ANNAPOLIS, SEPT. 27 -- Maryland's financial plight worsened today as state budget officials disclosed that the projected deficit this year could climb to $270 million, an increase of $120 million from a forecast released only four weeks ago.
Dennis H. Parkinson, deputy budget secretary, said a $270 million shortfall would be the "worst case" forecast for the fiscal year ending June 30, 1991. But the deficit could be even larger if the economic downturn accelerates, if war breaks out in the Middle East or if automatic federal spending cuts begin next week.
"I'm worried about it," Parkinson said.
A spokesman for Gov. William Donald Schaefer, Paul E. Schurick, said tonight, "The governor is doing what needs to be done to manage the potential shortfall."
Maryland, along with Virginia, the District and many suburban counties, is feeling the effect of a decelerating regional economy that is producing lower-than-expected tax revenues and higher expenditures for social programs. Virginia is seeking ways to cut $1.4 billion from its two-year budget.
The gloomy new Maryland forecast came even before the Schaefer administration could craft a detailed response to a $150 million deficit projected Aug. 31. Schaefer said at the time that much of that would be made up by a hiring freeze and delaying equipment purchases.
Today's bad news prompted some legislative leaders to look covetously at a $130 million "rainy day" fund set aside to deal with financial emergencies.
Senate President Thomas V. Mike Miller Jr. (D-Prince George's), while calling use of the rainy day fund "a definite possibility," said the state must consider more spending cuts before discussing tax increases.
"The mood of the taxpayers being what it is, any reforms are going to have to center around belt tightening," Miller said.
Del. Charles J. Ryan (D-Prince George's), chairman of the Appropriations Committee, said it will be more difficult to find ways of compensating for the deficit as it approaches 3 to 4 percent of the state's $11.5 billion budget.
"The trend is downward and it could be even bleaker next month," Ryan said. "Now you're biting into the substantial part of the programs."
In the first round of spending cuts, the Department of Health and Mental Hygiene and the University of Maryland system were required to give up 6 percent of their current budgets, a move that university officials said would wipe out any increase in the budget this year. Other agencies have submitted smaller percentage cuts to the governor's office, which is expected to make final decisions next week.
Members of the General Assembly will get their first detailed look early next week at the revenue projections for the coming year, and officials are hinting that any growth may barely keep pace with inflation.
Parkinson said today that the projected deficit was caused primarily by a faster-than-expected slump in sales taxes, corporate income taxes and real estate transfer taxes.
Rather than order a second round of budget cuts in the departments, Parkinson said the state could delay or cancel some construction projects. Also, he said, a hiring freeze for about 5,000 vacant state jobs likely will continue throughout the year. As a last resort, Schaefer could order up to 25 percent cuts for virtually all state spending except for public school aid.
On Wednesday, Schaefer warned the Maryland congressional delegation that the failure of Congress to settle a budget impasse with the White House would "wreak havoc" on the state's economy. A temporary furlough of the 260,000 federal workers who live in Maryland would further depress state revenue, he said, and automatic spending reductions under the Gramm-Rudman-Hollings Act would deprive state programs of tens of millions of dollars.