O'Malley Postpones Budget Cuts, Awaits $4 Billion From Federal Bailout

Related Link: Maryland Budget Highlights (.pdf file) Background Stories from CNS and Newsline: O'Malley Proposes $310 Million in Cuts Special Report Main Page

By Erika Woodward and Dylan Waugh
Capital News Service
Tuesday, Jan. 27, 2009

ANNAPOLIS - Gov. Martin O'Malley will delay $56 million in reductions to this year's budget in anticipation of $3.9 billion he expects the state to receive from the federal economic stimulus package being debated in Congress.

Proposed cuts to community colleges, local health grants and county school systems are now on hold, the governor announced Tuesday at the State House.

O'Malley had planned to present the cuts to the Board of Public Works on Wednesday. The $56 million in cuts were meant to help plug a $346 million hole in the current fiscal year's budget.

The "strong, broad and comprehensive" stimulus package might also negate the need for the state employee layoffs he proposed last week, O'Malley said. O'Malley proposed the layoffs as part of his plan for closing a $2 billion projected budget deficit next year.

"It's our hope that if [the stimulus package passes] we will not have to make 700 hard-working state workers unemployed in the middle of an economic downturn," he said.

The $825 billion American Recovery and Reinvestment Act could provide $2.5 billion to $2.9 billion over 27 months toward the state's operating expenses, said Secretary of Budget and Management T. Eloise Foster.

Of that money, $1 billion is allocated for Medicaid and $1.1 billion for education.

The delay of a proposed statewide 50 percent reduction to the Geographic Cost of Education Index, a formula which awards more money to counties in which the cost of education is greater, could provide much-needed relief to cash-strapped school districts already dreading proposed cuts in fiscal 2010.

Eliminating cuts in fiscal 2009 could ease next year's drought, said John White, a spokesman for Prince George's County, where school funding could decrease by more than $35 million next year.

White said the decision to protect the geographic index means "state ... officials understand the gravity of our situation, particularly how it affects children of poverty."

"We understand the hard fiscal times the governor is facing and trying to deal with," said Bonnie Cullison, president of the Montgomery County Education Association. "We're trying to adjust to cuts ... (but) we're hopeful that (the index) will be restored completely."

Shielding the Geographic Cost of Education Index from reductions means Maryland schools could continue to keep class sizes down and test scores up, said school officials.

But Delegate Curt Anderson, D-Baltimore, isn't convinced about the prospects of the stimulus package. If it fails, Baltimore would lose an expected $23 million in aid next year.

"We're going to meet with the governor (Wednesday) to find out why he is so confident that this stimulus money is coming in the way he says it's coming at the time that he thinks it's going to come," he said. "Because if it doesn't come before the budget has to be voted on, then what difference does it make?"

Community colleges, which are in "dire straits" and bracing for level funding, could instead receive a 4 percent increase in aid, said Jody Kallis, the legislative liaison for the Maryland Association of Community Colleges.

"We're obviously extraordinarily excited," she said. "It certainly is an indication of where (the governor's) intent is."

An additional $1 billion, including $479 million for highways, $191 million for school construction and $147 million for clean water, is expected over two years for infrastructure expenses.

"A major investment in our nation's infrastructure is good for public safety and good for the economy," said Sen. Barbara Mikulski, D-Md., in a statement Monday. "Our number one priority for this recovery bill is to create jobs."

The budget O'Malley introduced last week assumed only $350 million in federal relief, an estimate he then called "conservative and reasonable."

O'Malley said he expects the House of Representatives to vote on the stimulus package soon based on a Tuesday phone conversation he had with Rep. John Sarbanes, D-Towson.

The $3.9 billion estimate is "based on the language of the two bills," O'Malley said. He acknowledged the figure could change.

"We're keeping our fingers crossed," O'Malley said. "Until it's done, we don't know."

Copyright © 2009 University of Maryland Philip Merrill College of Journalism

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