Some Md. Officials Fear Reliance on Federal Dollars

Maryland's aggressive use of federal stimulus dollars to plug holes in its operating budget, in addition to funding one-time road and other infrastructure projects, has considerably eased pressure on lawmakers finishing work on a state spending plan. But some critics say the approach could lead to worse problems in a few years when the federal assistance dries up.

According to legislative analysts, Maryland plans to use more than $1 billion in aid from Washington to bolster its $14 billion general fund budget in the coming fiscal year, which starts in July. That is a significantly greater percentage of federal assistance than tapped so far for that purpose by either Virginia or the District.

The varied operating expenditures that Maryland is covering next year with federal money include more than $300 million for a children's health program; $137 million to cover growth in teacher retirement costs; almost $18 million to help pay salaries of the Maryland State Police; and more than $14 million in aid to community colleges.

Without the federal dollars, Maryland's budget process "would have been a bit of a bloodbath," said Del. John Bohanan Jr. (D-St. Mary's), a member of the House Appropriations Committee.

Before the federal help arrived, Gov. Martin O'Malley (D) had proposed a budget that closed a projected $2 billion shortfall, and lawmakers were contemplating deeper cuts to education, health programs and other priorities.

As it is, the budget the General Assembly is poised to adopt before Monday's scheduled adjournment calls for cuts in state aid for local road projects, the freezing of most state agency budgets and no salary increases for state employees, among many other reductions.

But without stimulus funds, additional cuts to agencies would have been required, and lawmakers might have contemplated releasing prisoners early and layoffs of as many as three times the 700 workers that O'Malley proposed in January, Bohanan said. With the arrival of the stimulus money, the budget for the coming year includes no layoffs.

Still, the strategy of using federal money for ongoing state expenditures has sparked considerable debate in the closing days of the session. Some lawmakers are cautioning that getting hooked on federal aid now will make it much harder to balance the state budget in two years, when the stimulus funds run out.

"Getting the help from the federal government is not something we should be thankful for," Senate Minority Leader Allan H. Kittleman (R-Howard) said during recent floor debate on the budget, where he argued for less spending now.

Although Kittleman's view did not sway a majority of his colleagues, Democratic leaders, too, say they are aware of "the cliff" they are facing when stimulus funds run out. Their hope is that the economy will have significantly improved by then, bolstering collections of income and sales taxes and other major sources of state revenue.

The budget lawmakers are poised to pass for the coming year is balanced. But analysts are projecting a $1.8 billion shortfall two years from now -- a larger gap than existed when O'Malley convened a special session on the budget in 2007.

Virginia and the District have also used federal stimulus dollars to avoid cuts to the operating budgets, but to a smaller degree so far than Maryland.