- The Washington Times - Tuesday, October 16, 2001

ANNAPOLIS With tax revenue declining and fiscal advisers warning of potential problems ahead, Maryland Gov. Parris N. Glendening is preparing to take the first steps to control state spending and head off a possible budget deficit.
The state comptroller's office said that during August and September, major state taxes brought in $53.7 million less than the same two months last year, ending a long string of healthy growth in state revenue.
"It doesn't look good," Carol Novella, a tax revenue analyst with the state comptroller's office, said yesterday.
She said personal income tax and business taxes were primarily responsible for the decline. Lottery receipts were not included and could change the $53.7 million decline.
Warren Deschenaux, the General Assembly's chief fiscal adviser, said it isn't a good sign "when your revenue collections for the current year fall below those for the same period the previous year."
But like Miss Novella, he cautioned against placing too much emphasis on revenue figures from just two months.
"We were expecting fairly moderate growth in the current year anyway, maybe on the order of two percent. There is certainly time for things to improve before we get to the end of this fiscal year," Mr. Deschenaux said. "But there is also the possibility that before things improve, they will get a little worse."
Mr. Glendening said last week he is preparing for the lack of revenue growth and additional security costs resulting from the terrorist attacks on the World Trade Center and the Pentagon on Sept. 11.
Mike Morrill, Mr. Glendening's communications director, would not discuss what steps the governor might announce tomorrow.
"These aren't particularly good numbers," he said.
But he said revenue from the first two months of the year has never been a very good indication of what will happen for the full year.
State Sen. Barbara Hoffman, Baltimore Democrat and chairman of the Budget and Taxation Committee, said the tax-collection figures for August and September do not reflect the effect on the economy of the terrorist attacks. They will begin to show up in statistics released at the end of October.
"We have to assume that it will get worse next month," Mrs. Hoffman said. "People stopped doing everything. The nation is in mourning.
"This means that we need to be very cautious," she said. "I think the governor needs to take some action to control spending."
One obvious way to reduce spending would be to cut back on construction projects that are included in the current budget, Mrs. Hoffman said.
Mr. Glendening and the legislature set aside about $700 million of last year's budget surplus to use instead of bond sales to finance construction projects. A lot of that money could be retained in the budget by canceling or delaying construction projects.
Mrs. Hoffman said the governor also should consider requiring some state agencies to reduce spending, perhaps by imposing a temporary hiring freeze.
Despite the worrisome numbers, state officials say it is not panic time for Maryland.
Mr. Morrill said the state has almost $1 billion cash in the budget to cover deficits that might arise if there is a continuing economic downturn.
He also said the Maryland economy continues to outpace most other states.
"We are about a point ahead of the national economy in job growth and a point behind in unemployment," Mr. Morrill said.
"The fundamental strength of our economy is still very clear, but there are some numbers that the governor has seen … that lead to a sense of great uncertainty."


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