Painful cuts for budget balance

O'Malley's proposal requires 700 layoffs, slashing programs

General Assembly 2009

January 22, 2009|By Laura Smitherman | Laura Smitherman,

Gov. Martin O'Malley wants to balance next year's state budget by laying off 700 workers, slashing programs and relying on balance-sheet maneuvers.

Facing a $2 billion shortfall, O'Malley proposed yesterday that the state's operating budget shrink by 1.3 percent, to $14.4 billion, which is the first year-to-year decrease offered by a governor in decades.

With Congress debating a fiscal stimulus package, O'Malley also assumes that the state will receive $350 million in federal aid to help fill the gap in the budget year that begins in July.

While O'Malley got accolades from fellow Democrats for his fiscal stewardship in tough economic times, some uncertainties hang over his plans. The economy could decline further and force deeper budget cuts. Congress could fail to approve an aid package or pass a smaller one than he envisions. And the governor has not solved the structural imbalance between revenue and expenses, leaving an expected shortfall of $713 million to fix a year from now, according to state officials.

"I can't sugarcoat the difficulty of these times," O'Malley said. "This is our best effort at coming up with a painful array of cuts, spending reductions and level funding of worthy programs in order to close the gap."

He said he crafted the budget with an eye to preserving funding for education and programs that help needy families, especially as more are turning to state health care and unemployment services. He also protected programs that he has championed, including stem cell research that would get a $400,000 increase to $18.4 million and full $32 million funding of the land conservation Program Open Space.

Republicans contend that O'Malley has not done enough to rein in spending. When accounting for federal funds and other money, the state's overall budget grows more than 2 percent, to $31.6 billion.

"It tells me they're still not willing to make the tough decisions that need to be made," said House Minority Leader Anthony J. O'Donnell, a Southern Maryland Republican. "It just defers the problem; it doesn't really solve the problem."

The General Assembly, despite being dominated by Democrats, is likely to object to some of the budget- balancing moves chosen by the governor. The legislature must approve a budget, but it has the power only to cut the spending plan or shift funds, not to add money. Sen. Ulysses Currie, chairman of the Budget and Taxation Committee, raised the possibility yesterday of more budget cuts.

"Everyone is going to have to make sacrifices," said Currie, a Prince George's County Democrat. "I don't think we have yet seen the bottom in this recession."

Maryland, like dozens of states across the country, is confronting yawning deficits as the recession has cut into tax receipts. O'Malley not only unveiled his next budget yesterday but also revealed how he plans to close a $400 million shortfall that opened in the current fiscal year as the economy deteriorated.

To keep the operating budgets balanced for both years, O'Malley proposed $1.2 billion in budget reductions and $900 million in transfers between funds and reserve accounts. The Board of Public Works, a policymaking body made up of the governor, comptroller and treasurer, must approve the current-year cutbacks, which could happen as early as next week.

Layoffs from the work force of more than 70,000 state employees are expected to save $30 million. Budget Secretary T. Eloise Foster said her office has not identified which jobs would be targeted.

That proposal is likely to draw objections. Some lawmakers have questioned why the governor doesn't abolish more vacant positions; his budget envisions eliminating 1,000 vacancies but leaving others. And the American Federation of State, County and Municipal Employees has warned that layoffs stretch thin a work force that has shrunk almost 20 percent in the past decade, though union officials expressed gratitude that the governor decided against making workers pay more of their health care costs.

"Any time you're laying off state employees it's controversial," said Senate President Thomas V. Mike Miller. "If you have a job in state government and you took a job with lower pay for job security and your job is getting axed, it's a great cause for angst."

Powerful local government executives also are expected to raise concerns about some of the governor's proposals. Localities would see a $310 million reduction in aid, including a requirement that county governments pay the cost of assessing property for tax purposes.

The plan also would require counties to replenish over 10 years the cost to raid a $366 million local income tax reserve fund. In a trickle-down effect, that could lead to higher local taxes or cuts to services.

"The cuts being proposed for local government will be painful," said Howard County Executive Ken Ulman, a Democrat. But, he said: "Had it not been for the fact that the governor understands and appreciates the role of local governments, it would have been worse."

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