O'Malley considering tough cost-saving measures to close Md. budget gap

Washington Post Staff Writer
Sunday, December 26, 2010; 10:46 PM

To close Maryland's next budget gap, Gov. Martin O'Malley is considering across-the-board cuts in local education funding, a reduction in payments to mental health providers who serve the poor and a shift of hundreds of millions of dollars in teacher pension costs to the state's counties, which already face their own fiscal problems.

Those and other cost-saving measures - all of which have been recommended by the governor's budget advisers - underscore the unpopular choices O'Malley (D) faces as he prepares to submit a balanced spending plan for fiscal 2012 next month.

O'Malley, who won reelection Nov. 2, spent much of his first term making largely recession-driven budget cuts. But even as the economy shows signs of recovering, Maryland and other states are facing arguably their most difficult budget season yet.

That is partly due to the evaporation of billions in federal stimulus funds that have propped up state budgets across the country for the past two years. And repeated rounds of budget-cutting have left few easy alternatives, including in Maryland, which is in better shape than many other states.

"This budget is going to feel a lot more painful than the last few," O'Malley told reporters this week as part of an effort to prepare lawmakers and interest groups, including many that helped him get reelected, for the disappointment ahead.

"Once the legislature gets this budget, the immediate reaction will be, 'Surely there is another way,' " he said, declining to discuss many specifics.

Shepherding the budget through the General Assembly is likely to pose a major political challenge for O'Malley. Aides say part of the aim will be to convince the many disappointed constituencies that they have been treated no worse than others.

O'Malley has pledged not to rely on tax increases to help close a gap of more than $1.2 billion in the state's $13 billion operating budget.

In 2007, O'Malley's first year in office, he and lawmakers used multiple tax hikes, including an increase in the state sales tax, to close a larger shortfall. But in the aftermath of last month's elections, there appears to be little political will among legislative leaders to repeat that strategy, even in left-leaning Maryland.

Still, there are several measures designed to raise additional revenue that remain under active consideration.

O'Malley's budget advisers, for example, have recommended increasing an "assessment" that Maryland's hospitals pay to help support Medicaid, the state's insurance program for the poor, according to a memo obtained by The Washington Post.

Under two options listed in that memo, that could raise either $121 million or $254 million next year.

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