ANNAPOLIS -- Here it was at last, the governor's long-awaited "either-or" budget. Either you raise taxes and cut spending or it will be "doomsday" for state government as Marylanders have come to know it.
But when Gov. William Donald Schaefer's $12.6 billion spending plan for the 1993 fiscal year finally landed yesterday, two weeks later than normal, it hardly caused a ripple.
Most legislators said it was about what they'd expected, and most seemed to take in stride the threat that $728 million in state programs could be imperiled if they collectively fail to act.
"I wouldn't call its arrival either a bombshell or a feather," said Del. Gene W. Counihan, D-Montgomery.
This is because most lawmakers realize this spending plan is different from any they have seen before: It's wide open to change.
By making so much of his budget contingent on legislative action, and by agreeing to work directly with legislative leaders on the state's fiscal problems, the governor has relinquished for this year much of his traditional power over spending priorities.
"It means we can act like a real legislature, and increase and decrease [spending] just like the other 49 legislatures," said Del. Timothy F. Maloney, D-Prince George's.
Maryland lawmakers have long been jealous of the strong
constitutional authority the governor has over a budgetary process that leaves them with few options other than reducing his budget lines.
But this year, Mr. Maloney said, "The legislature will be on equal footing with the governor to make or unmake priorities, more than we've done in the past or are likely to do in the future."
Mr. Schaefer said that continuing government services at current levels would cost $7.4 billion in the portion of the budget financed with general state taxes. But knowing that revenues have been in a free fall for nearly two years, he said, he trimmed $459 million in spending before introducing the plan.
The remaining $6.9 billion, he said, has been swelled by huge increases in welfare cases (up 32,000 in the last year), costly expansion of Medicaid health care for the poor (130,000 new cases) and an unrelenting surge in the prison population (up 3,800). The prison population is increasing at the rate of 100 inmates a month.
But state revenues, decimated by the recession, are expected to total only $6.2 billion during the budget year that begins July 1. To cover the shortage, Mr. Schaefer proposed -- as he promised -- to raise $543.7 million in new taxes and another $45.7 million in higher fees for government services. The new taxes would include an expansion of the sales tax base to include a variety of currently untaxed services, such as dry cleaning, data processing and auto repairs.
Also proposed: a doubling of the tax on liquor, beer and wine; a quarter-a-pack increase in the cigarette tax; an increase in the corporate income tax rate, from 7 percent to 7.5 percent; and a $200 minimum tax on all businesses (61 percent of Maryland business avoided paying any corporate tax last year).
The rest of the gap would be covered by cutting $192.8 million in legally mandated aid to Baltimore and the 23 counties. This includes state financing of school bus transportation and grants that keep property taxes down.
To offset those cuts, the governor would give local governments authority to raise "piggyback" income taxes from the current maximum of 50 percent to 60 percent of what the state takes in.
The governor's budget left untouched a scheduled $184.4 million increase in state aid for education known by the acronym APEX. But local school boards will surely feel the pinch as other general cuts in state aid to local governments are passed their way.
Higher taxes, higher fees and reductions in aid all require General Assembly approval. Because the governor is obligated by the state constitution to submit a balanced budget, Mr. Schaefer was forced to include a $728 million contingency list of programs that would be axed if he and the legislature were unable to pay for them. That is the doomsday list.
"Nobody is going to give any serious credence or discussion to that. That isn't even an option," said House Minority Leader Ellen R. Sauerbrey, R-Baltimore County, a comment echoed by many of her Democratic colleagues.
The Democratic-controlled leadership of the Assembly, in fact, has been working behind the scenes for weeks to fashion a compromise that would avoid such desperate cuts. But stubborn differences over whether taxes should be raised at all -- and if so, which ones and by how much -- have frustrated a consensus.
"I think what we'll end up with is something in between what the governor proposed and doomsday," suggested the governor's budget secretary, Charles L. Benton Jr.
But the Republicans have complicated the problem politically by proposing their own, tax-free budget, a measure many rank-and-file lawmakers would rather embrace because they think it's more in line with public attitudes.
"There's going to be a showdown, and I wouldn't count the taxpayers out just yet. There is a whole coalition working against the tax hike, Republicans and Democrats alike," said Del. Martha S. Klima, R-Baltimore County. "No matter what they do [to raise taxes], we're against it. That's it in a nutshell."
The Maryland Republican Party even issued a statement containing a bright yellow sticker declaring, "Remember New Jersey," a reference to the Republican takeover of that state's legislature after Democrats voted through a large tax increase.
One key Democrat, House Speaker R. Clayton Mitchell Jr. of Kent County, may be the biggest obstacle to a major tax increase this session, which irritates some of his Democratic colleagues.
"He's got what he perceives to be his thumb in the dike, but he's gumming up the works of government," said one frustrated Senate leader.
Even if legislators act to avoid the governor's doomsday option, plenty of state programs -- and state employees as well -- are to be affected:
* For the second year in a row, state employees would be denied any pay raise or even any automatic incremental increases. That would save $100 million.
