O'Malley Proposes Spending Cuts, Bond Sales to Close Budget Gap


ANNAPOLIS (Jan. 20, 2010) - Gov. Martin O'Malley said Tuesday that the state should continue furloughs, lay off several dozen employees, raise college tuition and transfer nearly a billion dollars from sources that include its capital fund in order to close a projected $2 billion budget shortfall.

O'Malley described his proposed fiscal year 2011 budget, which also includes a variety of other spending cuts, as a continuation of the "fiscal responsibility" he said has defined his administration.

"If you're not fiscally responsible, everything comes collapsing down like a house of cards," O'Malley said at a Tuesday afternoon press conference.

The state government has shrunk under his administration, O'Malley said, with $5.6 billion in total spending reductions over his term and the elimination of 3,500 positions—202 this year alone "in a state that's already pretty lean."

O'Malley proposes slashing $375 million from funding for state agencies and $330 million from assistance to local governments.

This year's proposed "reorganization/downsizing" of state employees—including the elimination of 44 occupied and 158 vacant positions—would save $25 million, O'Malley said. Furloughs of remaining employees would trim $78 million.

The effects of the recession cut the state's projected revenue for the next fiscal year—which begins July 1—to $12.7 billion in December. The next estimate will come out in March.

O'Malley largely spared education, proposing that half the budget be dedicated toward the state's public schools and universities as an "investment in the most important asset we have: the next generation of Maryland." An exception was a 3 percent increase in university tuition, ending O'Malley's four-year freeze.

The $5.7 billion O'Malley requested for education, which includes $450 million in federal stimulus funding, would be a record amount if it were approved by the General Assembly.

Republican leaders railed against the proposed budget, saying it delayed rather than solving problems.

"The governor relies much too heavily on one-time fund transfers," said House Minority Leader Anthony O'Donnell, R-Calvert. "That $900 million of revenue that we're trying to replace (with those fund transfers) will re-emerge in the following year. They're not ongoing structural reductions."

"We're supposed to balance our operating budget," O'Donnell continued. "We're not supposed to be borrowing money and paying it back over a 15- or 30-year period."

The proposed budget incorporates $913 million in transfers—largely from the capital budget and a local income tax reserve—into the general fund, which O'Malley said would help the state emerge from the recession. The budget also relies on $389 million in federal Medicaid funding.

The transfer of $442 million from the state's capital funds would not stop the state's construction projects—which O'Malley said would create 20,000 jobs—as the money would be replenished by borrowing through bond sales.

When asked at the press conference whether this spending would put the state in financial risk if the economic downturn did not reverse, O'Malley said that was a moot point.

"We could make an assumption that this would be a recession that lasts forever ... I don't think it would be a reasonable assumption to make," he said. "We are acting prudently and in a fiscally responsible way to move our state out of this recession as quickly as we possibly can while doing as little damage as possible."

In keeping with his theme for this legislative session of "jobs, jobs, jobs," O'Malley's proposed budget also includes $20 million for a tax credit to businesses that hire an unemployed resident. He also proposed dedicating $20 million to the Chesapeake Bay restoration and preservation trust fund.

Many legislators declined to comment on the budget before they receive access to the full documents Wednesday morning, but Sen. David Brinkley, R-Frederick, said he was concerned that an increase in education spending would likely come at the expense of funding for public safety.

The General Assembly will have the opportunity to make its own cuts to O'Malley's proposed budget but cannot add any spending.

"I look forward to seeing what (the legislators') alternatives are and having them put it out there on the table for debate," O'Malley said.

O'Donnell raised such complaints as the use of furloughs instead of layoffs and the use of federal funds.

If the legislature does not pass its own version of a balanced budget by the end of the session in mid-April, it must extend its session into May.

Capital News Service Reporter Daniel Leaderman contributed to this report.


The Governor’s presentation on the FY11 budget

briefing document on the FY11 budget key priority areas

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