Governor Directs Cabinet to Make $200 Million in Cuts

O'Malley Launches Effort to Close $1.4 Billion Deficit

ANNAPOLIS - In a Cabinet Meeting yesterday morning, Governor Martin O'Malley directed Maryland's Cabinet Secretaries to reduce state spending by $200 million, as an initial step in closing the $1.4 billion deficit that the state faces next year. Each agency will be given a budget reduction target - averaging 2.5% across state government - and will be asked to find additional savings.

"We need agencies to refocus on their core mission, thin out middle management and squeeze spending by working smarter," said Governor O'Malley. "Closing this deficit will be a difficult challenge. And it must start by tightening our belts."

The budget cutting process will be driven by the Governor's StateStat office. Budget reductions initiatives will include:

* At least $45 million being shaved from the FY 2007 Budget;
* Re-examining FY 2008 expenditure plans to achieve a 2.5% reduction - with varying individual agency cuts totaling at least $125 million;
* Reviewing encumbrances - or planned spending;
* Prioritizing cost saving recommendations from Transition reports;
* Identifying and reducing surplus inventories;
* Completing senior staff reorganization plans and scrutinizing vacancies;
* Achieving a double digit percentage reduction in overtime expenditures - which exceeded $125 million in FY 2006;
* Reducing communications staff;
* Centralizing redundant operations;
* Developing energy conservation programs;
* Centralizing purchasing statewide to achieve savings;
* Limiting travel;
* Consolidating redundant boards, commissions and task forces; and
* Reducing staff.

"These are some of the first steps in what will be a series of hard choices for Maryland," said Governor O'Malley. "But we need to close this budget gap so we can continue to make progress on education, make healthcare more affordable and protect our environment and quality of life."

Initial actions in this cost-cutting effort already have been taken. Examples provided by the Governor's office include:

* The closure of the House of Corrections at Jessup will save millions of dollars annually.
* The Department of Natural Resources reduced the number of Assistant Secretaries from five to three, which creates a ripple effect of savings with reduced support staff.
* The Departments of Juvenile Services and Public Safety & Correctional Services have reduced overtime during the first months of participation in StateStat.

According to the Governor's office, Maryland's budget deficit opened up when State government reduced revenue by nearly $1 billion per year with an income tax cut that was phased in by 2002, and then increased annual government spending by $1.3 billion that same year with the Bridge to Excellence school funding reforms - commonly know as the Thornton law.

The Governor's office further stated that either the tax cut or the increased education funding likely would have been affordable by itself. Together they created a structural budget deficit that reaches more than $1 billion annually - more than $4 billion over the next four years. This structural problem has gone unaddressed in the years since 2002 - with record spending increases prior to this year, including a 12% hike in FY 2007.

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