Maryland got more bad news about its financial future today when, for the first time in more than a decade, the state board of revenue estimated that the state may end the fiscal year in the red.
The bad news was compounded when the board confirmed that Gov. Harry Hughes must come up with an additional $125 million simply to balance next year's budget.
Hughes, who has almost finished drafting the 1984 budget, said the shaky national economy has affected Maryland as harshly as the rest of the country, with sales tax collections and investment income well below estimates. As a result, the state may close out the fiscal year that ends next June 30 with a $6 million deficit. In his first term, Hughes had surpluses as high as $300 million to offset projected deficits.
"There is a greater national problem than we have faced in the past," said Hughes. "We've been trying to be optimistic . . . (but) I'm not sure the administration in Washington knows what it is doing."
Hughes, a Democrat who has been sharply critical of the Reagan administration, said, "We've been fighting Reagan cuts for two years. Reagan trickle-down just doesn't work. That's why we're sitting here with $32 million less than expected in sales tax."
Hughes said he agrees with one recent comment by the president: "Reagan said into a microphone that he didn't realize was on: 'The economy in this country is in a hell of a mess.' He was right on that point."
Hughes and his chief of staff, Ejner Johnson, said this year's $6 million projected deficit would be easy to deal with, by having departments return unspent money, a figure that each year amounts to some $15 million.
But Hughes said filling the 1984 shortfall is a more serious matter. It could possibly force further cutbacks in departments and lead him to adopt a variety of income-producing measures, such as raising the property tax a penny or two and instituting new lotteries. He has also ruled out a raise for state employes this year.
The governor, who made much of what he called Maryland's "good" fiscal health during his reelection campaign, said the state remains in better shape than many, but that he is nonetheless concerned for the future.
According to State Comptroller Louis L. Goldstein, a member of the Board of Revene Estimates, Maryland's budget problems are caused by a slump in several major sources of revenue.
Sales tax collections are running 5 percent ahead of last year but several percentage points below projections. Income tax collections experienced their slowest growth ever, and because of a decline in interest rates, investment income is projected to bring in 36 percent less than the amount collected last year.
Taxes on alcoholic beverages and tobacco also appear to be bringing in less than in the past, a fact that Goldstein attributed to changing consumption habits and tighter personal budgets.
Hughes said he would not outline specific plans for dealing with the budget deficit until Congress resolves the federal gasoline-tax question, which could mean as much as $100 million for Maryland. He also said he intends to discuss the various options with legislative leaders in the next week or so.
"I don't want to be specific but we're not going to do nothing," he said. "We're going to submit a balanced budget as state law requires ."
However, it was apparent from his statements that Hughes is leaning toward a one-cent or two-cent increase in the property tax, now at 21 cents per $100 of assessed value, that would bring in an additional $5 million per penny. Hughes also appeared ready to endorse the idea of two new instant lotteries, which together could bring in $18-$20 million.
Another option which would draw some $40 million in corporate taxes out of the state's transportation fund can not be evaluated until Congress acts on the gasoline tax.