'Devastating' state revenue report may mean cuts in public safety, education

December 17, 2008|By Gadi Dechter and Laura Smitherman | Gadi Dechter and Laura Smitherman,gadi.dechter@baltsun.com and laura.smitherman@baltsun.com

A national economic meltdown has sucker-punched Maryland, according to state revenue numbers released yesterday portending major budget cuts in previously protected areas such as public safety, education and health care.

A grim-faced Gov. Martin O'Malley issued an executive order requiring about 67,000 state workers to take up to five days of unpaid leave, and he said a projected $1.9 billion revenue gap in next year's budget could require state worker layoffs.

O'Malley, a Democrat, said he and his budget officials were taken aback by the shortfalls in the state's income and sales tax revenues. After trimming $300 million from the current $14 billion state operating budget earlier this year, O'Malley was preparing an additional $200 million in spending reductions. Now, he said, he will have to find twice as many trims in an increasingly lean spending plan.

"This certainly is not a day of good news," O'Malley said after the state Board of Revenue Estimates issued projections that have plummeted since the last time they were revised, in September. For the budget year that began July 1, projections are down about $850 million from initial estimates, and off nearly $1 billion for the fiscal year starting July 2009.

O'Malley's summation was the rare understatement on a gray, rainy day that had Annapolis leaders reaching for inflated rhetoric to match the fiscal calamity they will have to wrestle with in coming months.

Comptroller Peter Franchot called the numbers "devastating." Treasurer Nancy K. Kopp said Maryland was being "battered by the forces of a national recession," which David F. Roose, the state's chief revenue forecaster, said "will rival the worst of the postwar period."

Senate President Thomas V. Mike Miller, a member of the General Assembly since 1971, said that the budget will increase next year at the lowest rate since he's been in office, and perhaps in more than a century. "Nobody anticipated the size of this recession. I mean people have been in denial now for five and six months," Miller said. "It's going to be longer and much deeper than anybody could have possibly indicated."

Maryland's fiscal situation reflects the recession that began at the end of last year. At least 43 states have wrestled with or are facing budget shortfalls, according to the Washington-based Center on Budget and Policy Priorities.

"We are where we are because we are a little state in a big world," said Warren G. Deschenaux, the General Assembly's chief budget analyst.

The governor said he was hopeful there would not be layoffs of state workers during the current budget year, but that "it's hard to say" what next year holds if pessimistic projections are accurate.

In the short term, O'Malley said he would likely have to cut Medicaid expansion, the Chesapeake Bay Trust Fund, and state aid for public education in jurisdictions with high costs of living. Those cuts could be submitted for approval by the Board of Public Works - comprised of him, Franchot and Kopp - as early as next month.

Wherever the cuts are enacted, they will be painful, said Deschenaux. "This is no longer cosmetic surgery," he said. "If you depend on state government for any service, you will be at risk of not getting that service in as timely a fashion, or getting that service at all." By law, the state budget must be balanced.

Yesterday evening, a bipartisan group of lawmakers convened to recommend that O'Malley next year increase his roughly $14 billion operating budget by 7/10ths of a percent -- effectively a reduction when taking inflation into account.

The recommendation of the Spending Affordability Committee, the lowest since the panel was formed in the early 1980s, is not binding, but state operating budgets have largely tracked the suggestions. Republicans wanted a reduction of 1.5 percent or a spending freeze, but those proposals were rejected by the Democrat-dominated panel.

"The fact is we're still looking at an increase," said Sen. David R. Brinkley, a Frederick County Republican, adding that many Marylanders are facing job losses or pay cuts.

The panel also recommended the governor trim 1,000 additional vacant positions from state employment rolls, on top of the hundreds of vacancies eliminated and 40 layoffs already enacted this year.

Lawmakers said yesterday that a range of budget-cutting measures would be considered during the General Assembly session starting next month.

Miller and House Speaker Michael E. Busch said they would discuss the possibility of shifting some pension costs to local governments.

The Senate president also raised the prospect of higher tuition at Maryland's public universities, though he said that would be the "the governor's call." O'Malley has kept tuitions frozen, an accomplishment he often touts in public speeches.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.