- The Washington Times - Friday, August 31, 2001

ANNAPOLIS Maryland deposited an unexpected $153 million in the bank at the end of the 2001 fiscal year and now has cash reserves of just under $1 billion.
But the surprisingly good news about the budget surplus, contained in a report released yesterday by the comptroller's office, was tempered by warnings that the surplus could turn rapidly into a budget deficit unless the national economy makes a quick turnaround.
"This doesn't mean we can be profligate spenders. We have to be cautious," said Sen. Barbara A. Hoffman, Baltimore Democrat and chairman of the Senate Budget and Taxation Committee.
The comptroller's report covered the fiscal year that ended June 30. Like other fiscal leaders, Mrs. Hoffman said she was less interested in the year-end figures than in the trends developing in tax collections since the new fiscal year began July 1.
The projected surplus for fiscal year 2001 was $385 million as recently as last spring, and it reached $538 million by the time the books were closed for the fiscal year.
Comptroller William Donald Schaefer said most of the unexpected revenue came from personal and corporate income taxes and estate tax.
Maryland's strong showing comes at a time when many other states are cutting spending or are worried about looming deficits.
In Virginia, Gov. James S. Gilmore III had to cut spending by $421 million to balance the budget. The Tennessee legislature mandated $110 million in budget cuts to avoid a deficit.
Sen. Robert R. Neall, Anne Arundel Democrat, said Maryland is faring better than many other states because key elements of the state's diversified economy, including government employment, have not been badly affected by the national economic slump.
But he joined other officials in both parties in warning that Maryland's good times may not continue.
"The most disturbing news I saw was the sales tax," Mr. Neall said.
Sales tax collections were almost $21 million less than anticipated, and Mr. Neall said the shortfall came at the end of the fiscal year.
"That could indicate a significant slowdown in consumer spending," he said.
Sen. Martin G. Madden also worried about the failure of sales tax receipts to meet the projections.
"This is still a hold-your-breath, cross-your-fingers budget. We're not out of the woods yet," said Mr. Madden, Howard County Republican.
Lawmakers cited other reasons for concern about the future, including a growing deficit in the state's Medicaid program.
Gov. Parris N. Glendening agreed with legislative leaders on the need for fiscal caution.
"While this surplus reduces the chance that Maryland will have to cut back on programs that address the unmet needs of Marylanders, it does not provide the opportunity for significant new spending," the Democratic governor said.
But Mr. Glendening said the state's cash reserves are now at the highest point in state history.
"Economists project that Maryland is well positioned to withstand the souring of the national economy," the governor said. "Our $1 billion in contingency funds ensures that Maryland can minimize any damage from the slowdown."

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