By Kate Alexander
WASHINGTON – Maryland’s economy is healthy and robust despite signs of a national economic downturn, according to an independent analysis released Wednesday.
But some state officials cautioned that the future might not be so rosy and they repeated fears that the governor is being “overly aggressive” in his spending during these good times.
The National Conference of State Legislatures announced Wednesday that Maryland was one of 22 states with revenues that are currently running above the forecasted levels for the current fiscal year.
The updated analysis of the states’ budget activity also shows that Maryland is enjoying steady growth and a hefty budget reserve, unlike a growing number of states that are experiencing the fallout of a possible economic contraction.
Maryland’s neighbors were less fortunate, according to the report. It listed Delaware and Virginia among the hardest-hit states and said they both are facing budget cuts as a result.
“Most state budgets in recent years have purred like the engine of a luxury car,” said California state Sen. Jim Costa, president of the National Conference of State Legislatures. “Now state legislatures are assessing the wear and tear and making the necessary adjustments.”
Maryland should be making those adjustments now, said some officials in the state, who are worried about Gov. Parris Glendening’s proposal to increase spending by 8.8 percent in fiscal 2002.
“We should recognize the economic warning signs flashing across the country and acknowledge that (the national economic downturn) could affect the Maryland economy as well,” said Minority Leader Sen. Martin Madden, R-Howard.
Glendening’s proposed 2002 budget exceeds the state’s economic growth rate of 6.2 percent, as well as the 6.95 percent increase recommended by the state’s spending affordability committee, Madden said.
The General Assembly’s non-partisan fiscal analyst also expressed his concern.
While the next two years appear fiscally solid, the economy’s present strength does not preclude trouble in the future, said Warren Deschenaux, director of the Office of Policy Analysis.
“We’re in a good fiscal posture right now, but we don’t know to what extent a slowdown in the national economy will affect that,” said Deschenaux. “If you look ahead, there is legitimate reason to be concerned.”
That concern comes from the possibility that a national economic downturn could constrain federal spending, which contributes heavily to the Maryland economy.
But Glendening is confident that the state is on solid economic footing for the long-term, said spokeswoman Raquel Guillory. That assessment is underscored by the state’s top-level credit rating and recent independent analyses that have lauded Maryland for its fiscal management.
Guillory also said that much of the increased spending has been allocated to one-time capital projects, and if the state’s economy turns sour, those projects can be delayed.
The report released Wednesday, “State Fiscal Outlook for 2001,” was an update to the conference’s annual study of the states’ fiscal health, which was released in December prior to the start of most legislative sessions. This update reflects economic changes since the December report was released.
The last time the conference released a mid-year update was in the early 1990s at the onset of the last national recession.
This update found that states with strong revenue growth tended to be in the West and the Mid-Atlantic. States experiencing shortfalls were primarily in the South and the Great Lakes region, areas that are heavily reliant on the manufacturing industry.
