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O'Malley Prepares Spending Trims Totaling $300 Million
More Cuts Coming, State Officials Say

By John Wagner
Washington Post Staff Writer
Wednesday, October 15, 2008

Gov. Martin O'Malley prepared yesterday to propose more than $300 million in mid-year budget cuts amid signs that Maryland's fiscal outlook is continuing to worsen and questions about whether the cuts are deep enough.

O'Malley (D) plans to present a wide array of cuts this morning, including reductions in some education and public safety programs, to the Board of Public Works, a three-member panel authorized to reduce the budget when the legislature is not in session.

O'Malley and lawmakers indicated that today's cuts will probably be the first in a series of budget reductions in coming weeks as Maryland continues to grapple with a serious decline in tax revenue because of the sagging economy.

Legislative analysts said yesterday that they are projecting a shortfall of $1.3 billion in next year's budget, up from an estimate of about $1 billion a few weeks ago. Cuts made to this year's budget by the Board of Public Works should bring that figure down slightly, as some cuts will carry over into the next fiscal year.

O'Malley did not release a final list of today's proposed cuts, but aides indicated that most reductions would be taken from a memo recently produced by O'Malley's budget secretary.

The memo includes about 100 options, totaling almost $400 million, which would affect services including higher education, community colleges and social programs that provide child-care subsidies and drug treatment.

Aides said O'Malley would also propose reductions in recent increases to state payments to nursing homes, physicians and other health-care providers.

"Unfortunately, we have to make some adjustments," O'Malley told reporters. "It's going to cause some pain and discomfort all around."

Some legislators, who were briefed on the cuts yesterday, wondered whether O'Malley should be reducing the budget more quickly.

"We need to make cuts more severe at the present time," said Senate President Thomas V. Mike Miller Jr. (D-Calvert). "By making cuts now, we make easier our cuts in the future."

Miller said he understood O'Malley's reticence, however.

"It's just very difficult for him as a chief executive to undo progress," Miller said. "Significant cuts, to him, seem like a step backwards, which is what they are."

House Speaker Michael E. Busch (D-Anne Arundel) said he thought O'Malley had made "fair decisions," adding that he was pleased that the governor is not proposing layoffs.

Legislators are scheduled to return to Annapolis full-time in January, when they will start work on next year's $15 billion general fund budget.

In a briefing yesterday, Warren Deschenaux, the legislature's chief fiscal adviser, suggested that lawmakers start thinking about longer-term responses to the "fiscal crisis," including less-generous benefits for state employees and shifting more state expenses to county governments.

Deschenaux also raised the possibility of scaling back some initiatives from O'Malley's first two years, including an expansion of subsidized health care and a new fund to clean up the Chesapeake Bay.

"There is a strong likelihood that strong action will need to be taken," Deschenaux told lawmakers.

O'Malley told reporters yesterday that he is continuing to weigh two options for budget savings that he will not propose today: furloughs for state employees and reduced spending on an initiative that provides additional funds for school systems in which the cost of education is more expensive. Montgomery and Prince George's counties are beneficiaries of that program.

During an address to Maryland school superintendents yesterday, O'Malley also made a pitch for next month's referendum to legalize slot machine gambling at five sites, calling it an important part of the "budget fix."

Legislative analysts project that the plan could generate $660 million for the state by 2013. The only revenue expected next fiscal year is $90 million in licensing fees from the five operators chosen for the slots sites. However, O'Malley said anticipation of slots revenue would create more flexibility in crafting next year's budget.

Comptroller Peter Franchot (D), who serves on the Board of Public Works with O'Malley and Treasurer Nancy Kopp (D), said yesterday that he plans to vote for today's cuts.

Franchot predicted that O'Malley would be back with another round of budget cuts by the end of the year.

Staff writer Lisa Rein contributed to this report.

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