August 01, 2003
WHILE PARING $208 million from Maryland's budget, Gov. Robert L. Ehrlich Jr. has illustrated the limits of cutting as a solution to the state's long-term financial problem. The newest round of cuts, announced Wednesday, make it painfully clear that new or higher taxes must be part of the budget-balancing equation.
Without more revenue, Maryland faces years of catastrophic deficits - $1.8 billion per year by 2007.
Projected tax receipts are expected to be outpaced by built-in spending commitments for public schools, health care for the poor and other needs.
FOR THE RECORD - The size of a budget cut for Blind Industries and Services of Maryland was incorrectly reported in an editorial Friday. The correct figure is $42,000. The Sun regrets the error.
Budget cutters did not take all of the $650 million the governor had set aside as potential targets in this year's budget, but to have escaped more draconian measures should not be taken for good news; it's only proof that the theme of "fat" in government can be overstated.
And the damage done by the $208 million cut is considerable: $600,000 in drug treatment funds for Baltimore; $44.5 million in Medicaid funding that results in a $34 million loss in federal matching funds; $125,000 from a program that trains blind Marylanders; and other painful cuts.
The governor's determination to get a head start on the crushing deficit predictions for next year was prudent, but his refusal to consider the tax revenue issue is deeply troubling. His political promise to hold the line on taxes has begun to damage services built up over decades.
Fortunately, others in Annapolis are thinking about how to restructure the tax system so that more revenue will be available to sustain needed programs.
For example, Democratic lawmakers are looking for ways to apply the sales tax to various services, from hair cuts and dry cleaning to lawyers and consultants. If the sales tax base were expanded to include some services, the sales tax rate might be reduced from 5 percent to 4 percent. Perhaps a portion of the sales tax revenue could be diverted to the sagging transportation trust fund.
Increasing the sales tax base to include certain services would raise hundreds of millions of dollars more - as would raising the existing sales tax by a penny. And rolling back the income tax cut would bring in about $1 billion a year.
All these options are worthy of consideration, but by refusing to participate in this discussion, Mr. Ehrlich is missing an opportunity to lead and to give Maryland financial stability for the future.
His Cabinet secretaries are rooting out inefficiencies, and that's obviously a good idea - but the tax structure needs just as much attention. Future revenue demands are staggering: a $1.3 billion annual commitment to public education; a $30 billion backlog of transportation projects; more than $100 million in cuts to higher education that should be restored.
The governor tried to solve the cash problem with slot machines, which he wants to see legalized at Maryland racetracks. But this is not a solution. Slots revenue alone won't close the gap, meaning the cuts to core services would have to go beyond draconian.
