Md. tax revenues less than expected

Maryland tax revenues dropped $76 million below what had been expected during the past three months, adding to the frustration of lawmakers who walked away from an update on the state's finances yesterday with little fresh information on how Gov. Robert L. Ehrlich Jr. plans to handle the fiscal crisis.

News of the decline in sales and income taxes from previous estimates - a drop of about 1.1 percent in the general fund revenues used to pay most state services - provided some of the few concrete facts House and Senate budget writers could digest during a lengthy briefing that grew heated at times.


State budget Secretary James C. "Chip" DiPaula Jr. told lawmakers he could not provide them with a list of specific budget cuts that Ehrlich has talked about for months.

The governor is two weeks away from announcing final decisions on program reductions, DiPaula said, laying out a timetable that flamed emotions inside packed House and Senate hearing rooms where legislators convened for a grim status report on difficult budget decisions that lie ahead.


"When is the governor going to decide on the numbers?" said Sen. Patrick J. Hogan, a Montgomery County Democrat and vice chairman of the Senate Budget and Taxation Committee. "I thought we were going to hear some specifics today, and there aren't any."

Maryland's $22.4 billion budget is balanced, but the governor and lawmakers say a gap of nearly $1 billion between revenues and expenditures is projected for the next fiscal year. The $76 million drop will add to that shortfall.

Leading the declines in the budget year that ended June 30: corporate income taxes, down $26.4 million; and sales taxes, down $18.6 million. The shortfall will likely be covered through cuts to the current year's budget, although accurate figures won't be available until next month.

"We have not bottomed out yet," DiPaula said. "We're not finished with these uncertain times."

As an anti-tax Republican governor and more tax-friendly Democratic legislative leaders square off over how to handle a bleak forecast, tensions are growing.

The main causes of the looming budget gap, both sides agree, are public education spending that is expected to rise by $388 million, Medicaid spending that will go up by $191 million and the cost of other state operations that should rise by $298 million. By law, the state must have a balanced budget - so program cuts or new revenues are required.

Ehrlich wants to close that gap through cuts, spread out over two years and beginning in this budget year, which took effect July 1. Many lawmakers favor a package of slot machine gambling, new taxes and some cuts to be enacted when they meet in January.

Yesterday was the first time that the House and Senate budget committees had met since Ehrlich ordered the withholding of 10 percent of the budgets of most agencies in a reserve account, setting aside $651 million.


Administration officials say only a fraction of the money will be cut, but the maneuver has made enemies among lawmakers who say that their authority is being trampled.

Some lawmakers said yesterday that they might began legal action to force the governor to make cuts through a more traditional means as spelled out in state law, by taking them to the three-member Board of Public Works.

'Legal options'

"I think we should very quickly explore some legal options," said Del. Peter Franchot, a Montgomery County Democrat. "We don't live in a dictatorship. Is the legislature being involved in this? Is the Board of Public Works being involved? These are important constitutional issues, and we were right in the middle of this."

DiPaula told the House Appropriations Committee that some money could be left in reserve through the next General Assembly session, a prospect that enraged some lawmakers who fear the executive branch is grabbing their authority.

"You talk about being collaborative in here, but you go on WBAL and WCBM [radio] and say something different," Del. Richard S. Madaleno Jr., a Montgomery Democrat, told DiPaula. "Wouldn't it be ironic if a Democratic legislature had to go to court to force a Republican governor to do the cuts?"


DiPaula replied that the administration was complying with law in withholding the 10 percent, but Franchot said that governor was misusing boilerplate language that has been included in budget bills for five decades for a different purpose. He predicted the language would be stripped next year.

"It's very clear you should enjoy this power for one year, because next year, it's gone," Franchot said.

Lawsuit played down

Del. Norman H. Conway, vice chairman of the appropriations committee, played down the possibility of a lawsuit against the governor over the budget-cutting process.

"I think we're away from that at this point," he said.

Conway, a Wicomico County Democrat, ran yesterday's fiscal briefing in place of Del. Howard P. Rawlings, the committee chairman. Rawlings, a Baltimore Democrat who has been diagnosed with cancer, is in the hospital, although lawmakers and family members said that they expect him to be released shortly.


Also yesterday, state university system officials painted a depressing picture of cuts they've absorbed: $121 million, or 14 percent less then what they started the last budget year with.

Chancellor William E. Kirwan said he believed the university system was shouldering a disproportionate share of cuts and was ill-equipped to accommodate a boom of college-age students about to enter the system over the past five years.

Asked by Franchot why he had not considered resigning over the magnitude of cuts, Kirwan - a former Maryland professor and administrator who was hired from Ohio State University last year - conceded that the job had not been pleasant to date.

"Let me say, this job is not what I thought it would be when I came back," he said. "I am not enjoying my days."