- The Washington Times - Wednesday, October 31, 2001

Maryland faces a potential budget deficit of $1.7 billion over the next two years that can be erased only by cutting spending and using up most of the state's cash reserves, legislative fiscal advisers said yesterday.
A report to the state Spending Affordability Committee released yesterday said a national economic downturn will put an end to the strong tax revenue growth the state has seen since the recession of the early 1990s.
Lawmakers said the deficit Maryland faces is early evidence that Gov. Parris N. Glendening will leave the state in debt at the end of his term in 2003 just as he left Prince George's County after three terms as its executive in 1995.
"What we're dealing with now is not even reflective of September 11. Revenue was down $40 million and we had $150 million in deficiencies prior to September 11," said Delegate Martha Klima, Baltimore County Republican and a member of the Spending Affordability Committee.
Her comments came as the legislature's chief fiscal analyst, Warren Deschenaux, told the committee that the state faces a $770 million shortfall in 2003 even if it spends "every shred of undesignated cash of which we are presently aware" that is an estimated $725 million that can be garnered by exhausting both the General and Rainy Day funds.
"If you spend all your revenues, you don't have anything even to make a patch," said Sen. Barbara A. Hoffman, Baltimore Democrat and chairman of the Budget and Taxation Committee.
Keeping 5 percent of state revenue in the Rainy Day reserve which states must do to retain their top bond rating that gives them access to low-interest rates when they borrow and spending the rest would result in a $109.7 million shortfall by June 30 and a $1.13 billion shortfall for 2003, Mr. Deschenaux said.
Both projections include the $205 million in budget cuts Mr. Glendening announced two weeks ago citing security costs of the September 11 terrorist attacks and "signs of slowing revenues."
Sen. Robert R. Neall, a former Anne Arundel County executive and key member of the Budget and Taxation Committee, said it was clear that the budget passed in the spring was unsustainable even without the repercussions of September 11. And Mr. Neall said he is concerned because Mr. Glendening doesn't plan to make more cuts until new revenue projections are released in December.
"Then half of the [budget] year is over, so if you need to make 2 percent more cuts you'll need to make twice that [to catch up]," Mr. Neall said.
So far, Mr. Glendening and his staff have not disputed the figures, although the administration had seen them early in the day, said Delegate Nancy Kopp, Montgomery County Democrat and co-chairman of the Spending Affordability Committee.
Michael Morrill, Mr. Glendening's communications director, said revenue projections the governor will get in December will be much worse than the forecast on which the current budget was based. But he disagreed with the projection of a huge potential deficit by the legislature's Office of Policy Analysis.
"They are paid to be doom and gloom and project the worst that can possibly happen," Mr. Morrill said. "The administration is hired by the taxpayers to make sure we don't reach that point.
"We will submit a balanced budget. We will make cuts if necessary to get there," he said.
Eight weeks ago, Mr. Glendening, a Democrat, announced that, while other states were reeling from revenue not realized due to a sustained economic downturn, Maryland would have a $153 million surplus.
On Aug. 30, the governor said his recent policy of using surpluses for one-time expenditures had positioned the state on good fiscal footing, but there would not be money for new initiatives.
On Oct. 17, Mr. Glendening citing security costs of the September 11 terrorist attacks and "signs of slowing revenues" announced he would cut spending by $205 million through freezing hiring, cutting operating costs in every state agency by 1.5 percent to save and deferring at least half of $133 million in construction projects.
"The signals were all there [last year] and they are multiples worse now," said H. Furlong Baldwin, retired chairman of Mercantile Bank and a citizen adviser to the committee.
"If I were going to run for office I know what my campaign would be: The incumbent had a $1 billion surplus 18 months ago. Where is it now?'"

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