News Briefs from the State Capitol

K-12 Funding, $100 Million VC Fund Questioned By Lawmakers

Senate leaders, hoping to prevent a "log jam" at the end of the session, are planning to talk with House Speaker Michael E. Busch about getting fiscal committees that deal with the state budget to start meeting "sooner rather than later."

That's from Senate President Thomas V. Mike Miller Jr., who briefed reporters Tuesday on discussions lawmakers are having about O'Malley's proposed fiscal 2012 budget. Lawmakers recently met with O'Malley to talk about his budget, which includes cuts to pensions, hospitals and local governments.

Changes to the spending plan will be proposed and debated in the coming weeks. Miller gave reporters a preview of early grievances lawmakers voiced with the budget.

Among them: The governor's plan to keep K-12 education funding level at $5.7 billion.

"Not everyone is happy in terms of where the cuts came in terms of education. The governor was very generous to education in the sense he said he was going to take a 5 percent cut, and he didn't take a 5 percent cut," Miller said. "Level funding it in the manner in which he did it (disproportionately affected) Baltimore City and Prince George's County, so there's some questions about possible changes in that area."

Miller said another problem some lawmakers have with the budget pertains to O'Malley's plan to invest $100 million over five years in a new venture capital fund that promotes high-tech startups. The plan is called "Invest Maryland" and is one of O'Malley's key initiatives this session, one he said will help spur new jobs.

As part of the program, "the state would invest in small businesses and start-up companies — partially through the dormant Maryland Venture Fund — and would reap both the risks and rewards." But some legislators are concerned that a future governor may have to deal with problems or losses if the program is unsuccessful.

"We're levying against the future for some future governor so that we can move forward today. Members asked the governor if he thought that was quite fair," Miller said.

— By Capital News Service's David Rauf.

O'Malley Says Tough Decisions Make Better Future

State governments have to make "tough choices" that include spending cuts and balancing budgets, said Gov. Martin O'Malley at the National Press Club on Tuesday as keynote speaker for the Outlook in the States and Localities conference hosted by Governing magazine.

"Constant streamlining, constant closings, constant consolidations have become the new normal of governing and I am sure that is true in all of your states," he told the crowd of about 200 people.

The difficult decisions are necessary, he said, to improve the future for the next generation.

"No generation of Americans ever built monuments to their own comfort," he said. The tough decisions are made because "we want our children to be winners in this change to a new economy."

At several points in the speech, O'Malley echoed President Obama's words from last week's State of the Union about "winning the future."

With 87 cents of every general fund dollar spent on public education, public safety and public health, there are limited resources for other areas of government like the judicial system, environmental protection and economic development, he said.

Part of the current economic struggle is the result of increased health care costs, O'Malley said. "I think one of the biggest drains on the innovative capacity of our economy in recent years has been the rapidly escalating, out of control cost of health care." Businesses have difficulty investing in new hiring, marketing, expansion and skills development when health care costs are so high, he explained.

O'Malley warned that states that do not embrace health care reform risk losses in the long-term. "We believe that states that are slow to adapt and slow to embrace this will lose out in this new competitive, this innovation edge, that will come to those states that figure out how to control those costs," he said.

All the economic news is not bleak. The state gained 26,000 net new jobs in the innovation economy last year — the best year of new job creation since the recession began, he said.

O'Malley praised the education system, noting that, unlike any other state, Maryland's university system has avoided any tuition increase in the last four years.

He explained that Maryland governmental units track and monitor data to improve efficiency and reduce costs.

Governing magazine named O'Malley a 2009 Public Official of the Year for his "data-driven approach to policy and administration."

The speech comes in advance of the governor's fifth State of the State address scheduled for Thursday at noon.

-By Capital News Service's Laura E. Lee

Senator: Tax, Fee Hike Needed To Fix Roads

Maryland lawmakers will consider legislation to raise the gas tax, increase vehicle registration fees and allow voters to block the state from tapping a fund dedicated for road projects as a way to balance the state budget.

Senate Majority Leader Rob Garagiola said Tuesday he will propose a transportation tax revenue package in the next week that would create about $400 million to $600 million in annual revenue to address roughly $40 billion in backlogged transportation projects. Garagiola said he is planning to propose an increase to the gas tax in the range of 8 to 12 cents per gallon that would bring in an estimated $360 million in annual revenue.

The gas tax, which is 23.5 cents per gallon, was last raised in 1992.

"The appetite in the legislature is it's never a good time to raise taxes," Garagiola said at a news conference where a non-profit group released a report that concludes Maryland's roads are deteriorating faster than the state can afford to repair them. "I'd counter that waiting another year is far worse."

"Action is needed. We need to move forward on a package this year," he said.

Garagiola, D-Montgomery, said the state would make additional revenue by increasing vehicle registration fees. His proposal would raise such fees by anywhere from 30 percent to 50 percent, he said, cautioning that details of the plan are still being worked out.

Maryland drivers currently pay an average of $128 every other year to register their cars, and $180 for trucks and sport utility vehicles.

"There will be heartburn with that discussion," Kathleen Snyder, CEO of the Maryland Chamber of Commerce said about Garagiola's transportation package.

Business leaders are supporting Garagiola's plans to raise the gas tax as a way to bring in new revenue to fix state roads. But they want to make sure that any new revenue that goes into the Transportation Trust Fund is allocated toward road projects and not used to fund the state's day-to-day operations.

As part of his plan, Garagiola said his proposal would include a constitutional amendment that would go before voters in November 2012 that puts a freeze on the state's ability to "raid" the transportation fund for purposes of balancing the budget.

Gov. Martin O'Malley is proposing to shuffle $60 million from the transportation fund to the state's general fund as a way to help bridge a roughly $1.4 billion budget shortfall this coming fiscal year.

Garagiola's proposal essentially would "create a firewall" around transportation revenues, Snyder said.

-By Capital News Service's David Saleh Rauf.

State Owes Nursing Homes $40 Million in Medicaid Payments

Long-term care facilities estimate that Maryland owes them $40 million in Medicaid payments, in part because of a backlog of more than 2,000 long-term care eligibility applications.

The Department of Health and Mental Hygiene and the Department of Human Resources briefed the Senate Finance Committee Tuesday on the situation, saying they were looking into other ways of processing the applications to speed up the process.

"This committee has been hammering this issue year after year after year after year," said committee Chairman Thomas Middleton, D-Charles. Middleton said he had seen no improvement.

Part of the problem, said representatives of the state agencies, are the requirements of the federal Deficit Reduction Act of 2006. Medicaid applicants are now required to produce five years' worth of financial information to prove their eligibility, which makes for applications that are hundreds of pages long. There have been no staffing increases to make up for the extra paperwork.

The agencies painted a dramatic picture of each application being sent in boxes. Each case worker handles about 450 of these applications, with two or three new applications coming in daily.

Maryland law requires that applications be processed within 30 days. Long-term care providers and consumers say that many applicants are waiting more than six months, sometimes up to a year.

Nursing homes continue to provide care while patients wait for their eligibility to be re-approved each year, tying up money that could go toward care.

The Department of Health and Mental Hygiene and the Department of Human Resources are looking to other states to decide how to fix the problem. Virginia interpreted the Deficit Reduction Act differently, and was able to streamline the process of reviewing applications.

Maryland is looking to do the same, but legislators and the agencies are hesitant to reinterpret the law. The Centers for Medicare and Medicaid Services, the federal agency which provides funding for state Medicaid programs, could determine that Virginia's methods are out of compliance and withdraw funding.

- By Capital News Service's Holly Nunn.

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