O'Malley budget proposal: No furloughs, but cuts to health care, aid to counties

Governor again relies heavily on one-time transfers

January 20, 2011|By Annie Linskey, The Baltimore Sun

For the first time in three years, Gov. Martin O'Malley will not propose furloughs for the state's 79,000 workers — a glimmer of good news in a budget that would otherwise freeze education funding while calling for deep cuts to health care, according to officials who have been briefed on the plan.

The governor is scheduled to unveil his proposal to address a projected $1.6 billion budget shortfall in a daylong series of briefings Friday to fiscal leaders, unions and the news media. He will also outline a plan to shore up the state's pension system by increasing employee contributions and raising the retirement age for new hires, according to a source familiar with the proposal.

O'Malley and his staff have been tight-lipped about his budget proposal for 2012, beyond his repeated comment that it is the "most painful" that he has prepared. Though state revenue is up slightly, Maryland will not continue to benefit from the federal stimulus funds that have bolstered the budget for the past two years.

Still, the budget looks far less draconian than some had feared. A rumored 5 percent, across-the-board cut to education is not being proposed. The governor is keeping his promise not to propose tax increases, and is not shifting any of the costs of the teacher pension system to the counties, officials say.

The plan would draw $950 million from the state's general fund, according to sources. Big-ticket savings would come from cutting about $250 million in Medicaid payments to hospitals. Keeping education dollars at current levels would save nearly $100 million.

O'Malley would cut $60 million from state aid to counties. He would save $40 million through buyouts of more than 1,000 state workers. His buyout offer last month drew nearly 1,400 applications, but some requests will be denied.

O'Malley's budget forecasts savings of $100 million through an overhaul of the pension system for public employees.

The state constitution requires the governor to present a budget that is balanced; the General Assembly may make deeper cuts. The legislative body may also raise taxes; and there has been a push by some Democrats this year to increase the state's 23.5-cents-per-gallon gas tax or the tax on alcohol. As promised, O'Malley does not suggest increasing either.

"This is arguably the toughest budget balancing act since [O'Malley's] been in office," said Del. John L. Bohanan Jr., the Southern Maryland Democrat who chairs the Spending Affordability Committee, which makes budget recommendations to the governor.

The spending plan would account for about $1.35 billion of the projected $1.6 billion difference between revenue and expenses in next year's budget.

O'Malley has dealt with about $250 million of the shortfall by making small midyear spending cuts and rolling bills forward.

As in previous years, O'Malley's proposed budget relies heavily on one-time transfers from cash-rich programs to fund operations. He would shift $430 million, with nearly half — $200 million — coming from the state's capital budget, according to two officials familiar with the plan.

The governor would also take about $60 million from the Transportation Trust Fund, which is supposed to be used for projects such as the proposed light rail lines in Baltimore and in the Washington suburbs.

Nearly $20 million would be moved from the Chesapeake Bay trust fund.

In the past, the governor backfilled these programs by borrowing money from Wall Street.

Patrick Moran, the Maryland director of the American Federation of State, County and Municipal Employees, said he was pleased that the governor had decided against furloughs for his members.

The largest union representing state workers negotiated a three-year contract that would take furloughs off the table.

State government still would close for five days in the next fiscal year, Moran said, but employees would be paid for those days.

"We came out with something positive that people could feel they made some gains," Moran said.

The contract calls for a $750 bonus for state workers on July 1, 2011, the first day of the 2012 fiscal year, and wage increases the next two years, assuming that state revenues increase. But employees would pay more for prescription drugs.

The contract has not yet been ratified by ASFCME's 23,000 Maryland members.

The counties have been begging to recoup some state money for local roads — but that doesn't appear likely. Last year, state lawmakers promised the city of Baltimore $125 million in road money, while the 23 counties split $8 million. Some county executives want the state to increase the gas tax to generate more revenue for the Transportation Trust Fund.

The budget for the current fiscal year is $13.1 billion. It was supplemented by $1.3 billion in federal stimulus money and a one-time transfer of $350 million from the income tax reserve fund, an obscure account the state has used to cushion cuts.

O'Malley's spending plan for next year includes $200 million from that reserve fund.

annie.linskey@baltsun.com

Correction: Due to an editing error, earlier versions of this article incorrectly reported that the proposed budget would not raise college tuition. The Baltimore Sun regrets the error.

twitter.com/annielinskey

Highlights of governor's budget proposal

• No state worker furloughs

•- Fund kindergarten through 12th-grade education at current year levels

•- Reduce payments to hospitals by $250 million

•- Save $100 million through changes to the state pension system

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