ANNAPOLIS, DEC. 5 -- Maryland Gov. William Donald Schaefer will have to cut an additional $250 million to keep the state budget in balance, sources said today, bringing the total retrenchment this year to at least $430 million.
That assessment, to be delivered officially Thursday by the Board of Revenue Estimates, reflects the gloomiest forecast to date as Schafer grapples with the effects of a continuing slump in Maryland's economy that is robbing state government of sales and income taxes it expected to collect.
"We are facing the most difficult decisions in the history of Maryland," Schaefer said during a gathering of incoming state legislators. "We are in a recession. It's going to be absolutely devastating."
The governor had expressed hope earlier that selected spending delays, minor cuts and a freeze in state hiring could stave off a deficit in the state's $11.6 billion budget. But late last month, after cutting $180 million, Schaefer for the first time raised the possibility of state employee layoffs.
Asked today how he was going to handle the deteriorating budget situation, Schaefer replied: "We're going to do some things that are going to be very painful. It's something we can manage, but it will be painful managing it."
Virginia is seeking ways to trim $1.4 billion from its two-year budget. And the District, along with Montgomery, Prince George's and Fairfax counties, have announced cuts to keep spending this year within the dwindling revenue expectations.
While higher-than-anticipated costs for Medicaid, pensions, welfare and prisons contributed to Maryland's projected shortfall, most of the problem stems from overly optimistic forecasts nearly a year ago for sales and income tax revenue.
Officials originally projected a nearly 8 percent growth in the state budget for the year ending next June 30. New forcasts due out Thursday morning are expected to drop that growth level nearer to 5 percent. The Board of Revenue Estimates, headed by state Comptroller Louis L. Goldstein, also will recommend a level of growth in the next budget that Schaefer presents to the General Assembly.
"The shortfall in this fiscal year will have spillover effect into the next fiscal year," Paul E. Schurick, Schaefer's press secretary, said today.
Economists are divided about how long the downturn will affect Maryland's economy, but most agree that growth will return in the later half of 1991. No one expects it to be as robust as the 8 percent to 9 percent of recent years.
Up to now, Schaefer has ruled out tax increases to prop up the sagging budget. Senate President Thomas V. Mike Miller Jr. (D-Prince George's) said this week that state leaders still believe they can deal with the deficit by making judicious cuts and "belt-tightening."