Budget fight ahead in Md.

By Miranda S. Spivack and Michael Laris
Washington Post Staff Writers
Monday, January 17, 2011; B01

Leaders from Montgomery and Prince George's counties prepared for the start of the General Assembly session last week with what has become a recession-era routine: They carefully craft expensive wish lists and then scramble for whatever they can get.

And this year promises to be even tougher.

It is becoming increasingly difficult to square ambitious spending requests from Maryland's two most populous counties with fiscal realities in Annapolis. Opportunities for less-painful state budget fixes have been used - as have federal stimulus dollars, which the state put toward key projects and school spending.

The counties are now playing defense and warily eyeing efforts in the state capital to shift some of the costs of teacher pensions to local governments, among other issues.

Gov. Martin O'Malley (D) said last week that he would not propose shifting some of the costs of teacher pensions to the counties in the budget plan his staff is finalizing. But some in the General Assembly are continuing to push the idea as the state tries to close a $1.3 billion budget gap.

"To say that is a problem is an understatement," said Prince George's County Executive Rushern L. Baker III (D). A version of the shift in retirement funding under consideration could cost Prince George's $28 million and Montgomery $70 million in 2012, according to state figures.

When the session opened Wednesday, Baker joined lawmakers from the House of Delegates and the Senate to resist efforts on shifting pensions and to press for $15 million for the county's troubled hospital.

O'Malley has also forecast a possible pullback on schools funding, a daunting prospect that could add to the counties' budget challenges. The Prince George's budget shortfall is at least $77 million, and Montgomery's gap has reached $300 million.

Much of the session will turn on issues of money: how to trim it, whether to raise it and how best to spend what is available. Many local officials say they are waiting for the governor's budget proposal to know precisely what they will be fighting for, or against.

"I think it's wide open. . . . We don't know what we don't know," said Montgomery Council President Valerie Ervin (D-Silver Spring). Once the governor shows his hand, "that will be the beginning of a 90-day session that's all going to be about: How do we negotiate the best deal we can for Montgomery County?"

In Prince George's, funding for schools and public transportation tops the list of items Baker says are crucial if the county is to shed its unfriendly-to-business image and improve schools. And, he said, even in tight economic times, state investments in Prince George's - a place with lots of developable land and underdeveloped Metro stations - is a wise long-term investment that will help the state and county rebuild its tax base.

"It's the one place in the area where there is great opportunity for growth," he said. "You can't grow it unless you have an education system that is improving."

But battle lines are being drawn, especially after county schools Superintendent William R. Hite Jr. raised eyebrows in the O'Malley administration when he outlined an ambitious - and costly - budget that would require an additional $139 million in state funds, about $60 million of that to make up for federal stimulus money that has expired.

Another priority for the county is resolving the fiscal challenges at Prince George's Hospital Center in Cheverly, which soaks up $30 million in state and county funds.

And Baker, who ran on a platform of cleaning up the county's political culture, also wants Annapolis to approve his ethics package, which could limit the powers of the County Council and put restrictions on council members who take money from political slates. Because slates can have multiple candidates, it's difficult to know to whom political contributions are being made.

"We are going to ask for what we need," said Baker, who recently credited the heavy Democratic turnout in Prince George's with propelling O'Malley's reelection victory in November.

Montgomery's history of generous spending on schools and local government has left the wealthy county with what many consider to be good problems to have.

It has excellent schools and many highly regarded public services. But they're expensive. And the ever-increasing spending that Montgomery officials had become accustomed to ended last year, as the economic downturn forced the first overall budget cuts in more than 40 years.

Now the pressure on state education funding at the kindergarten-to-12th-grade level threatens to make an already painful retrenchment even worse. How much worse will be the focus of an aggressive General Assembly lobbying effort.

"The top couple priorities, in alphabetical order, are protect education funding and protect education funding," said Montgomery County Council member Nancy Floreen (D-At Large).

In addition to legislative outreach efforts orchestrated by County Executive Isiah Leggett's administration and the schools, the council president is planning weekly meetings in Annapolis with legislative leaders from Montgomery. "I'm going to make it my business to be there a lot," Ervin said.

Ervin, for example, wants changes to a state law that requires counties to maintain their education spending levels or face potential penalties. For years, when local tax receipts were booming, Montgomery routinely exceeded those minimum spending levels. Ervin wants a clear mechanism in the law to give counties a temporary out if their schools have performed well but they are facing a fiscal crunch.

"There should be a way to weigh what the county has done to promote excellence in your school system, and you should be given credit for that," Ervin said.

The "maintenance of effort" issue is a particular concern in Montgomery, where school enrollment is increasing and adding significant new costs. Counties are penalized under the law only if state spending rises. Such spending could go up in some counties and down in others, depending on state education formulas.

Montgomery officials, for example, don't know what would be worse - the education funding changes that O'Malley might propose, or the haggling over them that might ensue. The give-and-take over education dollars could easily lend momentum to the idea of shifting part of the state's ballooning teacher pension costs to Montgomery.

Many county officials were "very relieved" that O'Malley has said he would not include the pension change in his budget proposal, Ervin said. But that was only a temporary reprieve. "Tomorrow's another day," she said.

spivackm@washpost.com larism@washpost.com

Staff writer Ann E. Marimow contributed to this report.

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