Ehrlich vows widespread spending cuts

Governor tells conference only Medicaid, education will grow next fiscal year

Balanced budget due in January

Some fear social services will suffer as he moves to close $700 million gap

November 20, 2003|By David Nitkin | David Nitkin,SUN STAFF

Despite a brightening economy, Gov. Robert L. Ehrlich Jr. said yesterday that he is planning cuts to nearly every corner of state government so that he can present lawmakers in January with a balanced budget that does not increase taxes.

Ehrlich and his budget secretary, James C. "Chip" DiPaula Jr., told an economic conference that of 54 programs in the state's $11 billion operating budget, only two -- public education and Medicaid -- would grow in the next fiscal year.

"We are pretty much trimming everywhere else in the budget to make room for education and Medicaid," DiPaula said, adding later: "It's very likely that most, if not all [other agencies] will have reductions."

The administration's comments come less than two months before the governor's fiscal 2005 spending plan is required to be delivered to the General Assembly. They raised concerns among proponents of programs for children and the needy that Maryland's social safety net -- constructed with taxpayer dollars -- was about to be shredded.

"We've been waiting to see when the shoe was going to drop. Now, the shoe has dropped," said Jann K. Jackson, executive director of Advocates for Children and Youth, a not-for-profit association that works on child-related policy issues.

The governor said he refuses to raise sales or income taxes to close a projected $700 million-plus gap between anticipated revenues and expenses in the budget plan he is preparing. By law, the governor must submit a balanced budget, and the General Assembly can only make cuts to the proposal; it cannot add to it.

Ehrlich said he was committed to the next installment of an expensive education reform package known as the Thornton Plan, which will cost nearly $390 million in the budget year that begins July 1. Growth in Medicaid, or health care for the poor or disabled, would take another $250 million in new money to meet requirements of the federally mandated program.

Speakers at the economic outlook conference in Woodlawn sponsored by RESI Research and Consulting and Towson University said the state's economic outlook was solid and job growth should continue, but the governor said those projections would not alter his budget-cutting plans.

Maryland is experiencing "not a good economy, a recovering economy," Ehrlich said. "We viewed the bad economic news as an opportunity to remake government."

The magnitude of the cuts, and the breakdown by agency, were not available yesterday. DiPaula has previously said that the governor supports some new revenues and fees, and would back a measure to prevent corporations from avoiding income taxes by shifting assets to Delaware holding companies.

Still, if the governor's budget included $200 million in new revenues, agency reductions could exceed $500 million.

Ehrlich and DiPaula said reductions are warranted to correct years of overspending by Democratic administrations. "We spent our way into this problem," DiPaula said. "We don't have a tax problem. We have a spending problem."

Democratic General Assembly leaders were muted in their response to the administration's pronouncement yesterday. Because Maryland's governor has perhaps the broadest budgetary authority of any chief executive in the nation, there is little lawmakers can do to change Ehrlich's mind.

"The people elected him to govern and make those decisions," said House Speaker Michael E. Busch. "Eventually, he has to take it out to the citizens of Maryland, and see what kind of reaction he gets."

Sen. Ulysses Currie, a Prince George's County Democrat and chairman of the Budget and Taxation Committee, said the governor risked reneging on promises made in his first State of the State address, when he singled out a heroin addict and several other individuals to demonstrate his commitment to social programs.

"There were specific areas that he said he would not cut -- he'd increase state spending," Currie said. "We're just changing what people have come to expect from government, and that's to take care of the poor, take care of the indigent."

The governor and General Assembly cut nearly $700 million from state programs to balance this year's budget, noted Jackson, of the children's advocacy group, with reductions heavily impacting youngsters.

The governor mentioned the prospect of revenues from slot machine gambling, his signature initiative early this year, only in passing yesterday. He said his next budget will not include money from slots, although spending plans in future years could include gambling money if an agreement is made with lawmakers on that issue.

But the slots issue played a role at the conference. RESI director Mark Jacobson released findings of a study of which slot machine locations would provide the most money for the state. After examining tax revenues in other states, Jacobson's study concluded that in many instances, slot machines at racetracks provided roughly double the revenue of machines at stand-alone slots emporiums, an idea under discussion in Maryland. But of the states Jacobson examined, none had publicly owned, lottery-run slots emporiums, making the comparison imprecise.

Jeff Hooke, a Vienna, Va.-based investment banker who has done studies critical of Ehrlich's slots-at-racetracks proposal, said Jacobson's analysis "turns logic upside down."

Sun staff writer Greg Garland contributed to this article.

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