O'Malley May Set Modest Agenda
Budget Constraints Are Likely to Limit 2008 Expectations

By John Wagner
Washington Post Staff Writer
Monday, January 7, 2008

For much of his first year in office, Maryland Gov. Martin O'Malley referred to the state's long-festering budget problems as a "dark cloud" that hovered over all that he and lawmakers contemplated in Annapolis.

As he enters his second year, O'Malley is continuing to bask in praise from fellow Democrats for calling a high-risk special legislative session that resulted in major tax increases and spending reductions to fix the state's finances.

But the skies have not entirely cleared.

With the General Assembly set to return to work Wednesday, analysts are predicting more tight budgets in the years ahead that could be undermined by an uncertain economy. And that, coupled with legislative fatigue from last fall's special session, is likely to curtail what O'Malley will ask of lawmakers in the coming 90 days.

In an interview, O'Malley said he will put forward "a solid and centered legislative agenda" this week that will allow the state to make "continued and steady progress" in areas important to his administration.

That will include initiatives to slow the wave of foreclosures on Maryland homeowners, to significantly expand a DNA database that the state taps for leads on unsolved crimes and to address a nursing shortage confronting the state, as well as a heightened focus on energy policy and the environment.

But O'Malley tacitly acknowledged that he will not be pushing lawmakers to do anything as sweeping as what occurred in the three-week special session: enactment of $1.4 billion in annual tax increases, a directive to cut $550 million from next year's budget and an agreement to let voters decide whether to legalize slot-machine gambling -- as well as major infusions of money for transportation, subsidized health care and cleanup of the Chesapeake Bay.

"What's next is more progress for more people," O'Malley said. "I don't know if people are looking for fireworks, dramatic moments and high-wire acts. . . . In terms of the work we've set about to do, it's strengthening and growing our middle class, improving public safety and public education, and expanding opportunity. I find all of those endeavors to be pretty exciting."

Joseph C. Bryce, O'Malley's chief legislative officer, told a gathering of county officials last week that "expectations management" will be one of the administration's greatest challenges in the coming session.

"There is not a ton of money laying around to be spent on people's new ideas," Bryce said.

Legislative analysts say the actions taken by the General Assembly during the special session called by O'Malley should be sufficient to balance a $15 billion budget next year that would otherwise have had a shortfall of at least $1.5 billion.

But under current projections, more modest budget gaps -- of about $200 million -- reappear starting in fiscal 2010. Those shortfalls could grow larger if Maryland's economy, which has been hurt by slumping home sales, does not accelerate or enters a recession.

And there are other uncertainties. Comptroller Peter Franchot (D) and some lawmakers have questioned whether a new tax on computer services passed during the special session will yield the $200 million a year predicted by legislative analysts. Business interests are seeking to repeal the tax this session.

O'Malley's budget fix, as well as funding for his health-care initiative passed in the special session, also relies heavily on approval of a slots referendum in November. Even if it passes, some lawmakers are skeptical that the slots plan will generate as much money for the state as quickly as projected -- more than $400 million annually within a few years -- given expected zoning fights in some of the jurisdictions where the machines would be placed.

All of that has many lawmakers counseling caution.

"I'm sure he's got things he'd like to do, but he's going to be constrained by the budget," Del. Murray D. Levy (D-Charles), a leading voice on the House Appropriations Committee, said of the governor. "I think the only responsible way to do new programs is to make room by cutting old ones."

O'Malley has said little publicly about his agenda in the weeks leading up to this year's legislative session -- a time other governors have used to build momentum for their initiatives.

In the interview, he said he is considering proposing a freeze on tuition at Maryland public universities for a third straight year, a nod to the concerns of working-class families, whose interests O'Malley promised to champion during his 2006 campaign against then-Gov. Robert L. Ehrlich Jr. (R).

O'Malley said he will also advance recommendations of an administration task force on mortgage lending, saying, "We have, unfortunately, a fast track to foreclosure in our state."

And O'Malley said his budget will also include funds to expand graduate programs and take other steps to address a nursing shortage in the state -- another campaign promise.

He is also planning to advance some crime-related initiatives, including expanding the state's DNA database to include samples taken from people arrested for certain violent felonies. Under current state policy, samples are taken only from those convicted of crimes.

As of the fall, at least 11 other states, including Virginia, had moved in a similar direction in an effort to link those under arrest to unsolved crimes.

"Virginia is way ahead of us on this score, and I'd like to catch up to where Virginia is," O'Malley said.

Environmental issues and energy policy are also expected to be part of O'Malley's second-year legislative agenda. His inability to curb utility rate increases was perhaps O'Malley's largest political setback during his first year.

O'Malley, who took office Jan. 17, is closing out his first year with overall high marks from leading members of his party for his work with the legislature.

Senate President Thomas V. Mike Miller Jr. (D-Calvert), who had been critical of the governor's caution during his first months in office, said O'Malley wound up accomplishing more in his first year than any governor since Marvin Mandel (D), who took office in 1969. Moreover, Mandel faced neither the budget challenges nor the fierce Republican resistance that O'Malley encountered, Miller said.

Republicans have been far less charitable in their assessments.

"If you want higher taxes across the board, and you want your legislature to rubber stamp anything you ask for, I suppose he's had some level of success," said House Minority Leader Anthony J. O'Donnell (R-Calvert). "But in reality, I think he's done tremendous damage to Maryland."

O'Donnell suggested that the tax increases pushed by O'Malley -- including higher income taxes on upper-end earners and increases in the corporate, sales, tobacco and vehicle titling taxes -- could push the state's economy into a recession.

Besides addressing the "structural deficit" that was several years in the making, O'Malley chalked up several other legislative wins over the past year, including securing a record $400 million for public school construction and passage of the nation's first so-called living wage law, which mandates that employees of state contractors be paid significantly higher than the state's minimum wage.

O'Malley also backed a "clean cars" law that mandates tighter emissions standards for automobiles, pegged to California standards. That initiative has been derailed, at least for now, by the Bush administration.

O'Malley's highest-profile loss in the legislature last year came on the death penalty, which he unsuccessfully sought to repeal. Though the governor continues to voice opposition to capital punishment, aides have signaled that O'Malley may be less visible during debate on that issue this session.

"I'm very proud of this first year," O'Malley said. "It was grueling, it was difficult and we had to do some unpopular things. . . . While it was a tough year, it was a year that allowed us to accomplish a very important transition. Restoring fiscal responsibility allows us to continue to make progress on a number of fronts."

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