ANNAPOLIS (January 22, 2011) — Gov. Martin O'Malley is proposing nearly $1 billion in spending cuts, shuffling hundreds of millions of dollars from state funds and slashing aid to local governments to close the state's nearly $1.4 billion budget shortfall in his fiscal 2012 budget unveiled Friday.
O'Malley, who has called this his most challenging budget to balance, stayed true to his pledge to present a spending plan that does not include tax hikes, though lawmakers could take steps to change that in the coming months.
Under the proposed budget, state workers will avoid furloughs for the first time in three years and funding for K-12 education will remain flat at $5.7 billion—two bright spots in an otherwise grim spending plan that makes cuts to almost all state programs.
"This will be the first word on the budget, not the last," said O'Malley, a theme he's reiterated over the last couple of weeks. "None of this is going to be easy."
O'Malley's budget includes cuts of $264 million in Medicaid payments to hospitals, $104 million from the state employee retirement system and $52 million in aid for local governments. Another $40 million in annual savings will come through buyouts of about 1,000 state workers, O'Malley said.
The budget also proposes transferring $285 million from state accounts. That includes diverting $60 million from the state's Transportation Trust Fund, a move that could prove to be unpopular with lawmakers.
"Transportation projects are already severely underfunded," said Delegate Heather Mizeur, D-Montgomery County.
During a budget briefing, O'Malley lamented the need to cut into the state's fund that helps pays for roads, bridges and construction of transit systems, saying he would have "rather not cut any" money from the fund.
Tough decisions, he said, had to be made.
"We're trying to get through this recession and keep intact as much as we can," he said.
Legislative analysts estimated the state's shortfall at $1.6 billion, but O'Malley presented a deficit closer to $1.35 billion Friday. O'Malley's budget will now go to the General Assembly, where lawmakers can make cuts but not add to it.
"On the first day of the budget it's a fool's errand to make prognostications about what will and won't stand," said Mizeur. "There are nuggets of ideas in here that will help us close the gap in interesting ways and there are other proposals we will probably part ways with from a legislative perspective."
Among the discussions lawmakers are expected to have this session regarding the budget is one about raising taxes.
A proposed "dime-a-drink" increase on the state's alcohol tax is being considered again this session. Lawmakers are also talking about raising the state's gas tax, and O'Malley appeared receptive during a radio interview Friday to the idea of reinstating the state's millionaire tax, which expired Dec. 31.
"We have to keep an open mind to all things," he said.
Sen. David Brinkley, R-Frederick, said O'Malley's budget could leave some lawmakers wanting to make changes.
"He may make some severe reductions to programs some legislators feel near and dear about with the expectation that if you want to restore this funding, raise some taxes," Brinkley said. "He's leaving any of that up to the legislature."
O'Malley's budget proposes a series of consolidations estimated to save the state $4 million, including merging the Higher Education Commission with the State Department of Education.
The budget also calls for closing Brandenburg Center, a state-run, residential center for adults with disabilities near Cumberland.
O'Malley on Friday also outlined plans to revamp the state's pension and retirement program by increasing employee contributions and raising the retirement age for new hires. The plan is estimated to reduce the state's unfunded retiree health liability by about $7 billion.
O'Malley and the American Federation of State, County and Municipal Employees, the largest union for state employees, recently reached a tentative three-year contract that includes the guarantee of no furloughs. The deal is scheduled to be ratified later this month.
But O'Malley's plan to revamp pensions and health benefits for state workers is likely to draw strong union opposition.
"We're going to fight like hell against it," said Patrick Moran, the union's state director.
RELATED INFORMATION:
See the Governor’s outlined FY12 budget, including budget history and context, here.
http://www.governor.maryland.gov/documents/FY12Budget.pdf
Electronic copy of the entire FY12 budget
http://dbm.maryland.gov/agencies/operbudget/Pages/FY2012OperatingBudgetDocs.aspx
Governor O'Malley's Press Release on FY12 Budget
GOVERNOR MARTIN O’MALLEY OUTLINES FY12 BUDGET FOCUSED ON JOB CREATION
Proposed budget closes deficit more than $1.3 billion, shrinks the size of government
Reforms state pension system, putting it on a path of sustainability; Includes no tax increases for Marylanders
ANNAPOLIS, MD (January 21, 2011) – Governor Martin O’Malley, joined today by Lieutenant Governor Anthony Brown and Secretary T. Eloise Foster of the Maryland Department of Budget and Management, outlined the FY 2012 budget for the State of Maryland, which closes a projected budget deficit of more than $1.3 billion, invests millions in job creating initiatives, and proposes new reforms to the state pension system, putting it on a path of sustainability. The FY12 budget brings total reductions under the O’Malley-Brown Administration to $6.6 billion and shrinks the size of government to lower levels than four years ago.
“We are in a period of profound economic change, and these remain still uncertain times,” said Governor O’Malley. “As Maryland businesses continue to add jobs at higher rates than the rest of the nation, we still must find ways to do more with less while protecting those priorities we share as One Maryland. This budget is one that is painfully lean, but rightly focuses resources on jobs and innovation – the worthwhile costs of making the right choices and investments in our future.”
