Jaws, the Sequel: The Return of the Deficit


Just when you thought it was safe to get back in the water, here come those sharks again!

That's the way city and county government officials must feel about that gang in the State House. Before you know it, they'll be chomping away on the aid handed out to local governments just last month.

These are deceptively quiet days in Annapolis. With the General Assembly -- thankfully -- out of town and out of session, the Schaefer administration can finally concentrate on what it is supposed to do: run the government.

Gov. William Donald Schaefer is studying bills to be signed or vetoed; his top aides are mapping plans for new initiatives; and his cabinet officials are devoting full time to running their departments without worrying about the latest legislative shenanigans.

But below the surface, problems are brewing. They're hardly new dilemmas, either. The state seems headed toward another budget deficit. Fiscal experts outside the Annapolis complex peg the red ink at somewhere between $150 million and $170 million.

By the fall, that means Governor Schaefer will be agonizing over another round of agency cutbacks and possible staff reductions. It also means the General Assembly could be headed toward yet another special session.

You are probably asking: How could this be? Didn't the Assembly just approve a whopping tax package and slash government expenses dramatically?

That's correct. But the depth of the state's black hole was underestimated by Annapolis officials, both in and out of the General Assembly. Revenue predictions for all those new items subject to the sales tax are probably way too optimistic. The higher piggyback tax revenue for the counties is also wildly out of sync with what county officials say are realistic numbers.

Meanwhile, the state's Board of Revenue Estimates helped close the budget gap by puffing up its predictions of an economic recovery. Although income tax revenue rose only 2.2 percent in fiscal 1991 and 2.9 percent in fiscal 1992, the state is projecting a 6.8 percent gain in the fiscal year that starts July 1. That's an Alice in Wonderland figure.

Most local governments are expecting a revenue rise from the income tax of no more than 3 percent. Even that might be too high.

Look at the situation in Anne Arundel County. The county is heavily dependent on defense and government employment. Yet recent and future layoffs at Westinghouse, Martin Marietta, the National Security Agency, the U.S. Naval Academy and Fort Meade will deprive the county of thousands of well-paid jobs -- and millions in tax revenue.

Other counties have similar concerns. The recession may be ending, but the recovery looks feeble.

Compounding the state's money woes is the continuing drain caused by the still-growing prison population, the constant influx of troubled juvenile offenders, the large number of welfare recipients and the burgeoning Medicaid rolls. The unanticipated budget consequence of the extra Medicaid costs could, by itself, wipe out the state's entire "rainy day" fund of $50 million.

These are some of the reasons Anne Arundel County Executive Robert R. Neall said, "I think the whole [state] budget is predicated on faulty assumptions," and why Baltimore County's budget director, Fred Homan, said the state budget is "balanced on paper only."

If the state's income-tax prediction is off by as much as county fiscal experts fear, it could mean a $140 million deficit -- not counting too-rosy sales tax estimates and the continuing extra costs for prisons, juveniles, welfare and Medicaid.

No one in the General Assembly or the governor's office wants to revisit the budget controversy. No one has the stomach to raise taxes again. That means cuts to existing state programs, layoffs and another state raid on local aid.

Some county leaders, such as Mr. Neall, are expecting a state pullback. He's put $10 million into an Arundel "rainy day" fund to cushion the county when Maryland asks for some of its money back. But other counties haven't made such contingencies. They could be staggered when the state pulls out of its financial commitment.

One positive fallout is likely to be new support for the Butta commission on government efficiency. This blue-ribbon panel releases its next round of suggestions in two or three weeks. These cost-saving ideas could give the governor and legislators a sensible blueprint for cutting expenses when the budget crisis hits.

There is, obviously, a chance this gloom is merely journalistic cynicism, that Maryland's economy will spring back to normalcy by mid-summer and we'll enjoy robust growth. That would make folks in Annapolis very happy. It is possible, but not likely. There are more hard times ahead for the ship of state. Local leaders had better keep an eye out for the sharks. They're still out there -- and hungry as ever.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad