State budget is tight Tax increases seen in offing


Gov. William Donald Schaefer today proposed a state budget that contains the smallest spending increase in decades, a move the administration hopes will build support for higher taxes.

Schaefer proposed an $11.56 billion budget for fiscal 1992, which represents an increase of only 1 percent over this year's budget. It is lower than the $11.6 billion 1991 budget passed last spring by the General Assembly, but that budget had to be cut in recent months when tax revenues failed to meet expectations.

While the 1992 budget gives more money to prisons and some education programs, it cuts spending for transportation, the environment and natural resources.

Schaefer's budget, submitted to the General Assembly two weeks late, is being unveiled at the same time the administration announced plans to seek tax increases that would raise $800 million a year in new state revenues.

Many lawmakers, however, appear reluctant to embrace any new taxes during a recession and suggest that Schaefer's budget may have to be trimmed by $100 million. The administration's revenue estimates, said Del. Charles J. Ryan, D-Prince George's, are too optimistic.

"We can reduce the budget without having to raise taxes," said Ryan, chairman of the House Appropriations Committee. Official revenue forecasts are scheduled to be updated next month and will likely play a big role in shaping the final budget.

Del. Tyras S. Athey, chairman of the Ways and Means Committee, predicted it would take several years of no-growth budgets to build support for a tax increase.

"There's no question we need an increase in revenue from somewhere in the future," said Athey, D-Anne Arundel.

Lt. Gov. Melvin A. Steinberg said yesterday that the Schaefer administration plans to propose a bill to increase state income taxes and the sales tax. The 125-page bill incorporates all the recommendations of a gubernatorial commission headed by Montgomery County lawyer R. Robert Linowes. The commission advocated higher income taxes for wealthier Marylanders; a half-percent increase in the state sales tax; charging sales taxes on cigarettes and some services; and imposing a 2 percent yearly personal property tax on cars and boats.

The $800 million raised would go toward education, transportation and to poorer areas, such as Baltimore.

Linowes said the 2 percent personal property tax could be halved if the legislature adopts a Schaefer proposal to impose a 5 percent sales tax on motor vehicle fuel and increase various vehicle fees.

Schaefer administration officials are hoping the tax increases will become more popular after legislators see the stark budget, which is based on the assumption that no tax increases are enacted. State House observers speculated that steep cuts in some programs may have been designed to build support for tax increases. Spending for transportation, for example, is down $374 million, or 18 percent.

Baltimore would receive the most state aid of any jurisdiction -- nearly $600 million in shared taxes, transportation aid, police grants and other funds. Money is included for a state takeover of Baltimore's jail and zoo.

But the total is still not good news for the city, which is facing its own budget woes. "The budget looks bad for everybody," said Del. Howard P. Rawlings, D-City, vice chairman of the House Appropriations Committee.

Administration officials said a poor economy forced Schaefer to submit a budget that, for the first time during his four years in office, has not exceeded the spending cap recommended by legislative leaders.

The $11.56 billion budget calls for eliminating 1,600 mostly vacant state jobs but no widespread layoffs. Hundreds of other vacant positions will be funded but placed in a "pool" to be distributed to programs or agencies as needed throughout the fiscal year, which begins July 1.

With the recession boosting demand for social programs, most of the increased spending would go to mandated programs, including Medicaid and welfare. There would also be more money to hire more guards for new prison facilities and new workers for the Baltimore area light-rail system.

Social service advocates are worried that the 1,300 positions eliminated in the departments of Human Resources and Health and Mental Hygiene will translate into program reductions for the poor and elderly.

"I'm afraid to even look at the budget," said a lobbyist for some health and social programs.

Losers in the budget proposal include the departments of the Environment, down 19 percent, and Natural Resources, down 3.2 percent.

Other key features of the budget include:

* A nearly 19 percent reduction for the Transportation Department, down $374 million to $1.6 billion. The cut is partly because $76 million in corporate income tax revenue that usually is pumped into the transportation trust fund is being shifted to the general fund. The one-time shift, opposed by many lawmakers, will require legislative approval. Money is still budgeted for the light-rail system, set to open in April 1992.

* A gain of 13.3 percent, or $287.6 million, in the state's largest department, Health and Mental Hygiene, for a total budget of $2.4 billion. Most of that increase goes to mandatory raises in Medicaid payouts. The Development Disabilities Administration and drug and addiction programs will both gain extra revenue.

* A loss of more than 1,000 positions out of a payroll of about 10,000 in the health department. It could not immediately be learned if any of these jobs are occupied.

* An increase of $35 million in the Human Resources Department, which coordinates welfare and child foster care programs, bringing the department's budget to $930 million.

* An increase of $38.4 million, or 5.9 percent, to help state prison officials accommodate expected increases in the number of inmates.

* An increase of about $150 million in funding for primary, secondary and higher education. Aid to local governments is up $137 million, to $2.7 billion, the bulk of which would go toward education.

Local planning agencies are expected to receive $3.8 million to help implement the so-called Barnes Commission proposals for managing growth in the region.

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