Maryland Gov. Harry Hughes, who issued a gloomy fiscal prognosis for the state a year ago and predicted the need for a tax increase, said today that an improved state economy will give him some breathing room in the budget he will submit next month to the General Assembly.
Largely because of a projected surplus in the current budget of about $47 million -- $30 million higher than had been anticipated last spring -- Hughes said he would have from $20 million to $50 million available for "discretionary" spending next year above what is needed to cover automatic inflationary growth in the budget and increases for state employes and welfare recipients. The governor also pledged that he would propose no tax increase this year.
But Hughes, after receiving his official forecast from the state's Board of Revenue Estimates, cautioned that Maryland does not have sufficient money to enact any major new spending programs, and he suggested that tax changes and spending cuts at the federal level could "cause some problems."
"Even though we are in better shape than a year ago or two years ago," concluded Hughes, "we are not in fat city. We can't do all we want to do."
Hughes' assessment follows an announcement by Virginia Gov. Charles S. Robb Monday that his state's surplus is approaching $160 million. Robb, however, also cautioned legislators against new spending plans because of fears of federal aid cuts and a possible downturn in the economy. The District of Columbia has also reported an expected surplus of $15 million this year, but that must be used to help retire the city's accumulated debt.
Hughes refused to be pinned down on how much of a salary increase he would give Maryland's 70,000 state employes, but employe representatives said it is expected to be in the range of 5 to 6 percent, or about what he offered last year. Hughes traditionally has given welfare recipients the same percentage increase given to state workers. A 5 percent increase for state employes would cost about $50 million, and the same percentage rise for all categories of welfare recipients would total about $10 million.
Hughes also declined to specify what state spending areas would benefit from the available pool of discretionary funds, but said "it would be spread over many different areas."
Compared with last year, when Hughes and the General Assembly remained at loggerheads for much of the session on budget funding, the governor's fiscal 1986 budget is expected to generate little controversy.
"This year, the budget will be a relative pleasure," said House Speaker Benjamin L. Cardin, who unceremoniously junked Hughes' proposal last year for an income-tax surcharge. "We don't have to worry about revenue, either too much or too little."
The revenue surplus outlined by Hughes stems primarily from continued growth in sales tax receipts -- which have been growing at a 13 percent rate -- and robust state lottery sales. Lottery revenue is expected to climb about 16 percent over fiscal 1984, the Board of Revenue Estimates reported.
Although the board predicted somewhat slower economic growth in the next 18 months, it said Hughes will have about $7.4 billion in total revenues for his fiscal 1986 budget that takes effect next July, a growth of about 8 percent over the current fiscal year.
Hughes warned of the prospect of further federal spending cuts.
Although Maryland managed to cope with the previous reductions, he said, "If this continues we are going to have some problems because we cannot continue to fill in those gaps."
"It's rosy in Maryland, but it's not rosy in Washington," agreed Comptroller Louis L. Goldstein.