ANNAPOLIS – With Maryland boasting a nearly $1 billion budget surplus at a time when the national economy is slumping, the state is one of the few that has not used temporary fixes and short-term gimmicks to alleviate its money woes, according to a Washington-based nonprofit organization that studies budgets.
In a report released today, the Center on Budget and Policy Priorities said many states bolster their budgets by dipping into rainy day funds, cutting programs or raising taxes. In the short term, they keep the state’s finances intact, but in the long run, the report says, they could cripple a state.
Because of the cyclical nature of state budgets, with surpluses and deficits always recurring, frequently legislators lack the foresight to look beyond the current fiscal year, the report said.
While Maryland is cash rich, Virginia reported a $52 million shortfall for fiscal 2001.
The center used Virginia as an example of a state that used budget gimmicks to prop up its economic outlook. As a result of political pressure, the report said, Virginia legislators merely increased revenue estimates to justify tax and budget decisions.
Other states, including South Carolina, Mississippi and Ohio used broad, across-the-board spending cuts that risk reducing vital services to low-income citizens.
“If the slowdown continues or deepens, more and more states will face budget shortfalls and problems in states already affected could intensify,” said Kevin Carey, one of the study authors.
The center looked at a diverse group of states, examining the strategy each is using to deal with a faltering national economy. It also focused on whether the responses the states have taken will hold up if economic conditions fail to improve.
“With all these uncertainties, it’s important to examine whether states are handling the slowdown in ways that won’t cause bigger problems later – especially for low-income and other vulnerable populations, which often are the hardest hit by the weak economy,” said Carey.
Not all of the fiscal stress felt by states could be totally attributed to the slow economy, the report said. Some states have structural problems that hinder them from collecting sufficient revenues.
Maryland, along with Minnesota and a few others, was highlighted as able to escape the slumping economy, at least for now.
“The revenue estimates in some states can become a political hassle,” said Neil Bergsman, budget director for the Department of Budget Analysis. “In some cases there is the governor’s estimate, then the Democrats have one, the Republicans have one. It can get real tedious.”
But Maryland has a long-standing consensus process where the Board of Revenue Estimates comes up with a number and political parties stick with it, Bergsman said.
“That’s what we budget to and we don’t have any players in the system trying to stretch the numbers,” he said.
Maryland’s lack of a strong manufacturing presence in the state and considerable government workforce also contributed to the states strong showing, said David Roose, director of Bureau of Revenue Estimates.
But the state’s good fortune may be short-lived, Roose said. “Sales tax collection has slowed and money from capital gains has slowed and possibly could decline.” Roose said. “Those two factors are things we must deal with now.” – 30 – CNS-9-7-01