he was taking the unusual step of releasing the Board of Revenue Estimates' September revisions because of what he called "the precarious economic situation and the tragic events of Sept. 11."

In a letter to Gov. Parris N. Glendening, Schaefer urged him to be "prudent" in preparing next year's budget because of the likelihood that the terrorist attacks in New York and at the Pentagon would cause revenues to fall more.

State budget officials also cut their forecast of next year's revenue growth from 4.3 percent to 3.6 percent. Louise Hayman, Schaefer's communications director, said that projection was the state's lowest since 1993.

Schaefer noted that yesterday's downward revision - by itself a small blip in Maryland's $21 billion budget - did not take into account the economic fallout of the crisis caused by last week's terrorist attacks.

Glendening, at a news conference later in the day, insisted that Maryland's economy is in good shape - especially when compared with other states' - but added that budget officials are monitoring unemployment and sales tax data on a daily basis.

He noted that the state has $998 million in cash reserves as a cushion against the effects of a possible economic downturn.

Schaefer's warning came as one of the Senate's leading budget experts called on the governor to rein in current spending in anticipation of losses from the terrorist attacks.

Sen. Robert R. Neall, an Anne Arundel County Democrat, suggested that the governor might want to delay some of the projects in the state's $700 million capital budget - in addition to the $133 million Glendening has agreed to put on hold. "Don't be in a rush to get money out the door," said Neall, adding that counties and nonprofit organizations, which in many cases have to match money for the projects, have budget woes.

Glendening said that, for now, the state is proceeding with projects that are under construction or ready to go. If the economy is slowing, he said, it will be important to keep up employment in the construction trades.

The governor, who has said that he plans no new spending programs next year, appeared to be walking a fine line between fiscal caution and a desire to emphasize Maryland's economic strengths.

Before last week, Glendening was highly critical of President Bush for his gloomy statements about the economy, charging that the president seemed determined to talk the nation into a recession. Yesterday, the governor was careful not to open himself up to accusations of doing the same on the local level - mixing promises of vigilance with declarations of economic strength.

Maryland's economy had weathered storms before Sept. 11 well. Last month, officials reported that the state took in $153 million more in the fiscal year ended June 30 than previously expected.

Glendening spokesman Michael Morrill said the state economy remains fundamentally strong. "To paint a different and false picture is a betrayal of all that America has gone through in the past week," he said.

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