O'Malley plans budget shift to avoid spending cuts

Republicans, other critics say it ducks tough choices

January 20, 2010|By Annie Linskey | annie.linskey@baltsun.com

Gov. Martin O'Malley plans to rely on a billion dollars in one-time accounting maneuvers to help balance next year's $13 billion state operating budget, avoiding deep cuts to services in an election year.

The strategy drew immediate concern from critics, particularly Republicans, who say the Democratic governor is deferring tough decisions.

O'Malley presented a broad outline Tuesday of how he plans to fill a $2 billion gap between projected revenues and expenditures in the spending plan he is required to submit to the General Assembly today.

He proposes steep cuts to hospitals, and wants to continue this year's plan, which forced state workers to take up to 10 days off without pay. Counties would receive the same reduced amounts of local aid and highway money they got this year.

"I do not relish this," O'Malley said of his proposal. "There is nothing about this I enjoy."

But the most notable part of the governor's proposal, lawmakers and other experts say, is its reliance on one-shot transfers to move more money into accounts that can be spent on continuing services.

The governor wants to dip into a little-known reserve account that accrues the counties' share of income taxes before they are disbursed, taking $350 million from the fund. He wants to take $442 million intended for capital projects and use it on state operations. The shift would mean that some construction is deferred and that the state has to borrow more than originally anticipated for projects that go forward.

O'Malley is also banking on Congress' approving a new package of emergency assistance to states grappling with the worst economic downturn since the Depression. The governor allocates $389 million he believes the state would receive from that program if it materializes.

Senate and House Republican leaders criticized the plans, saying the governor used "tricks" and "gimmicks" to paper over a gaping hole that will only loom larger next year. They warned that taxes could rise after the election.

"A lot of one-time fund transfers does not contribute to solving the ongoing problem," said House Minority Leader Anthony O'Donnell. He said the governor is, in essence, relying on bonds to pay for continuing services. "You are not balancing [the budget], you are borrowing money. That is a bad concept."

O'Malley used similar strategies in preparing the current budget, which runs through June, said Warren G. Deschenaux, the legislature's chief fiscal analyst, who was philosophical about the governor's plan.

"Is it better to cut if you have alternatives? Or is it better to keep things going until you don't have alternatives?" he asked. "That is the debate that the General Assembly will be having."

Republican leaders said O'Malley should reject any new round of largesse from Washington, which Senate Minority Leader Allan H. Kittleman of Howard County called "federal welfare payments."

Democratic lawmakers largely supported the plan. House Speaker Michael E. Busch said it was a "very conservative budget" that was also "socially responsible."

The governor's plan includes far fewer layoffs than expected, at 44. About 200 vacant state positions will also be eliminated. The total state work force is 70,000.

Still, Patrick Moran, the Maryland head of American Federation of State, County and Municipal Employees, which represents 30,000 state workers, bemoaned rounds of previous job cuts. He wished O'Malley had considered new revenue sources - like renewing a higher tax on million-dollar earners rather than letting it expire - to shore up the budget.

"There is obviously a revenue problem," Moran said.

O'Malley proposed snipping $123 million from state Medicaid aid to hospitals, a figure hospital advocates were scrambling Tuesday to understand. "It is definitely a big cut," said Jim Reiter, a spokesman for the Maryland Hospital Association. "We're trying to get more people enrolled in Medicaid who need care. We're trying to expand it to improve coverage and not cut it back."

As he'd hinted last week, O'Malley abandoned his freeze on tuition costs at the state's university system, proposing a 3 percent rise that would generate $16 million yearly.

Local officials had been bracing for deep cuts in state aide, but O'Malley left the assistance to 23 counties and Baltimore City relatively unscathed.

"It could have been worse," said Howard County Executive Ken Ulman, who added that O'Malley's experience as mayor of Baltimore made him sensitive to the needs of local jurisdictions.

But that could change as the budget plan moves through the Assembly.

Senate President Thomas V. Mike Miller said he'd prefer that local governments shoulder a larger share of the cost-cutting. He said cuts are "all on the back of the state," which, he said, "is not quite fair."

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