Schaefer plans raid on local aid, 'rainy day' fund


ANNAPOLIS -- Gov. William Donald Schaefer laid out plans yesterday to practically deplete his "rainy day" fund this year and severely cut help to local governments next year to balance his 1991 and 1992 budgets in the wake of the state's latest deficit projections.

Acting two days after deficits estimated at $88 million more for the current year and another $115 million for next year were figured, the governor told legislative leaders he hoped to close the gaps without raising taxes or laying off state employees.

But the proposals the governor put on the table during a 75-minute, closed-door meeting in his State House office may prove so difficult for lawmakers to swallow that several immediately suggested that tax increases and layoffs may be unavoidable.

"There were no surprises, but all kinds of things you don't want to do," said Delegate Charles J. Ryan Jr., D-Prince George's, the House Appropriations Committee chairman. "It was a set of negative choices -- which kinds of things do you want to do the least?"

The governor's plan to eliminate the additional $88 million deficit that has developed due to a continuing drop in revenues in the fiscal year that ends June 30 would rely primarily on taking another $39 million out of the state's Rainy Day Fund.

Although that pool of money was set up to meet just such financial emergencies, the governor and the legislature already have agreed to siphon off $72 million to help close an earlier deficit of $423 million. To take $39 million more would leave the fund with $15 million.

Charles L. Benton Jr., the governor's budget secretary, said that with only four months remaining in the fiscal year, it was impractical if not politically impossible to raise taxes on an emergency basis. And layoffs for such a short period would not raise enough funds to help, he said.

To eliminate the newly projected $115 million deficit for fiscal year 1992, the governor suggested broad cuts in state programs that aid Baltimore and the 23 counties -- cuts sure to be opposed by local governments and legislators alike.

Among the hardest hit would be the APEX aid to education program, set to increase by $82 million in the coming budget year, but which Mr. Schaefer yesterday proposed slashing by $45 million.

Legislators, worried that local governments would use most of the APEX money to raise teacher salaries at a time when state employees salaries are effectively frozen, seemed generally supportive.

But other proposed cuts in state aid, including a $26 million reduction in the property-tax grant the state gives back to local jurisdictions and a cap on how much the state pays jurisdictions for the Social Security benefits of teachers and librarians, may go beyond what the legislature is willing to do.

"I think what you find from the legislative side . . . is they really don't want to stick it to the locals," said Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee.

With his home county of Montgomery facing a deficit estimated at $175 million, and with the city of Baltimore and other counties finding it difficult to make ends meet, further cuts in state aid will only worsen their problems, he said.

Instead, he said, "I think there is some sentiment for some of the smaller types of taxes." He referred to a series of proposals pending inthe legislature this year that would raise taxes on cigarettes, close a series of loopholes in the state sales tax and increase the tax on telecommunications services.

Together, such taxes could raise as much as $70 million to $80 million, enough to offset some of the proposed reductions in local aid.

But Mr. Ryan, chairman of the House Appropriations committee, noted that because the General Assembly disapproves of the governor's budget-balancing mechanism of transferring $76 million in transportation money to the general treasury, legislators will have to find ways to come up with that much more money.

"I would not rule layoffs out," Senator Levitan said. "It seems it is something that should be thoroughly looked at."

Discussing the latest deficit projections on Friday afternoon, Governor Schaefer said that even "without this new shortfall, we've been doing damage to a lot of programs. There's nothing left to cut."

Mr. Schaefer said that if the state chose only to lay off workers, "the number would be staggering," certainly more than the 1,800 he considered laying off in December. "Layoffs won't be the only answer. We're going to have to do more cutting."

House and Senate leaders said late yesterday that they planned to meet informally and separately again today and then get together tomorrow to decide jointly how to respond to Mr. Schaefer's proposals.

Both administration officials and legislators said they want to demonstrate to New York bond-rating officials scheduled to visit the state next Thursday that they can cooperate to solve the state's fiscal problems.

"I think we're in an option phase on this thing," Mr. Levitan said. "We have to find $88 million or so for '91. What do we do about it? What do we transfer? What do we cut? What do we hit the locals for?

"Right now, we have some broad ideas -- his ideas, our ideas. . . . The House and Senate will meet, then we'll get back to the governor."

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