Budget cuts held as state awaits stimulus

O'Malley postpones plans as $3.5 billion expected for Md. during next two years

January 27, 2009|By Gadi Dechter and Laura Smitherman | Gadi Dechter and Laura Smitherman,gadi.dechter@baltsun.com

Gov. Martin O'Malley has postponed tomorrow's round of planned budget cuts in light of a roughly $3.5 billion windfall in federal funds his administration is cautiously estimating will flow to Maryland over the next two years.

If passed by Congress and signed by President Barack Obama, the much hoped-for stimulus package could allow a reversal of painful budget cuts already put in motion, O'Malley said. The money could also possibly forestall laying off workers and trimming millions of dollars from Baltimore schools next year.

Maryland's projected share of stimulus funds is derived from an $825 billion bill that is "all but certain to pass" the House of Representatives tomorrow, said Stephanie Lundberg, a spokeswoman for Rep. Steny H. Hoyer, the majority leader from Southern Maryland.

Senate committees are expected to begin working on a similar bill today.

O'Malley, a Democrat, said recent discussions with Maryland congressmen have produced a firmer estimate of how much the state could reap from a stimulus package.

Last week, O'Malley presented the General Assembly with a spending plan that assumed only $350 million in anticipated federal funds, and which included cuts to local schools, community colleges and layoffs of hundreds of state workers to close a projected $2 billion revenue gap.

Additionally, O'Malley had planned to bring about $54 million in cuts before the Board of Public Works tomorrow, said spokesman Rick Abbruzzese. The Baltimore Sun reported this month that the governor's budget secretary had proposed $66 million in cuts to local jurisdictions, including reductions in state aid to public schools, community colleges, health departments and local police.

But with Congress and the White House accelerating work on an extensive emergency spending bill, the O'Malley administration has put those plans on hold.

The governor said conversations yesterday with Hoyer and Sen. Barbara A. Mikulski have given him confidence that roughly $2.5 billion in operating assistance over two years and $1 billion more in infrastructure spending are possible.

"Governor O'Malley and I have been talking about the economic recovery package almost every day," said Mikulski, a Democrat who sits on the Appropriations Committee. "We've been BlackBerrying, we've been strategizing. ... The economic recovery package is on the move in the Senate. We are committed to working with our colleagues in the House to have it ready for the president to sign by Presidents Day weekend."

If that happens, Feb. 16 "would be very, very good for all of us," O'Malley said.

Roughly $1 billion over two years would be set aside for road, transit and sewer projects under one version of federal legislation under consideration. Another $1.6 billion would go to education and general government funding in the federal bill.

While legislation moving through Congress largely directs portions of the package to specific programs, it is unclear how much flexibility states will have. Sen. David R. Brinkley, a Frederick County Republican, said he favors using the federal money for infrastructure projects and not for government operations.

Maryland lawmakers who oversee the state's budget were cautioned yesterday by Warren Deschenaux, the General Assembly's chief fiscal analyst, that the state still faces annual budget shortfalls of at least $700 million in future years. He urged lawmakers not to use federal aid to fill budget gaps in the short term while ignoring a long-term imbalance between revenues and spending.

Deschenaux also said O'Malley's proposed budget for next year leaves just $46 million in unspent funds, a cushion he called "grossly insufficient" because the economy might decline further. Moreover, he warned, Congress could ultimately fail to pass an aid package. "This is a very unusual year with very unusual levels of uncertainty," Deschenaux said.

Hoyer estimated that the so-called American Recovery and Reinvestment Act would create or save about 100,000 Maryland jobs, offer tax cuts for 2 million families in the state and pump money into education, highway and health care programs.

Patrick Moran, Maryland director of the American Federation of State, County and Municipal Employees, said he was "encouraged" by the optimistic talk on the stimulus plan. But he said AFSCME, which represents about 30,000 state and higher education workers, has received no assurances from the governor that extra money would prevent the 700 layoffs in O'Malley's proposed budget for the fiscal year starting July 1.

"We would hope that the state would come to that decision," Moran said, "and we're going to do everything within our means to hold them to that."

Baltimore Sun reporter Julie Bykowicz contributed to this article.

STIMULUS PROPOSAL

Maryland stands to receive about $3.5 billion in the House version of the proposed federal stimulus package. Among the elements:

Balancing state budget: $1.1 billion

Medicaid: $650 million

Needy schools (Title I) and special education: $406 million

School construction: $191 million

Tax cuts: 2 million families to receive $500 (individual) or $1,000 (family) tax cut

Unemployment insurance: 242,000 workers to receive additional $25 weekly; 40,200 to receive extension of benefits

Sources: Federal Funds Information for States; office of Rep. Steny H. Hoyer

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