For the fifth consecutive year, the FY 2012 budget complies with the General Assembly’s Spending Affordability Guideline. This year’s recommendation – to reduce the out-year deficit by one third – is exceeded with this budget proposal. Spending cuts made in the FY 2012 budget reduce the standing deficit by 37%, improving the outlook for FY 2013 by more than $800 million while maintaining a healthy rainy day fund at 5% of revenues.
The proposed FY12 budget focuses more than $3.5 billion on jobs and job creating initiatives, including nearly 15,000 construction jobs supported through the FY 2012 capital budget.
· Creates InvestMaryland to grow the state’s knowledge-based industries and stimulate up to $100 million in venture capital investments, creating thousands of jobs.
· Increases funding for the Maryland Economic Development Assistance Fund by 25%, helping to stimulate small business growth and job creation.
· Funding for stem cell research, bringing the five-year total under the O’Malley-Brown Administration to $76.2 million.
· Funding for the biotechnology tax credit and the Maryland Biotechnology Center, investing in the new economy.
· $10 million in Sustainable Communities Tax Credits to promote urban redevelopment and create jobs.
Education
The FY12 budget proposes a second year of record $5.7 billion in funding for K-12 public schools, bringing the five-year total to $27.4 billion. This includes more than $128 million for the Geographic Cost of Education Index (GCEI), the third consecutive year of full funding and the only administration to have funded any level of GCEI.
In addition, for the fifth straight year, the O’Malley-Brown Administration has met or exceeded the Kopp Commission recommendations on school construction funding, bringing the total five-year funding level to more than $1.5 billion, a Maryland record.
Public Safety
Last year, together, we drove violent crime to its lowest rate in recorded history thanks to innovative programs that connected law enforcement to each other, traded information across borders, and focused resources on Maryland’s most violent offenders. The FY12 budget proposal includes nearly $2.18 billion in public safety funding including $108 million for the Violence Prevention Initiative, targeting more than 2,000 of the State’s most dangerous offenders.
In addition, Governor O’Malley includes millions to advance law enforcement technology, including continued implementation of the Computer Aided Dispatch and Records Management System to assist law enforcement and emergency responders with real-time information, and the Offender Case Management System to track inmates from initial booking through community release.
And to keep police officers on the streets, Governor O’Malley’s FY12 budget includes funding for a trooper class of 80 new recruits, and more than $45 million in local police aid.
Environmental Protection
Since taking office, the O’Malley-Brown Administration has developed innovative tools to scientifically guide environmental policy, and ensure taxpayer dollars spent on environmental protection are done so efficiently and effectively while maximizing long-term impact. Governor O’Malley’s FY12 budget continues increased funding for the Chesapeake Bay 2010 Trust Fund, and more than $16 million for the cover crop program, which experiences record levels of participation in FY11.
In addition, the FY12 budget focuses investments on the continued expansion of Maryland’s “green job” sector, putting $7 million in Strategic Energy Investment Funds toward clean, renewable energy grants and $1 million to support climate change programs. In addition, the budget provides more than $6 million for weatherization grants, enough to improve the energy performance of nearly 4,300 low income hones, and $4.7 million for other energy efficiency programs primarily to assist low and moderate income Maryland families.
Health and Wellness
Through a combination of expansion initiatives, the O’Malley-Brown Administration has expanded health care access to more than 247,000 Marylanders who were without health care four years ago, including 117,500 children. Governor O’Malley’s FY12 budget proposes $7 billion to provide comprehensive health care coverage to more than 900,000 low-income, disabled, and chronically ill children and adults.
In addition, the FY12 budget provides millions for programs for Marylanders with disabilities, including $17 million to expand placements for people with developmental disabilities, and $8 million to raise payment rates for providers of services to people with developmental disabilities.
State Employees
Over the last three years, employees have absorbed more than $580 million of reductions to salaries and benefits. This year, by Executive Order, Governor O’Malley created a Voluntary Separation Program for state employees, attracting almost 1,400 applicants. Governor O’Malley’s FY12 budget assumes $40 million in ongoing savings from approximately 1,000 accepted applications to the program.
The FY12 budget includes provisions of a new, three-year contract with the State’s largest employee unions that ends the use of furloughs and provides for future cost of living adjustments and step increases. In addition, the FY12 budget begins to put the public employee pension and retirement system on a path of sustainability.
GOVERNOR MARTIN O’MALLEY OUTLINES FY12 BUDGET FOCUSED ON JOB CREATION
Proposed budget closes deficit more than $1.3 billion, shrinks the size of government
Reforms state pension system, putting it on a path of sustainability; Includes no tax increases for Marylanders
ANNAPOLIS, MD (January 21, 2011) – Governor Martin O’Malley, joined today by Lieutenant Governor Anthony Brown and Secretary T. Eloise Foster of the Maryland Department of Budget and Management, outlined the FY 2012 budget for the State of Maryland, which closes a projected budget deficit of more than $1.3 billion, invests millions in job creating initiatives, and proposes new reforms to the state pension system, putting it on a path of sustainability. The FY12 budget brings total reductions under the O’Malley-Brown Administration to $6.6 billion and shrinks the size of government to lower levels than four years ago.
