- The Washington Times - Friday, December 15, 2000

ANNAPOLIS Maryland is likely to have less than half the nearly $1 billion budget surplus it had last year, officials said yesterday.

The state's Board of Revenue Estimates projects that Maryland will have roughly $375 million more than it needs to meet spending commitments in the next budget year, which begins July 1.

Comptroller William Donald Schaefer said that Maryland's economy is expected to continue to outperform or at least match the national average, but is slowing slightly.

Two important measures of the economy personal income and employment are expected to take minor downturns in Maryland over the next two years.

Personal income is expected to continue growing by 6.2 percent through 2001 before dipping to 5.9 percent in 2002. And employment growth is projected to move from an estimated 2.5 percent in 2000, to 1.6 percent in 2001 and 1.9 percent in 2002, according to board projections.

Although Maryland has record revenue, the numbers indicate that the state should be cautious in its spending, Mr. Schaefer said.

Yet, Gov. Parris N. Glendening said the current slowdown would be considered a boom in less prosperous times.

"At this point it's all psychological," said Mr. Glendening, who drafts the state budget.

The governor said he wants to invest Maryland's budget surplus in higher education and "quality of life" issues, which he said will help ensure continued prosperity.

He said the only tax relief he will support are "refinements" in tax credits for economic development and for conforming to his Smart Growth guidelines to curb suburban sprawl.

"There's no need to focus on additional tax cuts some of which are still being phased in," Mr. Glendening said, referring to a reduction in the state inheritance tax and a 10 percent income-tax cut to be complete in 2002.

In addition to more spending for education, the budget he plans to introduce next month will call for new short- and long-term spending on transportation improvements that complement Smart Growth; and "expanding programs to deal with social issues," he said.

"We've reduced a number of taxes, but we've also been restrained and have seen some states around us feeling the consequences [of large tax cuts]," Mr. Glendening said in a slight swipe at Virginia, whose governor, Republican James S. Gilmore III, is struggling to end the state's property tax on cars.

The Board of Revenue Estimates will issue new projections in March before the General Assembly acts on the budget.

But the next step in shaping Maryland's spending comes Tuesday when the Legislature's Spending Affordability Committee decides how much the budget may increase over current spending.

The committee had traditionally keyed spending increases to personal income growth, but in the past two years raised the spending limit by factoring in capital gains increases fueled by a volatile, now declining, stock market.

Republican leaders said they expect and fear more of the same.

House Minority Leader Robert H. Kittleman, Republican for Howard and Montgomery counties, said he believes the governor and Democrats who control the Legislature plan to raid more than a third or all but what they are required to keep of the state's Rainy Day Fund.

Senate Minority Leader Martin G. Madden, Howard and Prince George's counties Republican, said the solution is to have a mechanism in place so when there is a surplus taxpayers get something back.

Mr. Madden said Senate and House Republicans are working to craft a proposal.

"The problem is money only has to travel one way to Annapolis," Mr. Madden said.

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