The State of Maryland's embarrassment of riches in the form of a $195 million this year, Gov. Harry Hughes revealed today.
Unexpected windfalls from the state lottery, from income, corporate and sales taxes and interest on the state's investments all add up to a massive surplus for the third year in a row.
"I was told two years ago that this was one-time suprlus, and last year that it was a one-shot deal," said Sen. John J. Bishop Jr. (R-Baltimore County).
What happened, said the governor's press secretary, is that long-forecast recession didn't come."
With about 2 million taxpayers in the state, the surplus, using the highest available estimates, averages out to an extra $147 per taxpayer.
Budget experts cringe at such statements, saying that the general public views supluses -- in the words of one expert -- as "some sort of slush fund" for the governor and legislature to fund pet projects. They don't realize that the surpluses are rolled back into the budget for the next year."
That public perception in these days of staggering inflation made the surplus a burden to any governor, but the possibilities for funding programs without raising taxes turn it into a boon.
"It is a double-edged sword," said House Speaker Benjamin L. Cardin (D-Baltimore), the legislature's acknowledged fiscal expert. "But it cuts sharper on the side in favor of the governor, because of the flexibility it gives him.
"If anyone had said a few years ago that you could do things like fund transit programs or increase state and to education by $67 million, all without tax increases, the people would have said it was impossible," Cardin said.
But this year, via the surplus, that is precisely what Hughes has proposed.
The surplus is a product, in part, of a process in which officials try to figure out in January 1979 how much revenue the state will get from various sources for a budget that covers a period ending 18 months later.
"It's an imperfect science at best," said William Ratchford II, director of the General Assembly's department of fiscal services. "You're trying to predict what's going to happen 16 months from now on spending and employment matters."
This year's surplus, for instance, includes a huge chunk of individual income tax payments -- about $58 million -- that officials never expected to get.
A predicted economic slowdown that never materialized and an inflation rate that soared beyond forecasters' expectations worked together to increase people's incomes, and along with it the taxes they paid according to H. Louis Stettler III, deputy director of the state's budget department.
The surplus also includes various other items, on which the projections were low:
$17 million in income taxes collected from corporations.
$30 million in interest on the state's investments.
$14 million on unexpected revenues from the lottery.
There is a complex explanation as to why each of these projections was low, but perhaps the broadest reason is plain old fiscal conservatism on the part of the budget technicians.
"We're far better off to end up more in the black than we thought we would, than to run in the red," said Ratchford. "I can remember when the state closed its books about $2.5 million in the red in 1968. The papers had a field day with us.
"You can bemoan the fact of having a surplus, but you're in worse shape the other way."
Some legislators, such as Bishop, believe that the surpluses should be used to "reduce the most regressive taxes -- those that take the most money from people who can least afford it."
To that end, Bishop said, he is introducing a bill do reduce the state's 5 percent sales tax back to the 4 percent level it was at until 1977. Last year a similar measure was killed in a Senate committee.
Last year a huge portion of the surplus was returned to Maryland residents in various other forms of tax relief, but some legislators said the programs were not generous enough and did little for middle-income taxpayers.
Most of the nation's states do have surpluses, and Maryland's surplus last year placed it a few percentage points above the average for all the states, according to the National Association of State Budget Officers. Maryland surplus was far below such states as Texas, Alaska and California, but above, for instance, Virginia's.
Will the surpluses continue? Maryland fiscal expert Ratchford was asked.
"That's like asking is it going to rain on March 1," Ratchford said. "If I knew these things, I'd be making $200,000 a year putting out an economic forecasting newsletter."