Maryland Gov. Harry Hughes today proposed a $6.2 billion budget for 1983 that he portrayed as a Democratic response to Reaganomics--using millions of state dollars to fill gaps left by federal cutbacks and to protect the state against a precarious national economy.

"Our immediate goal has to be the bandaging of wounds created by misguided federal policy," Hughes said in his State of the State address, his harshest attack on Reagan to date. "To the extent that this unfortunate climate persists, it is our obligation to address the problems of human misery created by it."

Hughes also proposed phasing in an increase in the legal drinking age from 18 to 21, and called on the legislature to vote to deregulate the lending industry by abolishing all ceilings on interest rates, one of the most politically explosive issues of the 1982 session.

In his most emotional State of the State address since his inauguration, Hughes promised to augment spending for the "less fortunate amongst us." He said his proposal to increase welfare benefits "demonstrates a caring attitude in a Stockman sea of insensitivity."

His budget, which tops the $6 billion mark for the first time in state history, also documents the precarious nature of Maryland's own fiscal health. It portrays a Democratic state struggling to assert its own priorities in the midst of sharp revenue losses brought on by the Reagan administration and a slumping national economy.

In a year of austerity, Hughes has asked for a spending increase of nearly 7 percent, a contrast to last year's 20-year record low of 4 percent, which relies in part on legislative passage of a proposed gas tax to bolster the strapped transportation fund. The fund includes revenues from corporate taxes, which were sharply cut in the Reagan tax bill.

Most state officials and legislators say that Maryland has to this point survived the first round of Reagan cuts better than other states. But they express wariness about the future, with 20,000 people already cut from welfare rolls, with the worst state unemployment rate in five years, with shrinking funds for mass transit and roads, and with more U.S. cutbacks expected in President Reagan's budget message next week.

While Hughes confidently outlined the state's success in coping with the first year of Reaganomics, he said that Maryland cannot continue to substitute its own resources for federal funds. "The only viable alternative available to us is a steady reduction in state services," he said. "I have seen no rush at the federal level to assist states in coping with new responsibilities by providing access to fresh revenue resources."

In all, Maryland will lose $49 million in aid from Washington, lowering the federal share of the state budget to 22 percent from roughly 25 percent. In the past, the state received yearly increases of 10 percent or more. Hardest hit are social service and transportation programs; education and housing cuts are less visible in the state budget, because some of these reductions will be delivered in the form of block grants to localities.

The system of block grants also has threatened the state's delicate financial base, Hughes said. He charged that the grants were merely a "thin disguise" for future cuts in social programs.

The increase in state spending that Hughes is asking for was fashioned by juggling dollars, programs and jobs. It was made possible by a surprise $150 million surplus for this year that resulted partly from a tight 1981-82 budget, from an unexpected windfall of interest earned on state investments, and the delayed startup of a competitive D.C. lottery--circumstances that the governor cannot control, and that are not likely to recur. It also counts on passage of the gasoline tax, which will account for $104 million of the $148 million increase in transportation money included in the budget.

"By hook and crook and sleight of hand, some of the programs actually will be funded in the budget," one senior budget official said last week, explaining the economic tightrope on which state programs now are balanced.

As Hughes approaches the end of his first term in office and prepares his campaign for reelection, the surplus money for Democratic programs has come in handy. It has enabled him to ask for election-year increases in what one administration official described as "do-gooder" programs--education, alcoholism, aging, mental retardation, jobs for child abuse investigations and, if the gas tax passes, transportation--and to dull the pain of a 36 percent reduction in federal funds for social service programs.

The budget also ia an advertisement for Hughes' main election-year issue, crime, which until now has been the rallying cry of those who support his most likely Republican opponent, Anne Arundel County Executive Robert Pascal. Hughes has requested a $16 million increase for corrections, nearly half of which will be spent for more guards in state prisons. One-third of the state's capital budget is devoted to prison construction.

After tightening the state's fiscal belt last year, the governor this year proposes salary raises for himself, the legislature, and all state employes, and increases in welfare grants. At the same time 901 state jobs have been abolished on paper, with roughly 200 workers actually being laid off.

Administration sources said Hughes' staff considered the political value of many budget items in this election year. As one official said, the final product "does not advance many programs but it does have a little bit for everybody."


