By John Wagner and Tim Craig
Washington Post Staff Writers
Thursday, October 9, 2008
The region's governors are preparing to propose hundreds of millions of dollars in budget cuts, including layoffs in Virginia and cuts to education and public safety in Maryland, in an early sign of the impact of the economic slowdown on government services.
Virginia Gov. Timothy M. Kaine will announce plans today to use money from the state's $1 billion reserve fund, lay off hundreds of state workers and announce other major cost-saving measures.
Maryland Gov. Martin O'Malley is weighing almost $400 million in potential spending reductions and will present at least $250 million of those next week to a panel with authority to make cuts while the legislature is not in session, aides said.
A memo prepared by O'Malley's budget secretary outlines about 100 possible spending reductions, which would affect a swath of state government, including higher education, community colleges and social programs that provide child-care subsidies and drug treatment.
In both states, additional rounds of reductions are being planned to cope with the longer-term impacts of a sluggish economy that has undercut anticipated collections of income taxes, sales taxes and other revenue that governments rely on for day-to-day operations. Revenue estimates, which were revised down before the high-profile troubles on Wall Street, could worsen further in the next months.
"Until we see some sign of rebound on the horizon, this is going to be a constant exercise in cutting," O'Malley (D) said in an interview, adding that his goal will be "to protect our priorities as best we can."
O'Malley said his administration would probably present another round of budget cuts to the three-member Board of Public Works in December, a month before his spending proposal for fiscal 2010 is due to the General Assembly.
Maryland is estimated to face a nearly $1 billion shortfall in its $15 billion general fund in fiscal 2010, which starts in July.
The proposals by Kaine (D) will be the first step in what he and lawmakers expect to be grueling rounds of cost savings over the next months. Administration officials say Virginia faces a shortfall of about $2.5 billion in its two-year, $77 billion budget for fiscal 2009 to 2010.
Other governments in the region are being strained by the downturn, too.
D.C. Mayor Adrian M. Fenty (D) has proposed eliminating 400 vacant government jobs, postponing a retirement benefits package for city employees and using accrued revenue in the bank accounts of city agencies to help close a $131 million gap.
Montgomery County Executive Isiah Leggett (D) has asked county department heads to make midyear budget cuts of $50 million to help cope with an estimated $250 million shortfall for fiscal 2010.
In Maryland, O'Malley has deferred consideration of two of the more controversial proposals contained in the memo from budget secretary T. Eloise Foster, a copy of which was obtained by The Washington Post.
One proposal would require six days of unpaid leave from all state workers, a move that the Maryland's labor unions would probably resist.
The other would roll back an initiative that provides additional funding for 13 school systems, including Montgomery and Prince George's counties, where the cost to provide education is more expensive.
The initiative, known as the Geographic Cost of Education Index, was part of Maryland's landmark 2002 Thornton education plan but was never funded until this year. Foster's list of possible cuts takes back half of this year's $75.8 million from the initiative.
O'Malley said the furloughs and rollback of the education funding required more discussion with affected parties. He did not rule out resurrecting the proposals.
In her memo, Foster proposes eliminating 776 state positions, most of them vacant. That is about the same number that O'Malley has cut during his first two years in office, which have been marked by budget turmoil he largely inherited.
Last year, Maryland held a special legislative session in which taxes were raised by almost $1.4 billion annually and the budget was cut by several hundred million dollars. Since taking office, O'Malley says he has cut the budget by $1.8 billion.
The proposed job reductions include 283 vacant correctional officer positions and 22 parole and probation agents.
Under several of Foster's proposals, recent increases in funding would be rolled back. For example, the state would halve funding increases that are going to an array of health-care providers this year, including nursing homes, mental-health providers and physicians.
The proposals also include a $30 million cut to the University System of Maryland and a $16 million cut to community colleges.
P.J. Hogan, a lobbyist for the university system and former Montgomery senator, said that "nothing is off the table" but that university leaders want to avoid a midyear tuition increase. "That's a real disruption in the middle of a year for a student," Hogan said.
In Virginia, Kaine will unveil several hundred million dollars in spending cuts as well as other budget reductions.
"Every agency is on the table," said Kaine spokesman Gordon Hickey. "Nothing is going to be exempt."
The layoffs and other cuts announced today will account for about one-third of the state's shortfall. More reductions will probably occur in January, when the General Assembly reconvenes.
In that round of reductions, cuts to public education might have to be made, administration officials said.
"There is nothing yet that is going to impact the classrooms in this school year," said Delacey Skinner, Kaine's communications director.
In preparation for his announcement, Kaine said he is curtailing his office and living expenses. His executive office budget will shrink by 10 percent.
Kaine said he will limit expenses, including his staff's cellphone costs, end purchases of jugs of water and cancel some newspaper subscriptions. He will also continue the 5 percent self-imposed cut to his $175,000 annual salary implemented last year.
Hickey said Kaine will hold fewer official events at the governor's mansion. And those will feature lower-quality beer and wine and a less exquisite range of food. The cooks will be encouraged to use "leftovers," Hickey said.
"If Virginia families and business have to make difficult spending decisions in tough times, we need to show them we're doing the same," Kaine said.
The latest proposals are in addition to the $1.7 billion in reductions that Kaine and the General Assembly made last year when the housing downturn began.
Many House Republicans resisted efforts last year to tap the state's "rainy day" reserve fund, saying then that they didn't think the economic conditions were bad enough to warrant such a move.
But House Majority Leader H. Morgan Griffith (R-Salem) said he will support taking money from the fund this year because he says Virginia could face its worst budget crisis in more than a decade.
"There is no question it is raining," Griffith said. "In fact, I would say, while we have had some drizzle and some mist in the past, in my 15 years in the House this is the first solid rain we have had. This is the time you use the rainy day fund."
Staff writers Daniel de Vise and Ann E. Marimow contributed to this report.
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