Analysts dispute budget proposal

Governor's plan will generate deficit of $1 billion, they say

January 22, 2002|By Howard Libit | Howard Libit,SUN STAFF

Legislative analysts warned yesterday that Gov. Parris N. Glendening's proposed budget relies too heavily on one-time funding measures and, if approved, would leave Maryland with a $1 billion deficit in a year.

The moves proposed by Glendening to pay for his $22.2 billion spending plan include transferring $50 million from a restricted welfare reserve fund and taking $5 million from money set aside for emergency medical services - savings from a car registration-fee increase that took effect last year.

To minimize projections of future deficits, Glendening's budget not only would delay the final installment of an income tax cut for one year, but would put it off indefinitely, the General Assembly's chief fiscal analyst said.

And even though the governor seeks to add $367 million to Medicaid spending, analysts predict his plan still would fall up to $100 million short of what's needed to cover health care for the poor because of "unrealistic" projections of increases in enrollment and costs.

"The level of spending in this budget cannot be sustained," said Warren G. Deschenaux, the Assembly's chief fiscal analyst. "It is a fictive forecast."

But a spokesman for the governor said that the legislature's fiscal analysts routinely predict worst-case scenarios that don't come to pass. "As always, it's the doom and gloom, where they predict that nothing will be done and we'll have large deficits," spokesman Michael Morrill said.

Morrill said Deschenaux had projected in October large budget deficits for the coming fiscal year, but that Glendening's budget plan was balanced as required by the state Constitution.

"He assumes that we do nothing" to address shortfalls as they arise, Morrill said, "but we have taken prudent fiscal steps."

Morrill said that if the recession continues, more spending reductions would be identified. But if the economy turns around, the tax cut could go forward, he said.

Yesterday's briefing by Deschenaux and other analysts prompted the Assembly's already skeptical budget leaders to further question Glendening's proposal and predict with even more certainty that they will seek to make large changes.

"It's very cleverly constructed ... and we have our work cut out," said Sen. Barbara A. Hoffman, a Baltimore Democrat and chairwoman of the Senate budget committee. "Everything about this budget bothers me."

Hoffman and other legislative leaders have said they don't plan to go along with the governor's efforts to delay for a year the final 2 percent of a phased-in, 10 percent state income tax cut - and she said emphatically that the Assembly will not permanently eliminate it. Delaying the tax cut for one year generates about $175 million in revenue.

"We have never not lived up to an obligation," Hoffman said. "We said you're going to get a 10 percent income tax cut, and you will get an income tax cut."

Though Glendening cannot run for re-election, Hoffman said delaying a tax cut isn't a wise political option in an election year. She said he should be thinking about Democratic legislators, as well as the Democratic nominee for governor. "He is the head of the party in this state," she said.

Though Glendening's overall budget plan calls for a modest 2.7 percent increase in spending in the fiscal year that begins July 1, the general fund operating budget - which is driven by state tax revenues and includes most state services - would grow 6.6 percent, from $10.1 billion to $10.7 billion.

Yet general fund revenues for next year are expected to be almost $1 billion less than expenditures, forcing the governor to turn to cash reserves and other one-time funding sources. Glendening seeks to spend about $800 million of the state's $1.3 billion in reserves, retaining the minimum $500 million required for Maryland to maintain its AAA bond rating.

Some of the changes sought by Glendening would affect the current year's budget to free additional funds for next year's spending plan.

Legislative analysts said some of the one-time measures proposed by the governor include:

Transferring $70 million from the Maryland Automobile Insurance Fund, the state-run insurer of high-risk drivers. Such a move was considered to cover budget deficits during the recession of the early 1990s but was rejected.

Reducing by $64.8 million the state's contribution to the state employee pension system. Glendening seeks to put in the same amount as this year, though actuarial estimates call for more.

Shifting $50 million to the general fund from reserves held in case the welfare rolls go up. The ranking Republican on the House Appropriations Committee, Del. Robert L. Flanagan of Howard County, said the transfer "is basically robbing the rainy day fund for families that are working to get off of welfare."

Transferring $5 million from the reserves for the state's emergency medical system. The reserves help pay for such services as Maryland Shock Trauma Center. Last year, in anticipation of that fund facing a $7.2 million deficit in July 2002, the Assembly approved a $3 per year increase in the fee paid by Marylanders to register their cars.

Cutting $6.6 million from the Private Donation Incentive Program, which matches private funds raised by state colleges and universities.

Transferring $32 million from the state's injured workers insurance reserve, taking $2 million in profits from state-use industries and cutting $800,000 from efforts to crack down on drivers who don't register out-of-state cars.

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