“We are in a period of profound economic change, and these remain still uncertain times,” said Governor O’Malley. “As Maryland businesses continue to add jobs at higher rates than the rest of the nation, we still must find ways to do more with less while protecting those priorities we share as One Maryland. This budget is one that is painfully lean, but rightly focuses resources on jobs and innovation – the worthwhile costs of making the right choices and investments in our future.”
For the fifth consecutive year, the FY 2012 budget complies with the General Assembly’s Spending Affordability Guideline. This year’s recommendation – to reduce the out-year deficit by one third – is exceeded with this budget proposal. Spending cuts made in the FY 2012 budget reduce the standing deficit by 37%, improving the outlook for FY 2013 by more than $800 million while maintaining a healthy rainy day fund at 5% of revenues.
The proposed FY12 budget focuses more than $3.5 billion on jobs and job creating initiatives, including nearly 15,000 construction jobs supported through the FY 2012 capital budget.
· Creates InvestMaryland to grow the state’s knowledge-based industries and stimulate up to $100 million in venture capital investments, creating thousands of jobs.
· Increases funding for the Maryland Economic Development Assistance Fund by 25%, helping to stimulate small business growth and job creation.
· Funding for stem cell research, bringing the five-year total under the O’Malley-Brown Administration to $76.2 million.
· Funding for the biotechnology tax credit and the Maryland Biotechnology Center, investing in the new economy.
· $10 million in Sustainable Communities Tax Credits to promote urban redevelopment and create jobs.
Education
The FY12 budget proposes a second year of record $5.7 billion in funding for K-12 public schools, bringing the five-year total to $27.4 billion. This includes more than $128 million for the Geographic Cost of Education Index (GCEI), the third consecutive year of full funding and the only administration to have funded any level of GCEI.
In addition, for the fifth straight year, the O’Malley-Brown Administration has met or exceeded the Kopp Commission recommendations on school construction funding, bringing the total five-year funding level to more than $1.5 billion, a Maryland record.
Public Safety
Last year, together, we drove violent crime to its lowest rate in recorded history thanks to innovative programs that connected law enforcement to each other, traded information across borders, and focused resources on Maryland’s most violent offenders. The FY12 budget proposal includes nearly $2.18 billion in public safety funding including $108 million for the Violence Prevention Initiative, targeting more than 2,000 of the State’s most dangerous offenders.
In addition, Governor O’Malley includes millions to advance law enforcement technology, including continued implementation of the Computer Aided Dispatch and Records Management System to assist law enforcement and emergency responders with real-time information, and the Offender Case Management System to track inmates from initial booking through community release.
And to keep police officers on the streets, Governor O’Malley’s FY12 budget includes funding for a trooper class of 80 new recruits, and more than $45 million in local police aid.
Environmental Protection
Since taking office, the O’Malley-Brown Administration has developed innovative tools to scientifically guide environmental policy, and ensure taxpayer dollars spent on environmental protection are done so efficiently and effectively while maximizing long-term impact. Governor O’Malley’s FY12 budget continues increased funding for the Chesapeake Bay 2010 Trust Fund, and more than $16 million for the cover crop program, which experiences record levels of participation in FY11.
In addition, the FY12 budget focuses investments on the continued expansion of Maryland’s “green job” sector, putting $7 million in Strategic Energy Investment Funds toward clean, renewable energy grants and $1 million to support climate change programs. In addition, the budget provides more than $6 million for weatherization grants, enough to improve the energy performance of nearly 4,300 low income hones, and $4.7 million for other energy efficiency programs primarily to assist low and moderate income Maryland families.
Health and Wellness
Through a combination of expansion initiatives, the O’Malley-Brown Administration has expanded health care access to more than 247,000 Marylanders who were without health care four years ago, including 117,500 children. Governor O’Malley’s FY12 budget proposes $7 billion to provide comprehensive health care coverage to more than 900,000 low-income, disabled, and chronically ill children and adults.
In addition, the FY12 budget provides millions for programs for Marylanders with disabilities, including $17 million to expand placements for people with developmental disabilities, and $8 million to raise payment rates for providers of services to people with developmental disabilities.
State Employees
Over the last three years, employees have absorbed more than $580 million of reductions to salaries and benefits. This year, by Executive Order, Governor O’Malley created a Voluntary Separation Program for state employees, attracting almost 1,400 applicants. Governor O’Malley’s FY12 budget assumes $40 million in ongoing savings from approximately 1,000 accepted applications to the program.
The FY12 budget includes provisions of a new, three-year contract with the State’s largest employee unions that ends the use of furloughs and provides for future cost of living adjustments and step increases. In addition, the FY12 budget begins to put the public employee pension and retirement system on a path of sustainability.