Maryland tax revenue to exceed expectations

Trend likely to influence health care budget cuts

September 24, 2004|By David Nitkin | David Nitkin,SUN STAFF

Maryland is collecting more tax revenue than anticipated, a trend sure to influence Ehrlich administration decisions on whether to cut deeply into health care for children, addicts and the poor.

The treasury should take in $242.6 million more in the current budget year than projected when officials were preparing the spending plan six months ago, according to unofficial figures obtained by The Sun.

The state Bureau of Revenue Estimates presented the figures yesterday to Budget Secretary James C. "Chip" DiPaula Jr. as a guideline for preparing next year's $24 billion budget.

The good news contrasts starkly with the revelation a day earlier that the Department of Health and Mental Hygiene had drafted a $480 million list of potential program cuts. If enacted, the cuts would force the closing of four mental health centers and eliminate free health insurance for poor children, among other reductions.

Do the resurgent sales and income tax numbers eliminate the need to slash health care and other services?

Probably not, budget experts say. But what they might do - once again - is push the toughest decisions into the future.

"In the near term, we don't have to do something that drastic," said Steve Hill, head of the liberal-leaning Maryland Budget and Tax Policy Institute, which advocates greater spending on education and social programs. "But looking into the future, we still have a disconnect between the amount of money that we take in and the amount of money we spend on the services we want to provide."

What Hill calls a disconnect is often referred to as a "structural deficit" by state budget experts. Translation: Even with reasonable economic growth, Maryland is projected to spend more than it takes in, largely because of a massive education reform package adopted in 2002 and continuing growth in Medicaid spending.

The gap has been there for years but never fully addressed, either under Republican Gov. Robert L. Ehrlich Jr. or his predecessor, Democrat Parris N. Glendening. By law, the governor must propose and lawmakers must adopt a balanced budget.

"The state has balanced the budget for the last three years on pretty substantial amounts of transfers [from reserve accounts] of about $400 million a year," said David B. Juppe, senior operating budget manager in the state Department of Legislative Services.

"The underlying problem was never repaired," he said. "So even though you have some good news ... spending is still growing faster than the revenue."

To address the gap, Ehrlich budget officials have ordered agencies to complete a "strategic budgeting" exercise, in which programs are prioritized as critical or ancillary. Extraneous programs could be cut, and agencies have been asked to propose ways to reduce spending by 12 percent.

It was that exercise that produced the $480 million health department cut list.

But some Democrats believe that Ehrlich will continue the process for political purposes, even though 12 percent cuts may not be needed because of rising revenues.

"Clearly, he has a philosophical desire to make cuts, because that is the political school he comes out of," said Del. Peter Franchot, a Montgomery County Democrat. The governor may want to foster a grim financial outlook and dangle the prospect of deep cuts, Franchot said, to build support for his thwarted slot-machine plan.

"Painful cuts are offered that will quickly disappear - like magic - if a slots bill begins to move," said Franchot, a slots opponent. "It's a very cynical exercise but one that alarms people."

But Roy T. Meyers, a budgeting professor at the University of Maryland, Baltimore County, does not believe Ehrlich is concocting a problem.

"It's not as if the administration is creating a crisis that will allow it to cut spending to fit with an extremely conservative ideology." Meyers said. "This is a moderate group, as far as fiscal policy goes."

Nonetheless, the administration is contemplating some severe reductions. The health department cut list that was leaked this week despite an administrative gag order continued to rile advocates yesterday.

Jennifer Pollitt Hill, executive director of the Maryland Coalition Against Sexual Assault, said a proposal to save $400,000 by billing women for laboratory tests after rapes is impractical because the state would lose $1.9 million in anti-female-violence grants by doing so.

The state has cut rape counseling funding by 10 percent, Hill said.

"It is just unbelievably disgusting to think the state would make women pay for their own exams," she said.

Franchot said he planned to introduce legislation requiring the state to buy drugs for employees and retirees from Canada, with savings being used to pay for breast and cervical cancer screening - a proposed $2.5 million cut.

Health Care for All, a group proposing coverage for uninsured Marylanders, asked through an "urgent action" e-mail for supporters to contact the governor's office and legislators to stave off the cuts.

As of late yesterday afternoon, though, Ehrlich's office had received seven telephone calls concerning health care cuts, said spokeswoman Shareese N. DeLeaver.

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