$500 million in cuts seen

House panel IDs savings to help close budget shortfall

GENERAL ASSEMBLY special session

November 13, 2007|By James Drew and Laura Smitherman | James Drew and Laura Smitherman,Sun reporters

House budget writers identified yesterday nearly $500 million in potential savings in next year's budget, including recommendations to freeze inflation increases in the state's Thornton education funding plan, eliminate vacant state jobs and tap surplus funds in the state health insurance fund.

"We're at a point where some very, very tough decisions have to be made," said Norman H. Conway, chairman of the House Appropriations Committee, before the committee approved the bill to reduce spending by $498 million in the fiscal year 2009 budget.

The full House of Delegates takes up the proposed cuts today as part of the General Assembly's special session to close a $1.7 billion budget gap for the next fiscal year.

The committee agreed yesterday to reduce inflation increases under the Thornton education plan, a move that is expected to save $150 million.

Also, the panel tapped surplus funds in a health insurance fund for state employees and retirees, taking $77 million. Sue Esty, a spokeswoman for the American Federation of State, County, and Municipal Employees, said the move amounts to raiding extra monies that accumulated because workers overpaid for their health care.

Legislators did decide to give workers a holiday from paying their share of the insurance plan for one pay period.

The committee softened another proposal to eliminate 1,000 vacant state jobs, deciding instead to eliminate 750 positions for a savings of $15 million.

Delegates rejected a controversial amendment that would have eliminated a 2 percent cost-of-living increase to salaries for state employees.

The move would have saved the state about $62 million. They also urged Democratic Gov. Martin O'Malley to make an additional $179 million in spending reductions in next year's budget.

After limited debate, the committee voted to reduce commissions to lottery agents from 5.5 percent to 5 percent, which would increase revenue to the general fund by $8.6 million.

Del. Tawanna P. Gaines, a Prince George's County Democrat, added a provision to the bill saying the General Assembly would review the amount of commissions paid to lottery agents if voters legalize slot-machine gambling next year.

The goal would be to determine whether lottery agents should be paid higher commissions because of lost revenue, Gaines said.

The committee also approved a $10.3 million spending reduction by saying funding should not be increased for the Heritage Structure Rehabilitation Tax Credit program.

The Maryland Historical Trust provides tax credits equal to 20 percent of the bricks-and-mortar cost of rehabilitating historic structures.

The closest vote on the spending reductions was 19-7, as the committee chose to save $6.7 million by deferring changes to the formula that would have increased funding to community colleges.

"We're running out of space in community colleges," said Del. Charles E. Barkley, a Montgomery County Democrat. "This is a big step backwards."

House Speaker Michael E. Busch, a Democrat, had directed budget writers to identify $500 million in cuts from next year's projected budget.

Republicans have criticized O'Malley for failing to significantly cut spending while proposing a range of tax increases. Lawmakers also are working on a package of $1.4 billion in tax increases.

Del. Steve Schuh, an Anne Arundel County Republican, said that while he supported the final bill in committee, he would like to have seen spending curtailed even more.

He also criticized the deficit-reduction plan being crafted by Democrats because it would raise a variety of taxes and relies on revenue from legalized slot-machine gambling that wouldn't kick in for several years. The slots proposal would be put to voters in a November 2008 referendum if the legislation passes.

"If you blow it on spending restraint and if you blow it on slots, you're backed into a fiscal corner of having to raise taxes in a very big way to balance the budget," Schuh said.

But other Republican legislators yesterday balked at some of the small spending reductions.

Del. Susan L.M. Aumann, a Baltimore County Republican, opposed a measure to keep grants to private colleges at the current fiscal year amount, which would save the state $3.4 million. She expressed concern that more students will leave Maryland to attend private colleges.

"I'm glad to hear you agonize," replied Del. John L. Bohanan Jr., a St. Mary's County Democrat, who added that the legislature is trying to slow the rate of growth in spending to match revenue. "We're just trying to live within our means."

Four subcommittees of the Appropriations Committee had a choice of $339.8 million in spending reductions crafted by the Department of Legislative Services.

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