Growth allows rise in spending

Strong Md. economy to add $850 million more for programs

Half-billion in budget cuts still needed

December 10, 2004|By David Nitkin | David Nitkin,SUN STAFF

With Maryland's economy growing at its fastest clip in four years, General Assembly leaders decided last night that the state can spend $850 million more on education, public safety and other services in the next fiscal year without raising taxes or tapping emergency reserves.

But the healthier fiscal outlook is tempered by daunting mandatory increases in public school spending and Medicaid programs.

Even with robust growth, Gov. Robert L. Ehrlich Jr. would have to cut more than a half-billion dollars from the budget he is preparing to submit to lawmakers next month to meet the spending goal recommended by the legislature.

To pay for programs already in place and avoid cuts, Maryland would need to generate $1.4 billion in new revenue in the next fiscal year.

FOR THE RECORD - An article in some of yesterday's editions of The Sun incorrectly stated the date on which the state budget will take effect for the next fiscal year as July 1, 2006. The budget will take effect on July 1, 2005.
The Sun regrets the error.

The growth rate "sounds like a big number, because it's bigger than last year, but it's fairly stringent," said Warren G. Deschenaux, chief budget analyst for the nonpartisan Department of Legislative Services.

Last night, the Assembly's Spending Affordability Committee unanimously endorsed a 5.7 percent growth rate for the $25 billion state budget that will take effect July 1, the largest increase since 2001.

Last year's increase was 4.37 percent.

The committee makes its recommendations based on estimated increases in the personal income of Marylanders and other economic trends.

The limit is only a suggestion. Maryland's governor has the strongest budgeting authority of any state in the nation. The General Assembly typically can only make cuts to departments, and cannot move money from one area to another. If it suggests spending increases, it must identify revenues to pay for them.

Still, the assembly has historically demonstrated that it will cut the governor's budget to meet the spending affordability limit.

State Budget Secretary James C. "Chip" DiPaula Jr. would not provide a commitment last night that the governor would meet the spending target. But he said state agencies have submitted budget proposals that are 12 percent lower than this year's spending, and have identified programs that could be reduced or eliminated.

"The governor right now is evaluating options for these reductions," DiPaula said. "They will be hundreds of millions of dollars. There will be significant reductions in spending."

Ehrlich will submit his budget for the 2006 fiscal year in mid-January.

The governor is opposed to new taxes, and the spending plan will not include revenues from legalized slot machines - a thwarted priority of Ehrlich's. So spending cuts and growth-rate reductions are expected as part of the governor's plan to close a structural budget gap - a $1 billion shortfall between revenues and expenses caused largely by the dictates of a public schools reform program - over the final two years of his four-year term.

Top Democratic lawmakers have expressed concern that Ehrlich staffers are refusing to share potential budget reductions with legislative analysts, unlike in past years.

J. Lowell Stoltzfus, the Senate Republican leader from the Lower Shore, said yesterday that the secrecy was warranted.

"It's understandable why it needs to be that way," Stoltzfus said. "As soon as you make those dramatic cuts, it becomes a political football way before it should. ... If any of that information leaked, everybody would be second-guessing what the cuts are."

Stoltzfus said he was pleased with the suggested budget growth rate because it reflected a rare bipartisan consensus.

"I think this was an honest appraisal and an honest response, and I am delighted that Democrats and Republicans were unanimous on it," he said.

Data from the Legislative Services Department show that state spending is at a 20-year low when measured as a percentage of the personal income of residents, a benchmark in the spending affordability law. The state is spending the equivalent of 6.96 percent of personal income this calendar year; the 20-year high was 7.63 percent in 1990.

The committee also recommended that:

Any fund created to help pay the rising malpractice liability premiums of doctors should be exempt from the spending limit recommendations.

The state can borrow $670 million for construction projects and stay within its debt guidelines.

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