Magazine article Insight on the News

Budget Woes Greet New Governors: Thanks to Their Spendthrift Predecessors, Many of the Nation's Incoming Governors, Including Maryland's Bob Ehrlich, Must Navigate Treacherous Rivers of Red Ink. (the Nation: State Budgets)

Magazine article Insight on the News

Budget Woes Greet New Governors: Thanks to Their Spendthrift Predecessors, Many of the Nation's Incoming Governors, Including Maryland's Bob Ehrlich, Must Navigate Treacherous Rivers of Red Ink. (the Nation: State Budgets)

Article excerpt

Newly elected Maryland governorBob Ehrlich has his work cut out for him as he takes over a state that has been thrown into a tank of red ink under the leadership of his Democratic predecessors, Gov. Parris Glendening and Lt. Gov. Kathleen Kennedy Townsend. Facing massive budget deficits, estimated to be at least $1.7 billion by the end of 2003, the four-time Republican congressman might be asking himself why he wanted this job.

Maryland's first Republican governor since Spiro Agnew was elected in 1966, Ehrlich knows that what he does immediately to manage the state's financial crisis likely will shape the landscape for his party for decades. If that's pressure, then Ehrlich might take comfort in knowing that he is not alone. Governors nationwide are scrambling to deal with the same kinds of problems, and it won't be easy or popular among voters who fear increased taxes and worry about cuts in jobs, health care and education.

So far, 33 states are reporting declining revenues and more than one-half of states have exceeded spending levels projected in their fiscal 2003 budgets. According to the National Conference of State Legislatures (NCSL), only 10 states report a stable budget outlook--Florida, Hawaii, New Mexico, North Dakota, Rhode Island, Tennessee, Utah, Washington, West Virginia and Wyoming. The state governments of the rest appear to be heading for hard times.

According to the NCSL, the budget deficits of the 50 states will stand at a collective $17.5 billion before fiscal 2003 ends, which is June 30 for most states. This amounts to about 3.6 percent of their 2003 budgets, but the total will rise as revenue collections continue to decline.

What happened to the money? State employees tell INSIGHT the first thing the new governors should do is pull in their auditors to learn exactly how some of these states threw away so much money as to leave the new administration in a financial morass. A former state auditor tells INSIGHT he is bewildered by the fact that few transition teams ever so much as talk with the auditors, who almost always know more about a state's fiscal problems than the generic economic consultants brought in to macromanage. What the new governors might find, says the former state auditor, is the true story of why the numbers don't compute.

Certainly that appears to be the case in the state of Maryland, where a federal grand jury and prosecutors continue to probe whether laws were broken in the allocation of federal-grant money to the state's criminal-justice programs. It is an issue that may have played a role in Ehrlich's stunning defeat of Townsend, the eldest daughter of Robert F. Kennedy. Under her leadership, for instance, the state paid out $4 million in civil settlements to young offenders who frequently were beaten in so-called boot camps. That was on top of allegations that she mismanaged public money in her anticrime program. She called all such allegations "political garbage" [see "Townsend Fighting for Political Life," Oct. 29-Nov. 11], but those huge deficits are there to remind Marylanders that their tax money went somewhere.

The problem is that the garbage now has to be sorted by Ehrlich, who wasted no words in describing the Glendening/ Townsend tenure as a "corrupt administration." While Ehrlich figures out his next step, he no doubt will be keeping a close watch on how 23 other new governors will be cleaning up the dirty laundry they inherited from the boom-boom days of the nineties. These new state leaders already know it is not a pretty picture.

Warren Deschenaux, in the Maryland Office of Policy Analysis, predicted in June that his state would suffer a shortfall of at least $1.7 billion. That may be an underestimate, according to state auditors. The state must set aside 5 percent of its rainy-day fund as a cushion to avoid budget deficits in lean years, but Ehrlich points out that Glendening "raided the fund for $557 million--more than any other governor in the nation--leaving only $80 million. …

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