It's either feast or famine.
After a recession-filled era of major budget deficits, the state of Maryland now faces the prospect of a $148 million surplus in the current fiscal year that ends June 30. But don't get too excited: Medicaid, prison and welfare spending are already in the red and will gobble up most of this extra cash.
Still, the news from the state Board of Revenue Estimates is unusually upbeat.
The state's economy is rebounding. Income-tax receipts are expected to rise 5 to 6 percent. Retail and service industries (especially in the health-care field) are moving ahead smartly, while the worst of the layoffs and downsizing from the manufacturing, insurance and financial sectors seem to be behind us. The best news of all is that consumer confidence -- as exhibited in sales-tax receipts -- was up a whopping 9 percent in the three months ending Sept. 30. The consumer buying spree is expected to continue through the holiday season and then moderate a bit next year.
That should leave Gov.-elect Parris N. Glendening in a comfortable position to start his administration. The revenue board set a 5 percent growth figure. That's far more than the incoming governor wants to spend initially. He's still set on downsizing the state bureaucracy to erase a chronic "structural deficit" and free-up money long-term for his top three priorities: education, public safety and economic development.
The new governor also wants to find the money in his first budget for a cut in targeted business taxes. That would go a long way toward changing Maryland's reputation as being hostile to businesses. It also could stimulate business investment and job-creation.
Mr. Glendening would like to squirrel away any leftover money for a large personal income-tax cut late in his term -- to boost his re-election chances. That may be wishful thinking, though. Despite the rosy revenue forecast this week, Maryland's long-range economic outlook isn't so bright. The state spends some $50 million to $100 million more than it normally takes in through revenues. New, costly expenses are on the horizon two and three years from now. Medicaid and prison costs continue to climb.
We applaud the governor-elect's cautious approach. A $140 million surplus looks enticing, but it is a one-time cash infusion that may not reoccur in later years. Besides, voters made it clear in November they want a smaller government, not a larger one. It will be up to Mr. Glendening to follow the mandate laid out by voters.