* State assistance to local health offices would be reduced by $10.4 million and a state police recruitment class would be canceled to save another $1 million. Various forestry, coastal zone and geological projects under the Department of Natural Resources would be trimmed by $1.5 million.
* Foster-care expenditures would be cut by nearly $8 million, and computerized tracking system to follow child support and income maintenance cases would be delayed to save another $3 million.
* More than $27 million now spent for placing handicapped children in specialized institutions would be eliminated.
"It's a minimal budget," said Deputy Budget Secretary Frederick W. Puddester. "There are no enhancements, no initiatives. It just protects the core services of government, and does little else."
Despite the hard times, the budget creates 1,135 new state jobs, thebulk of them to staff soon-to-be-opened state prisons. But it also abolishes 597 existing jobs, for a net increase of 538 state workers.
The doomsday alternative painted by Mr. Schaefer yesterday -- one which he said "would tear state government apart" -- was even more bleak:
* Five state agencies -- Natural Resources, Economic and Employment Development, Agriculture, Housing and Community Development, and Environment -- would be stripped of state funds and forced to rely on federal funds and money from fees, licenses and permits.
"These agencies will all but shut down and their services to the public will stop," Mr. Schaefer said. "Parks will close. There'll be no gypsy moth or mosquito spraying, no tourism program." Historical and cultural programs would be eliminated; efforts to clean up the Chesapeake Bay would be trimmed back.
* Grants under the state's largest welfare program, Aid for Families with Dependent Children, would remain at already reduced fiscal 1989 levels. A family of three, for example, would continue to get $377 a month -- instead of the $406 Mr. Schaefer would propose with more revenue.
* The General Public Assistance program for 27,000 disabled, destitute adults would be abolished.
* Medicaid programs for the poor that pay for prescription drugs, dental and vision care, kidney dialysis and basic personal needs would be eliminated. These are not required by federal law.
* The Maryland School for the Deaf and the Montebello Rehabilitation Hospital would be closed.
* Subsidies for fire and rescue squads, Baltimore police foot patrols, drug enforcement in Prince George's County, rape crisis centers, assistance for the elderly, drug and cancer treatment programs, and local health offices would be slashed.
But like most lawmakers, Mrs. Sauerbrey dismissed as highly unlikely the doomsday predictions: "It's almost a useless document."
SCHAEFER's PREFERRED BUDGET
CUTS
Governor Schaefer proposed "solution" budget that calls for spending cuts and new taxes. Here are some of cuts:
Reductions in Local Aid ($192.8 million): Change the law to reduce state aid to local governments, including payments that reduce property taxes and fund school bus transportation. Part of this would be offset by a $184 million increase in APEX aid to education.
No salary increase for state employees ($100 million): This would be theHealth and Mental Hygiene ($73 million): Reduce aid to local health departments and keep General Public Assistance recipients off Medicaid rolls.
Higher Education ($27.9 million): Eliminate 363 jobs in the University of Maryland System, all funding for University College (continuing education progrmas), cuts in maintenance and equipment.
Elementary and Secondary Education ($30.1 million): Mostly cuts rTC in state payments for placement of handicapped children in non-public schools.
Human Resources ($12.1 million): Almost $8 million in cuts in foster care payments, as well as postponement of computer system to track child support payments.
Public Safety and Corrections ($7.9 million): Eliminate State Police recruit hiring and hold 250 positions vacant.
New Taxes:
Sales Tax ($374.4 million): Keep rate at 5 percent but expand taxes to a wide variety of goods and services not covered before.
Tobacco Tax ($105 million): Increase tax on cigarettes by 25 cents a pack.
Alcoholic Beverage Tax ($29.9 million): Double current taxes on spirits, wine and beer.
Corporate Income Tax (28.4 million): Increase tax rate from 7 to 7.5 percent.
Individual Income Tax ($6 million): Close loopholes involving nonresidents.
Doomsday Budget Items:
In addition to the cuts in his "solution budget," Governor Schaefer said he would have to make these reductions if the General Assembly doesn't raise taxes or cut spending on aid to local governments:
State Agencies ($353.9 million): Eliminate general funds for Departments of Natural Resources, Agriculture, Housing and Community Development, Economic and Employment Development and the Environment.
Medicaid ($138.2) million: Eliminate programs not required by federal goverment including prescription drugs, dentistry, kidney dialysis, eye care, personal care, and all medical care for those receiving state General Public Assistance.
Health and Mental Hygiene ($108 million): Eliminate local health program, reduce community placements for mental health patients, close Montebello rehabilitation center and eliminate cancer and drug treatment research.
Welfare ($89.5 million): Reduce grants to families with children to 1989 levels and eliminate General Public Assistance for the indigent.
Higher Education ($23.8 million): Eliminate tuition subsidies and and scholarships not mandated by law.
Public Safety ($9.9 million): Eliminate state subsidies for local fire and rescue squads, funding for Baltimore City foot patrolmen and Prince George's County drug enforcement, and reduce funds for the Public Defender.
Other Cuts ($4.8 million): Eliminate subsidies for rape crisis centers and all funding for local drop-in Youth Service Bureaus.