ANNAPOLIS, AUG. 31 -- Maryland Gov. William Donald Schaefer, blaming the region's softening economy and the state's soaring welfare costs, ordered a freeze on state hiring today in an attempt to forestall a projected $150 million deficit.
Schaefer also ordered administrators to curtail out-of-state travel and the purchase of motor vehicles. By not filling nearly 5,000 job vacancies, the state can save approximately $100 million of the anticipated shortfall in the state's $11.5 billion budget. Schaefer said there would be no employee layoffs.
Flanked by top leaders of the General Assembly, Schaefer ruled out a tax increase for the time being, but said an increase in the state gasoline tax and the elimination of some sales tax exemptions may be considered next year, after a commission studying the state's tax structure reports its recommendations.
The governor revealed the budget woes 11 days before Maryland voters cast ballots in primary elections. Schaefer attempted to put the best face on the bad news; other states in the region and around the country are in much worse shape, he said. But he warned that the situation could worsen in a deeper recession or if the state is forced to absorb further cutbacks in federal welfare aid.
"Many states are grappling with decreased revenue and increased budget costs," Schaefer said. "It's a small amount now compared to other states, but it's a trend we want to stop right now."
In Virginia, Gov. L. Douglas Wilder disclosed on Aug. 1 that his state faced a $1.4 billion shortfall in its two-year budget and ordered across-the-board spending cuts and delayed major construction projects.
The District also is facing what budget officials say could be a $90 million shortfall in the year that ends Sept. 30. Mayor Marion Barry, after backing away from employee furloughs, has ordered city departments to trim spending across the board.
Maryland, said Treasurer Lucille Maurer, has "a touch of the economic flu."
The climate of budget uncertainty throws into doubt some massive education funding increases expected to be sought for next year, among them $175 million the state Board of Education has proposed to pay for an array of educational initiatives, such as statewide kindergarten and gradually increasing the mandatory attendance age for public school from 16 to 18.
Legislative leaders, who were briefed on Schaefer's actions earlier, voiced unanimous support. House Speaker R. Clayton Mitchell
Jr. (D-Kent) praised the governor for avoiding layoffs.
"We're in good shape," Mitchell said. "And we do have a rainy day fund that will be $140 million by the end of the year."
Schaefer, however, cannot easily tap that fund and did not propose to do so today. To use those funds, state law requires that unemployment in Maryland be 6.5 percent, almost a percentage point above the current level.
Senate President Thomas V. Mike Miller Jr. (D-Prince George's) lauded Schaefer for attacking the projected deficit now, only two months after the fiscal year began.
"From a politician's point of view, this is not the best thing to do in an election year," Miller said. "Maryland's problem is minimal compared to other states on the Eastern Seaboard."
Though fiscal analysts said the state's economy was slowing, they still predicted that government revenue would rise 7 percent in the year that ends next June 30.
Schaefer said the $150 million projected deficit resulted from both higher-than-expected costs of state programs and lower-than-expected tax collections. Sales taxes are expected to fall $32 million below projections, corporate income tax $11.5 million and personal income tax $8 million. At the same time, expected costs for Aid to Families With Dependent Children, the main welfare program, skyrocketed $38 million. Medicaid increased by $20 million, teacher Social Security payments by $13 million and prison operating costs $12.5 million.
State Comptroller Louis L. Goldstein blamed the slowed tax collections on a sluggish economy, particularly a downturn in housing construction and car sales.
J. Randall Evans, secretary of the Department of Economic and Employment Development, agreed that Maryland is being buffeted by the unstable national economy. "Things are unfortunately softening," Evans said. "While the revenue projections for the state are down, it means really that there's not as much growth as was expected."
Next week, state budget officials will begin determining which agencies are most affected by the cutbacks ordered by Schaefer. Administration officials said today they did not know whether large numbers of the 5,000 job vacancies are clustered in a few large departments. In any case, exemptions from the freeze will be allowed so that additional prison guards and welfare case workers may be hired.
Each department will be told to reduce its current budget 1 percent to 5.5 percent, said Dennis H. Parkinson, deputy secretary of the Department of Budget and Fiscal Planning.
Schaefer also ordered agencies to begin a "critical review" of state construction projects, loan programs and equipment purchases.
Paul Schurick, the governor's press secretary, said the review would include millions of dollars in state school-construction projects. "But no one is anticipating one penny being cut from school construction programs," Schurick said.
Some other construction projects could be pared down or postponed, Schurick added. "We'll take a thoughtful, hard look at those types of expenditures before they are made . . . but in no way is that an indication that they are going to be cut."
Most of Maryland's capital projects are financed by bonds and would not be subject to the review.
Schaefer, who is seeking reelection this year, noted repeatedly today that the projected shortfall represents only about 1 percent of the overall state budget.
"That's where we are right now," Schaefer said. "I don't want to doom and gloom, but we're softening."