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Tough Cuts Ahead for Maryland's Budget

Gov. Martin O'Malley must cut an additional $200 million to $300 million in spending to balance the state budget. (File photo by Maryland Newsline)

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By Karen Anderson
Capital News Service
Friday, Oct. 16, 2009

ANNAPOLIS - When a family hits hard times, it cuts obvious excess spending by eating out less, shopping smarter, and abstaining from luxuries.

But when hard times keep coming and reducing the excess isn't enough, families can be forced to cut back on essentials, dip into savings or make more money to pay the bills.

This is the situation the state of Maryland finds itself in.

"We're essentially broke. We're broke," said Maryland Comptroller Peter Franchot.

Now somewhere in what's left, the Board of Public Works must identify ways the state can get by with less.

"We don't have enough revenue to pay for what we're doing," said Maryland's top budget analyst, Warren Deschenaux. "So job one is either to do less or raise more."

Raising more means raising taxes, something politicians are loathe to do, especially during a recession. Money also won't likely come from the rainy day fund, which amounts to 5 percent of the state's revenue, because that fund helps Maryland keep its coveted AAA bond rating, saving the state interest when it borrows money.

Instead, Maryland has chosen to do less, a decision that could mean more cuts to local government aid, an increase in university tuition rates, and other painful alternatives.

The state faces revenue shortfalls of $1 billion for this year and $2 billion for fiscal year 2011, according to the Board of Revenue Estimates.

In August the Board of Public Works cut $736 million -- roughly 5 percent -- from the operating budget. To pay for it the state ordered three to 10 furlough days for employees, abolished 364 positions, and cut funding by $20.1 million for local health, $20.6 million for police aid, and $10.5 million for community colleges, among other reductions.

In September, Gov. Martin O'Malley said an additional $200 million to $300 million would need to be cut to balance the budget, the specifics of which Deschenaux predicts will be announced in November.

And on Oct. 7, Franchot said the Board of Public Works "may be writing down the revenues again" during its December meeting.

Because the excess has already been trimmed, it's becoming difficult to find more spending cuts.

"Things we would not choose to cut in other times, we are nonetheless forced to cut as we choose from among options, all of which are painful and all of which to one degree or another affect our core mission," said O'Malley, during a recent Board of Public Works meeting.

But reductions must come from somewhere.

"I really don't have a feel just yet for where the administration is going to go because everything is important in its own way," said Deschenaux. "We're going to have to stop doing things we've been doing or do them less well."

Sen. Ed Kasemeyer, vice chair of the Senate Budget and Taxation Committee, anticipates O'Malley will spread the reductions across several agencies to avoid significantly affecting any single area.

"These next $300 million could be significant in terms of its impact," Kasemeyer said.

What may be most vulnerable are tuition freezes -- described by Franchot as "unsustainable" -- for Maryland students attending state universities, and local aid, which has already taken a significant hit in previous cuts.

"It's a good deed to try to keep ... tuition affordable, but at this point it becomes counterproductive," Franchot said.

Because the state is unable to take from K-12 education funding without losing federal money, the remaining state money to local government may be the most vulnerable for additional cuts. Already, $213 million has been pulled from this fund through reductions this year.

Anne Arundel County, for instance, lost $13 million in state aid so far in fiscal year 2010 after initially budgeting for $17 million.

"They've made meeting our budget very difficult," said John Hammond, county budget officer.

Hammond said roughly 50 percent of Anne Arundel's expenditures go toward education. The rest are dispersed among the fire department, police department, library, detention center, office of planning and zoning, administrative staff, and the departments of public works, recreation and parks, social services, and others.

"Hopefully whatever reductions we make won't have a significant impact on the average citizen, but given the size of the reductions that we're facing, there may be some minor impacts on the fringes of the services," said Hammond.

The county cut 109 "non-education jobs" out of its 3,500 positions in fiscal year 2009 and is "being very judicious" with replacing those positions. Hammond doesn't anticipate the county will be able to fill the vacancies until after fiscal year 2011.

"We'll just do without," he said, though he described public safety as a "top priority" and said it was an area where position vacancies would be filled more quickly.

Education funds with federal strings attached have become a source of controversy at the state and local level. Senate Minority Leader David Brinkley, R-Frederick, said they must be controlled, citing education as the only area of the state budget that saw increases while all others took a hit.

"Education funding is coming at the expense of public safety, the environment and health care," he said. "It's because no one has the political will to go in and say, 'We have to make some serious decisions about education.' Any time someone mentions it, people hide behind the children."

One strategy to reduce state spending is transferring the $800 million annual payment of teacher pensions from the state, which currently pays all of it, to local jurisdictions.

Franchot doesn't like the idea and instead challenges the state to reform its spending.

"I don't see that as cutting state spending," Franchot said. "We're just sticking it to somebody else, and they're going to have to do the hard job. I'm not a big fan of getting our fiscal house in order by passing the buck to somebody else."

O'Malley feels the strongest reform must come from health care, not education.

During a phone-conference hosted by the Democratic National Committee, he said the state must first address "the rapidly, unsustainably escalating cost of health care," which he said grows by 7 percent or 8 percent annually and runs the risk of "[crowding] everything else out of the picture."

"There's no way that any of us is going to be able to sustain this escalation in costs without it impacting every other part of the budget," O'Malley said.

Deschenaux said whatever cuts are made this year will be intensified in fiscal year 2011.

"The gap that we're anticipating in that budget is much larger than what we're confronting right now," he said.

Franchot is not optimistic about what's facing the state budget in the coming years.

"We've had this horrible economic calamity, and we are not anywhere near through it," Franchot said. "We simply have to make adjustment and realize that the good old days are not going to come back again."

O'Malley is preparing Marylanders for the worst.

"As we go forward every cut will become increasingly more painful than last month's cuts, a lot more painful than last year's cuts," O'Malley said.

Copyright 2009 University of Maryland Philip Merrill College of Journalism

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