Hughes continues to peg education as one of his main concerns. The biggest share of this year's budget, nearly 30 percent, will be used for education programs.

The overall increase of 5 percent in education spending includes continuation of the $8 million targeted aid program, a favorite of Baltimore politicians, which provides extra money to poor areas. The governor's popularity in Baltimore has slipped recently, in part becuase of his cool relationship with Mayor William Donald Schaefer. Hughes also budgeted $61 million to continue the popular aid program for community colleges.

Although the University of Maryland is slated to receive an 8 percent increase in its budget, bringing its funds from the state to $583 million, tuition for students at the four Maryland campuses will rise 10 percent next year. The state college system is due for a smaller increase of 6 percent.

Human Resources

"The safety net Washington talks about has a lot of holes," Hughes said. "We must do what we can, not to cushion a fall, but to keep the net intact."

Nowhere was that more difficult than in social service programs, which lost $17.6 million in federal funds because of federal budget cuts. The loss was the main reason that the department's half-billion dollar budget declined by $3 million.

The Hughes administration started early to develop ways of salvaging some programs. The governor said he would recycle into the welfare program $5 million of savings that resulted when Reagan cut 20,000 Marylanders from the welfare rolls. Hughes says the recycled dollars will return 10,000 poor people to the welfare program, a figure that some administration officials say could move up or down.

He also has proposed a 9 percent increase in welfare grants, an increase in the standard of need to $450 each month for welfare families, a 9 percent rise in family foster care, and higher state payments for family day care.

Further savings were made, and then recycled into the budget, by increasing the staff for reviewing welfare applications and investigating fraud.

Hughes' proposed 13.6 percent increase in the public safety and corrections budget reflects his departure from reformist corrections policies to a more conservative approach, a shift that began last year when his two liberal corrections chiefs resigned under fire for alleged mismanagement.

While Hughes in the past asked for more community-based rehabilitation programs, his proposed $16 million increase for the department this year chiefly expands security and health care in the state's prisons.

In a year when the state bureaucracy is being trimmed by more than 900 positions, Hughes has asked for an extra 132 prison jobs, including 95 new guards. In his capital budget, he has proposed $35 million for prison construction, almost triple last year's appropriation, including $13 million for a new medium-security prison in Hagerstown that he had earlier opposed.

The budget also reveals the mismanagement of past years, showing that the department ran up a record $8.5 million deficit in 1981-82. According to budget documents, departed prisons chief Gordon Kamka drastically underestimated the 1981-82 prison population, leading to unexpected costs for inmate care and forcing guards to work overtime. Maryland now has more than 9,000 inmates (Kamka had predicted 7,500) in a system built to house 7,100, and faces three court orders to ease overcrowding. Budget documents also show that the department under Kamka accumulated more than $1 million in unpaid inmate medical bills.

In addition to covering the deficit, Hughes has added an extra $8 million mainly to pay for the care of the expanding inmate population. Hughes' new prisons administrators have made it more difficult to qualify for release than under Kamka. Because of those new policies, and the legislature's interest in cracking down on crime, the prison population is sure to grow in 1982-83.


An increase of $55 million in spending for health programs that Hughes requested would help treat alcoholism, mental illness, mental retardation, and would provide new services to the elderly, all programs likely to be popular with voters and the legislature during an election year.

Hughes called for a $1.5 million increase for drunken driving programs in the $9 million budget for treatment of alcoholism. The mental health administration would get a modest $4 million increase, and another $6.5 million will be added for mental retardation programs.

One of the smallest allocations, but one that Hughes stressed in his budget message, is a $900,000 program intended to centralize services for the elderly.

Medicaid and Medicare account for $559 million, more than half of all the funding for the state's health programs. This includes aid for 3,000 families who Hughes returned to the rolls after Reagan attempted to cut them off.


"Should we fail to act, the pot-holed roads of today will become unpassable roads of tomorrow," Hughes told the legislature. "The bridges in need of repair today will be condemned tomorrow."

The $148 million increase that the governor has requested in the $1.3 billion transportation budget is built around a 4 percent gasoline tax that is likely to be challenged or changed by the legislature. Last year a gas tax failed.

The increase includes $66 million for capital projects, $9.5 million for highway and port operations, and $29 million for localities. The budget also includes Maryland's $17 million share of construction costs for the Washington metro system.