Maryland's leading candidates for governor are offering starkly different visions of the state's budget woes and how they would balance the books if elected.
Republican Robert L. Ehrlich Jr. portrays a state in which spending has been allowed to grow unchecked. He is calling for budget cuts of at least 4 percent for most agencies next year, as well as the legalization of slot machines at racetracks and an eventual scaling back of some government services.
Democrat Kathleen Kennedy Townsend sees the state facing one more bumpy year, forcing spending and hiring to be frozen in most areas through June 2004. But she then foresees a resurgence of economic growth restoring the bountiful budgets of the late 1990s.
Both candidates talk of reviewing the budget for wasteful spending -- Ehrlich calls it a "show-cause process," Townsend labels it a "top-to-bottom management review" -- and they've avoided making very many expensive campaign promises.
But with less than three months to go until the November election, neither candidate has laid out all the specifics of a plan for dealing with what is shaping up to be Maryland's most difficult budget crunch in a decade. Both campaigns promise more detailed fiscal plans after next month's primaries.
Legislative analysts project that revenues will fall at least $900 million short of spending in the fiscal year that begins July 1 -- the first budget facing the candidate elected governor in November.
The analysts hint that when the latest estimates of tax collections and other revenues are released next month, Maryland's projected shortfall could be even worse, perhaps exceeding $1 billion. The state's budget for the current year is $21.7 billion, but only about half of that is in the general fund operating budget -- the portion driven by tax revenues and covering education and most state services.
State auditors are still closing the books on Maryland's just-completed fiscal year, and those revenues also could fall short of projections -- cutting into the surplus that is being counted on to keep this year's budget balanced.
"We're spending more on current operations than we're receiving in current revenues," says Warren G. Deschenaux, the General Assembly's chief fiscal analyst.
The state Constitution requires the governor and lawmakers to approve a balanced budget each year, and the national bond agencies have enough confidence in Maryland's fiscal future that they continue to give the state their highest ratings.
Nevertheless, calculations by Deschenaux's office indicate that only 95 percent of spending in this year's general fund budget is covered by incoming tax collections and other revenues. Maryland's rainy-day fund and other one-time sources are being tapped for the rest.
For next year, 93 percent of projected spending would be covered by projected revenues -- a trend that can be sustained only as long as the state has money left in its reserves.
Representative Ehrlich says the gap between spending and revenue will require severe steps. "We've grown way out of proportion to our means over the last eight years," he says, relying on taxes from the stock market boom that have dried up. "A difficult situation calls for, in some cases, draconian means."
The Baltimore County Republican says that he'll ask anyone who wants to be a Cabinet secretary in his administration to identify at least 4 percent cuts -- though he calls that a "flexible" target likely to exclude schools, public safety and health care.
Ehrlich rejects "a massive tax increase," though he says he is open to a possible gas tax increase to fund transportation projects and would look at "filling holes" in products and services exempt from the state sales tax. He also says large tuition increases ought to be considered for out-of-state residents.
For rising health care costs for Maryland's poor, he suggests the state could use $1 billion from the sale of CareFirst BlueCross BlueShield, if that is approved by the state insurance commissioner. Townsend opposes the sale. Ehrlich also raises the possibility of privatizing some state assets, including Baltimore-Washington International Airport.
But the biggest budget difference between Ehrlich and Townsend involves a potential source of new revenue -- legalizing slot machines at Maryland racetracks. Ehrlich predicts that could raise between $200 million and $400 million, and he would use the new dollars to help fund the Thornton Commission plan to substantially increase spending on public schools.
"Marylanders' money is already going to West Virginia and Delaware, and it will soon be going to Pennsylvania. And it's paying for important services in those states," Ehrlich says. "We should be keeping those dollars here in Maryland, paying for our needs."
Like Gov. Parris N. Glendening, Lieutenant Governor Townsend firmly rejects legalizing slot machines, saying they create too many social problems. "Slots are the most addictive form of gambling," she says, "and the studies show they hurt small business."
Townsend agrees with Ehrlich that Maryland faces short-term budget difficulties, though she disputes the severity.
For next year, she would freeze the spending of most state agencies, except public safety and education. But after that, Townsend foresees an economic recovery that resumes steady increases in tax collections and state revenues.
"I believe Maryland is well, well positioned to take advantage of the growth in the national economy when it comes roaring back," Townsend says.
Townsend would reject all tax increases in her first year in office, but would back a 36-cent-per-pack increase in the cigarette tax during her second year to help fund health care for the poor -- a tax increase that Ehrlich opposes.
While Ehrlich and other Republicans charge that the Glendening administration has increased spending too rapidly over the past eight years, Democrats charge that Ehrlich's congressional record is no better -- noting that he voted recently to permit large increases in the federal debt limit.
When it comes to campaign promises of new spending, Townsend has been more specific and more restrained. She has called for a prescription drug plan and other proposals that altogether would cost less than $15 million.
Ehrlich has mentioned several ideas during speeches, but has not detailed how much they would cost. One such proposal -- tax breaks on veterans' pensions -- could cost $60 million in the first year, according to legislative analysts.
Rescinding all or part of Maryland's 10 percent income tax cut, which was phased in over the past five years, is one possible source of revenue that neither candidate mentions.
The tax cut amounts to a roughly $600 million annual drop in state revenues -- or about two-thirds of next year's projected deficit.
But Deschenaux notes that Maryland would likely be facing a similar deficit even if the tax cut hadn't been approved.
"It's fair to assume that if the adjustment had not been made, some of that money would have been appropriated to other purposes," he says. "We would probably be facing the same numbers."