By DYLAN WAUGH
ANNAPOLIS (Jan. 21, 2009)—Gov. Martin O'Malley proposed a "very, very lean" 2010 budget Wednesday, including $1.2 billion in cuts, 700 state employee layoffs and level-funding for numerous programs.
Local governments were hit with $310 million in cuts. In-state tuition for higher education would be frozen for the fourth straight year.
O'Malley's proposed budget assumes $350 million from a federal economic stimulus package that has yet to pass Congress, and includes millions from the state's rainy day fund.
"There will be more cuts in this budget than any other prior budget in our state's history," O'Malley said Wednesday at the State House.
O'Malley's proposals addressed a $2 billion projected shortfall for next year, as well as a $346 million deficit this year. By law, legislators can only make reductions, not additions, to the governor's proposed budget, and have until April to pass a balanced budget bill.
The $14.4 billion operating budget is 1.3 percent lower than this year's $14.6 billion budget.
The 700 layoffs "will come from many, many departments," O'Malley said. In addition, 250 vacant positions will be eliminated.
"It's my hope that these painful cuts—will be done in such a way that it will not too terribly impact services," O'Malley said.
Education was on a "very, very short list" of items seeing increases in O'Malley's budget.
O'Malley proposed a $68.3 million increase in K-12 spending. He also set aside $260 million for school construction.
Throughout his speech O'Malley touted the No. 1 ranking Maryland's public school system received from Education Week and called education the state's top priority.
But not all educational programs were immune from level funding, including the School Breakfast Pilot Program and aid to community colleges.
House Speaker Michael Busch, D-Anne Arundel, said community colleges might suffer from the proposed cuts to local aid.
"When you talk about the affordability of higher education, you also have to include community colleges in Maryland," Busch said.
He said there are 120,000 community college students in Maryland, many of whom are going there for economic reasons.
University of Maryland Chancellor William Kirwan seemed pleased with the budget.
"I don't think it would be possible to find another state that has a governor with this aggressive commitment to higher education," he said, adding that O'Malley provided funds for the university to cover next year's increased costs.
O'Malley said he hopes a federal stimulus is passed in the next few months.
The $350 million figure is a "conservative and reasonable assumption," he said. He based the estimate on "conversations with our Congressional delegation" and daily readings of various newspapers.
"I fully concede that there's no guarantee that it will be $350 (million)," O'Malley said. "It might just be $50 (million). It might be more than $350 (million)."
Nearly $510 million will be transferred from other funds, including $255 million from the state's "rainy day" fund. Another $380 million will be transferred from other reserves funds.
A proposed $154 million in cuts, including savings from state employee furloughs, agency reductions and abolishing vacant jobs, will help close this year's shortfall if approved by the Board of Public Works.
Although counties will be asked to shoulder $310 million in local aid, the state will not pass on responsibility for the $770 million in teachers' pensions.
O'Malley stressed the importance of providing funds for protecting the environment. The proposed budget diverts $6.5 million from the Chesapeake Bay 2010 Trust Fund this year to the general fund, leaving $25 million for the 2010 fiscal year—half of the $50 million per year initially promised by the General Assembly.
Given the current economic conditions, the fact that O'Malley still did his best to fund the trust fund at the same level as the previous year is encouraging, said Alison Prost, the Maryland office attorney for the Chesapeake Bay Foundation.
"He's still funding Program Open Space (land preservation program) and the Chesapeake Bay restoration, so the overall commitment to the environment is still significant," Prost said. "He's proposing layoffs, so we really can't be greedy."
Not everyone was pleased with the budget proposals.
"We are not conquering our spending problem with this budget," said Sen. Nancy Jacobs, R-Cecil.
Sen. Allan Kittleman, R-Carroll, doesn't like O'Malley's plan to take money from a reserve income tax fund, money the state will have to pay back over time.
O'Malley is "robbing Peter to pay Paul, hoping he has money next year to give back to Peter," Kittleman said.
Even before Wednesday's proposed cuts, state leaders had taken drastic measures to address the budget shortfalls.
Lawmakers raised $1.3 billion in taxes in a 2007 special session by increasing the sales tax from 5 percent to 6 percent, restructuring the income tax, raising some corporate taxes and doubling the cigarette tax.
The state Board of Public Works cut $350 million from this year's budget last October.
Two variables with critical implications for the budget, said O'Malley, include how well the global economy rebounds and whether federal aid comes to fruition.
If a federal stimulus package is not passed, O'Malley said he would "probably submit a budget with an additional $350 million in cuts." A special session would not be necessary, he said.
Busch had another idea if Congress does not allocate funds for the states.
"I'm going to come to the press," he said, "and ask everyone for $4."
Capital News Service Staff Writers Erika Woodward, Michael Frost and Erich Wagner contributed to this report.