Rosy numbers for Md. seen as misleading

THE BALTIMORE SUN

Gov. Robert L. Ehrlich Jr. offered a glowing account of Maryland's finances during his State of the State address yesterday, saying the state would end the current budget year in June with a $680 million surplus.

Since he took office, the governor boasted, "we have resolved a $4 billion - four, with a b, billion dollars - in shortfalls."

But the numbers Ehrlich plucked for his speech offer only a partial - and somewhat misleading - view of Maryland's fiscal outlook, lawmakers and legislative analysts said.

By promoting a $4 billion solution, the governor is adding up several years' worth of temporary patches that leave the underlying problem unresolved, analysts say.

"If he has a $1 billion projected budget deficit for four years in a row, and solves each of them mostly with one-time solutions, he has $4 billion in solutions," said Warren G. Deschenaux, the General Assembly's top budget analyst. "It illustrates the fact that we haven't made the structural solution, because we keep filling gaps heroically."

By law, the governor must submit, and the legislature must pass, a budget that is balanced. Unlike the federal government, Maryland cannot run a deficit in its spending plan, which totals $26 billion under Ehrlich's proposal this year.

Because of conservative projections, most budget years end with a surplus, sometimes ranging in the hundreds of millions. Virtually every year, money is left over after the state collects its tax revenues and pays its bills in the form of salaries, grants to local governments, health care payments and other expenses.

The fiscal 2005 budget year is expected to end with a $680 million surplus. That's because sales and income tax revenues came in stronger than expected, and corporations that had been avoiding taxes by shifting assets to Delaware paid more money than expected once the loophole was closed, Deschenaux said.

But the budget surplus doesn't solve Maryland's long-term budget woes, he said.

In the current budget year, as well as last year and next year, the state is taking in less money than it spends on programs. It has made up the difference through one-time fixes, including taking money from gas taxes that were earmarked for local road projects, and from real estate transfer taxes that are supposed to pay for land preservation.

"We just keep cutting county governments," said House Speaker Michael E. Busch, an Anne Arundel County Democrat.

In the balanced budget plan that Ehrlich submitted last week for the 2006 fiscal year, he filled a $1 billion gap with more than $900 million in one-time measures, analysts have said. Those solutions include the use of some of the current budget year's projected surplus, which can be rolled into next year and spent.

Anticipated spending is growing faster than revenues largely because of two factors: a 2002 law known as the Thornton Plan which requires gradually higher levels of education spending reaching $1.3 billion in additional money by 2008 and the growing demands of Marylanders eligible for Medicaid.

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