Budget cuts planned

O'Malley to present $300 million in trims, including to health care, higher education

October 15, 2008|By Laura Smitherman and Gadi Dechter | Laura Smitherman and Gadi Dechter and,laura.smitherman@baltsun.com and gadi.dechter@baltsun.com

Gov. Martin O'Malley will present about $300 million in state budget cuts today to the Board of Public Works, as fiscal analysts warned that the state's financial outlook is rapidly deteriorating.

The board, made up of the Democratic governor, Comptroller Peter Franchot and Treasurer Nancy K. Kopp, is expected to approve the budget-balancing plan, which also includes transfers from other accounts to create a $150 million cushion in the $14 billion operating budget.

"It's going to cause some pain and discomfort all around. It's not because we want to do any of these things, but we must," O'Malley said. Warren G. Deschenaux, the legislature's chief budget analyst, outlined possible future budget trims. They include restructuring state employee benefits to delay retirements and reduce retiree health costs, rolling back an expansion of health care coverage for the uninsured and raising tuition at the University System of Maryland.

In the short term, O'Malley plans to propose steep cuts to health care and higher education, among other programs. Other recommended budget cuts - state worker furloughs and reducing state aid for schools where the cost of education is higher - are off the table for now. The governor has said he needs more time to discuss those proposals with state employees and educators.

The governor is reducing this year's budget more sharply than previously anticipated, a move that reflects the worsening economy and builds savings. Nonetheless, O'Malley said, additional budget cuts could be made in the coming months before he presents next year's budget to the General Assembly.

Meanwhile, legislative leaders have agreed to ban out-of-state travel by lawmakers and postpone renovations and maintenance on buildings for a savings of about $6.5 million.

"These are tough times, and everyone's got to do their part," Senate President Thomas V. Mike Miller said.

But Republicans have criticized O'Malley, saying he should have slowed the rate of growth in government spending more severely over the past year. They also charge that in addition to $1.3 billion in higher taxes, O'Malley has backed new spending.

"We knew that the good times weren't going to last," said Sen. David R. Brinkley, a Frederick County Republican on the Budget and Taxation Committee.

The belt tightening has prompted local governments and school superintendents to prepare for midyear budget changes, and an outcry from advocates who say some recommended cuts could hurt the state's poorest and most disadvantaged. The mental health and disabled community plans to rally on Lawyers Mall before the board meeting to protest cuts that could affect them.

The faltering economy has led to an increase in state food stamp and temporary cash assistance programs for low-income residents, fiscal analysts said yesterday.

Much of the state's long-term financial outlook remains uncertain. While the governor and many lawmakers hope that voters approve slot machine gambling in November, a study released yesterday suggested that estimates of slots revenues might be optimistic and that "social costs" relating to the expansion of gambling could outweigh benefits.

Produced by researchers at the University of Maryland, Baltimore County, the study concludes that costs associated with problem gamblers could top $600 million a year, potentially exceeding revenues, and that Maryland could lose tens of millions in lost lottery and sales tax revenue if voters approve the constitutional amendment that would allow 15,000 slot machines in five locations across the state.

The study was funded by Stop Predatory Gambling, but UMBC researchers said the anti-gambling group had no research or editorial role in the "impartial and objective study."

O'Malley noted yesterday that about $6.4 million of slots revenue would be dedicated to a problem-gambling fund and that local governments would receive aid for infrastructure improvements and services to mitigate the impact in their areas.

CLOSING THE GAP

Maryland tax collections are taking a steep dive, and are expected to drop further.

In September, this year's budget gap - the difference between revenues and expenses - was estimated at $432 million.

Yesterday, the gap was pegged at more than $590 million.

Estimates for the budget gap in next year's spending plan have swelled from $1 billion to $1.3 billion.

By law, Maryland's budget must be balanced, so budget gaps must be filled by spending cuts, transfers or additional revenues such as higher taxes.

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