Glendening urged to act now to reduce spending

July-August revenue down, figures show

October 16, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

Leading legislators are calling on Gov. Parris N. Glendening to take immediate steps to reduce spending - including budget cuts and a possible hiring freeze - amid new figures indicating that state revenues are down more than previously thought.

Sen. Barbara A. Hoffman said she and Del. Howard P. Rawlings, the Baltimore Democrats who head the legislature's budget committees, will deliver a letter to the governor today asking him to act now to avert a fiscal crisis.

"He really needs to slow down state spending," said Hoffman. "We're talking about this current fiscal year."

Rawlings, recalling the budget crisis that forced painful cuts in the early 1990s, was even more discouraged by new figures showing a nearly $54 million decline in tax collections and other revenue in July and August. He said the numbers could be extrapolated to add up to a shortfall in the hundreds of millions of dollars by the end of the year.

"It's not a pretty economic picture - kind of like revisiting 1991," Rawlings said. "Very clearly, we're in the midst of a recession."

Glendening spokesman Michael Morrill said the governor will meet with lawmakers today and hold a news conference tomorrow to announce decisions regarding the budget. He said the $53.7 million decline from last year, which exceeds previous projections, is a matter of concern but not alarm.

"It doesn't change the fundamental strength of our economy," Morrill said. "When you see a number like that, you make the appropriate adjustments to ensure you don't face a far greater crisis later."

Morrill noted that the revenue figures reported by the comptroller's office do not include the Maryland Lottery's totals for August. The July totals show the lottery got off to a strong start in the quarter. If August brings in an equal amount of lottery revenue, the overall decline would be less than reported.

Warren G. Deschenaux, director of the General Assembly's Office of Policy Analysis, noted in a letter to legislative leaders that the figures reflect only economic activity that took place before Sept. 11 - indicating that Maryland was facing budget problems before the terrorist attacks further slowed the economy.

The state took its biggest revenue hit in business taxes, which declined 12.8 percent from the same period last year. Personal income taxes were down by 3.4 percent.

Sales taxes were up 1.1 percent from last year but fell short of projections. Deschenaux estimated that the increase would have been 2.8 percent if not for the cost of a tax-free week in August.

Overall, excluding the lottery, revenues were down 3.5 percent for the two months.

Deschenaux said the July-August revenue figures - reflecting the first two months of the fiscal year - indicate the state is headed for a budget shortfall of more than $100 million by the end of the year, but probably less than $500 million in a $21 billion state budget.

"This is the time to think about doing some serious but not necessarily apocalyptic budget action," Deschenaux said.

Rawlings said possible actions include a hiring freeze and spending cuts, noting that the governor has the authority to withhold up to 25 percent of an agency's budget. He said layoffs might be necessary if the impact of the Sept. 11 attacks is severe enough.

Hoffman said the projections of hundreds of millions of dollars in shortfalls can be misleading because they don't take into account the adjustments the governor and legislators can make.

"We're not going to just sit here and do nothing," she said.

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