By DYLAN WAUGH
ANNAPOLIS (Jan. 14, 2009) - Maryland lawmakers returned to Annapolis Wednesday for the opening of the 426th session of the General Assembly optimistic about the state's future despite a nearly $2 billion projected budget deficit.
"We're going to come through this national economic downturn quicker than any other state in the union," said Gov. Martin O'Malley, in his speech to delegates and other invited guests.
With Maryland facing about a $400 million shortfall for this fiscal year, in addition to the $1.9 billion deficit for fiscal 2010, the annual 90-day session is expected to be dominated by budget talk.
"There's no money," said Delegate Saqib Ali, D-Montgomery. "There's clearly going to have to be some cuts."
O'Malley's office confirmed a Baltimore Sun report Wednesday that the budget will include between 500 and 1,000 layoffs of state employees.
"Obviously the budget will be the center of what takes place," said House Speaker Michael Busch, D-Anne Arundel, after the opening session. "I know the governor has to make a lot of tough decisions."
But Busch said he hopes layoffs are not necessary.
"Everything's on the table," said Lt. Gov. Anthony Brown, about the budget crisis. Brown said he remains "extremely optimistic and hopeful."
While the budget shortfall and the slumping economy are sure to dominate the session, issues like a repeal of the death penalty and a bill mandating cuts in carbon emissions might also receive attention.
In the wake of the widely-reported 2005-2006 state police spying incidents, legislation protecting peaceful protesters from surveillance is likely to be considered. Emergency medical transportation might be discussed following the September rescue helicopter crash which killed four people.
Land use issues and anti-domestic violence legislation will likely get the attention of legislators.
But the main issue is the budget.
The state Constitution requires a balanced budget, so O'Malley and lawmakers must cut expenditures or raise taxes to cover the deficit. O'Malley is required to submit his budget to the legislature next week.
At a Democratic luncheon on Tuesday, O'Malley said some programs will maintain level funding and some will be cut.
K-12 education will likely be one of the few items to receive increased funding, O'Malley said Tuesday.
"We're going to cut the budget, I understand that," said Delegate Curtis S. Anderson, D-Baltimore. "I'm hoping that education will be the last cut."
Busch and O'Malley both touted the progress made by the state's public school systems in their speeches Wednesday.
State leaders are hoping for a federal economic stimulus package from Congress and President-elect Barack Obama that will help alleviate the budget crunch. O'Malley stood, cheered and ushered the crowd to its feet when Rep. Chris Van Hollen, D-Montgomery, mentioned the possibility of a federal stimulus package at the Democratic luncheon Tuesday.
Even with a federal aid package, O'Malley and lawmakers will have to get creative when searching for solutions.
A furlough plan for state employees has already been introduced and is expected to save $34 million.
Among the cuts O'Malley will consider is the state's direct support to county governments, many of which are already dealing with deficits of their own.
Slot parlors, which Maryland voters approved in a November referendum, will not be online soon enough to generate revenue to help with the looming deficit.
Maryland Senate President Thomas V. Mike Miller Jr., D-Calvert, has publicly suggested the state should permit universities to increase tuition, reversing a three-year-old freeze. But O'Malley may oppose such a move.
Miller has also said Maryland should consider raising the state gas tax, which now stands at 23.5 cents per gallon.
Debate has already started about whether the state should shift responsibility for some of the $600-$700 million per year cost of public school teachers' pensions to the county level.
"That will bankrupt several counties," said Ali. "It's something that I'm very focused on preventing."
Other options include tapping a $700 million "rainy day" fund or a $366 million little-known income-tax reserve fund.
The income-tax reserve fund is kept to ensure the state can issue tax refunds. But refunds have been paid out of incoming tax collections each year, making the reserve fund available.
"My office can use the $366 million reserve fund, which is a one-stop source for funds, and that should be helpful." said State Comptroller Peter Franchot.
Withdrawing money from either fund might cause bond-rating agencies to lower the state's strong AAA bond rating, making it more expensive to borrow money.
The state might also consider taking money from its annual capital budget.
Legislators raised $1.3 billion in taxes during a special session in the fall of 2007 to address a then-$1.7 billion shortfall, likely making budget cuts more appealing than increasing taxes to address the current deficit.
Despite the looming cuts, lawmakers are confident.
"It's very important for us to all work together," said Busch. "We can get the job done in the tough times."
Capital News Service reporters Michael Frost and Erich Wagner contributed to this report.