State debates cutting local aid

New furloughs also eyed to fill $516 million budget gap

March 12, 2009|By Laura Smitherman | Laura Smitherman,

Legislative leaders, saddled with a new budget hole of $516 million and a deadline for balancing the budget, said yesterday that they might resort to additional furloughs for state workers and slashing aid to local governments that have largely been spared in previous rounds of spending cuts.

Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch laid out some budgetary options yesterday as the state's revenue forecasters officially reported that they now anticipate more than $1.1 billion less in tax revenue during the next 16 months. That means they will have to drastically cut a spending plan they had already begun to craft for next year.

Gov. Martin O'Malley pledged to work with the Democratic leaders to finish the budget before the General Assembly session ends in little more than a month. The governor, also a Democrat, interrupted a meeting at the State House with his budget team yesterday to hold a news conference but offered few clues as to how they would address the budget gap.

"We're right now going over the various options, none of them very good," O'Malley said. "It's all going to be very painful."

The worsening fiscal picture has forced the governor to abandon the rosy outlines of a budget plan he offered last month that included billions of dollars in federal aid from a stimulus package. At the time, he said he would be able to avoid some of the most painful cuts, such as a reduction in aid to school districts and plans to lay off 700 state workers.

But the latest revenue projections leave the governor and lawmakers with yet another gap to fill. The scenario is becoming familiar as state revenues have steadily deteriorated for the last several years.

The latest projections from the state Bureau of Revenue Estimates account for the impact of the deepening recession on income and sales tax collections, which have slowed with increasing unemployment and declining consumer confidence. There is no indication that the recession will end this year, and "tremendous uncertainty" regarding revenues remains, said David F. Roose, the bureau's director.

To keep the operating budget balanced during the current budget year, state officials plan to shift pots of money from other funds. But they must pare next year's budget more than they had expected.

While O'Malley has indicated layoffs might be revisited, legislative leaders have rejected the option. Miller said yesterday that an alternative is additional furloughs, and legislative analysts have suggested a 1 percent across-the-board pay cut.

Labor union leaders have balked at those proposals. They point out that state workers have already been asked to take up to five furlough days, which amounts to a pay cut, and are not getting pay raises next year.

"This is a time when the state has got to step up to the plate and be there for the people of Maryland, and this does not send the right message," said Patrick Moran, Maryland director for the American Federation of State, County and Municipal Employees. "At some point we have to say there are other places they need to look."

Legislative leaders also raised the possibility of cuts in aid to local governments, which accounts for about 40 percent of the state's operating budget.

They noted that few jurisdictions have imposed furloughs on government employees, and Miller said some counties continued to cut taxes while state lawmakers met in a special session two years ago to approve $1.3 billion in tax increases and a plan to legalize slot machine gambling.

"We're prepared to make the tough decisions, but the counties and beneficiaries of the state budget are going to have to bear their fair share of the costs," Miller said.

Local governments will be confronting difficult budget choices in the coming weeks as the economy weakens and they prepare for the state to make good on threats that aid will be cut, said Michael Sanderson, legislative director for the Maryland Association of Counties.

"It's always appealing to shift some cost or some responsibility to a different level of government and then at least in part declare victory with your budget problem," Sanderson said. "But the problem has not disappeared; it only landed in someone else's lap."

Another option lawmakers are exploring would alter so-called disparity grants intended to help less-wealthy jurisdictions such as Baltimore City. The proposal would shift the $120 million cost to localities, so that more affluent areas such as Montgomery County would essentially subsidize poorer areas, but with smaller amounts. Baltimore City, for instance, would get about $7 million less.

An additional option would force localities to reimburse about $30 million in education aid they mistakenly received because of a miscalculation by the state. O'Malley had said those jurisdictions would be able to keep that money, but Miller said yesterday that "perhaps we can not be so generous."

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