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State faces cuts, tax rise Top officials seek solution to budget deficit.


Gov. William Donald Schaefer is warning that "startling efforts to balance Maryland's ailing budget could touch programs and employees in nearly every level of state and local government.

Depending on which projections are used, the state is facing a deficit of $395 million to $450 million in its current $11.5 billion budget.

Unless remedies are found, the state's money problems are expected to grow more serious next year.

Dramatic spending cuts, early retirements and layoffs of state employees, and raising taxes are being considered in earnest.

After a private luncheon meeting yesterday with the General Assembly's key lawmakers, Schaefer told reporters he is preparing to make substantial cuts in state spending to balance the budget.

"When we give you the facts and figures . . . you're going to be startled," Schaefer said. "Some of the solutions are startling."

The governor said the proposed cuts, many offered as sacrifices by his Cabinet secretaries, could affect entire programs.

The Schaefer administration had been working to cut spending by $300 million. But last week, William Ratchford 2nd, General Assembly chief fiscal adviser, said the projected deficit is closer to $450 million.

Schaefer conceded that the deficit is higher than his analysts had projected: "About $395 million would be an accurate figure."

Besides cuts in programs, the Schaefer administration reportedly is considering holding back more than $100 million in aid earmarked for local governments.

Layoffs of state employees also are possible. The largest departments, including Human Resources and Health and Mental Hygiene, reportedly are targets of what could be "massive" work-force reductions.

The governor's plan to deal with the deficit could be unveiled by Oct. 1 and implemented by early 1992. Schaefer and lawmakers will review details of the plan after Sept. 25, when the General Assembly meets for a special session to approve a congressional redistricting map.

For the first time in weeks, Schaefer, Senate President Thomas V. Mike Miller Jr., D-Prince George's, and House Speaker R. Clayton Mitchell Jr., D-Eastern Shore, met yesterday at the Governor's Mansion to go over ways of balancing the budget.

Apparently agreeing it is time to put aside what has become routine bickering among themselves, the three now are pledging PTC to work together to solve the financial crisis.

Miller said the governor discussed three methods of closing the deficit -- layoffs and budget cuts, increasing taxes and a combination of tax increases and budget cuts.

Among lawmakers' concerns is the prospect that, unless they display a willingness to cooperate on budget problems, the state's coveted Triple A bond rating -- the highest ranking a state can have when it sells bonds to raise funds for capital projects -- could be jeopardized. A lower rating would make it more expensive to borrow money through bond sales.

New York bond-rating houses periodically review a state's finances and ability to solve money problems. Maryland plans to sell $200 million in bonds next month and another $100 million in February.

A push by some lawmakers to raise state taxes has not been embraced by everyone. Mitchell, who led opposition to tax increases during the 1991 General Assembly session, said yesterday he will withhold his opinion until a legislative study of state revenues and spending is completed next month.

"It's my opinion at this time that it's too early to prejudge the tax issue," he said. It is unlikely the legislature will meet in special session to increase taxes, Mitchell said.

Meanwhile, state employee unions are bracing themselves for news that the governor's plans could include layoffs. Bill Bolander, executive director of Council 92 of the American Federation of State, County and Municipal Employees, said he supports raising corporate taxes and income taxes on the wealthy.

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