O’Malley unveils $39 billion budget that he says closes shortfall without raising taxes

Jose Luis Magana/AP - Gov. Martin O'Malley speaks during a rally outside the Maryland State House in Annapolis on Jan. 14.

Maryland Gov. Martin O’Malley unveiled a $39.3 billion budget Wednesday that offered few new initiatives but that he said would close a projected $421 million deficit without raising taxes and put the state on a path toward removing a structural deficit by 2017.

The budget also proposes more money to hire corrections officers while calling for a modest down payment on an expansion of pre-kindergarten education and continued investment in new-school construction.

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O’Malley (D) struck a valedictory note during a news conference on his eighth and final budget proposal. He said the fiscal 2015 budget is the culmination of a tough but realistic approach to spending and taxes that has allowed the state to prosper despite the worst recession in generations, recent cutbacks in federal spending and the effects of last year’s U.S. government shutdown.

“So much of the tough decisions that we’ve made over these last few years have righted the ship and gotten us on a better course,” O’Malley told reporters. “We’ve corrected a lot of the shortsighted math, if you will, of the prior decade.”

But Del. Kathy Szeliga (R-Baltimore County) described O’Malley’s final budget as proposing more unsustainable taxing and spending. During O’Malley’s tenure, lawmakers have raised a string of taxes, including the income tax on those earning $100,000 or more, the corporate tax, the sales tax, the gas tax and the tobacco tax.

“I would say that seven years of raising 70-plus taxes and fees has allowed him to raise his spending by another $2 billion,” Szeliga said. “I’m very concerned about the huge increases we’ve seen in spending. I’m very concerned that this will mean raising taxes.”

O’Malley’s budget includes $4.3 million toward full-day, universal pre-kindergarten and nearly $290 million for school construction.

Looking back over his two terms, O’Malley made the case that his administration has held the growth in government spending to a pace slower than those of recent predecessors. He said the administration had trimmed the size of government while spending record sums on education, expanding access to health care, holding down college tuition and putting Maryland in a sound position relative to competitors such as Virginia.

O’Malley, who is considered a possible presidential contender in 2016, said the state had made spending cuts of $9.1 billion and eliminated 5,800 positions on his watch, making his administration the leanest per capita since 1973. Under his stewardship, O’Malley said, the state has outpaced Virginia in job creation and helped replace jobs lost under what he called the “Bush recession.” He said Maryland was one of seven states to retain a triple-A bond rating from all three major ratings companies during the recession.

O’Malley also boasted that Maryland has restrained college tuition increases better than any other state, allowing only an inflation-adjusted 3.33 percent increase during his tenure.

But Maryland’s budget outlook has worsened since last year’s General Assembly convened. The Department of Legislative Services, in an analysis of the budget, said depressed corporate income tax and sales tax revenue and unforeseen costs have weakened the state’s fiscal situation. The higher costs included higher-than-expected Medicaid spending — caused by increased provider rates — and additional spending on court-ordered public defenders at initial bail appearances.

In addition, Maryland’s economy relies heavily on the federal government, which was a blessing during the recent recession. But as the federal government scales back spending, Maryland is also feeling the pinch.

Warren Deschenaux, director of the Maryland General Assembly’s Department of Legislative Services, said the budget proposal was a good starting point but was built on several assumptions and budgetary maneuvers worthy of more scrutiny.

Among other things, the governor’s budget relies heavily on savings at the expense of the state’s contribution to employee health insurance and retirement benefits, Deschenaux said. He said the budget also engages in one-time fixes and questionable practices. For example, he said the state was using a preservation fund intended to buy open space in Maryland for current spending and borrowing money for land purchases, thereby driving up the program’s overall cost.

“We’re going to look most closely at the assumptions built into the budget itself,” he said.

 
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