Maryland Gov. Larry Hogan (R) on Thursday proposed cutting Medicaid reimbursements, salaries for state employees and extra funding for the state’s most expensive school systems, setting up an immediate test of the call for bipartisanship he issued a day earlier at his inauguration.
Several leading Democrats balked at the reductions, which Hogan said are necessary to shore up the state’s fiscal health. He said the plan he was sketching out would help balance the state’s books for years to come, clearing the way for promised tax relief.
Hogan’s budget — which he is set to formally unveil Friday — includes a 2 percent reduction in state agency spending, canceled pay increases for state employees and lower rates for doctors who participate in Medicaid, the state health insurance program for the poor.
Although overall spending on K-12 education would increase to a record level — a point Hogan stressed during his first news conference as governor — several jurisdictions where it costs more to provide education, including Montgomery and Prince George’s counties and the city of Baltimore, would lose millions of dollars in anticipated funds.
“There are lot of issues that we have concerns with,” House Speaker Michael E. Busch (D-Anne Arundel) told reporters, adding that “state employees, education and health care ... seemed to take the brunt of the hits.”
Busch said he remains eager to work with Hogan but pledged that the House Appropriations Committee would take a hard look at Hogan’s budget proposal in the coming weeks. “This is why you have a 90-day session,” he said.
Hogan, who made fiscal restraint and tax cuts the focus of his campaign, said that his plan follows through on what he was elected to do in Annapolis.
“Over the last eight years, Maryland families and small businesses were tightening their belts, while state government was doing just the opposite,” Hogan said. “That’s not right, that’s not fair, and that stops today.”
Hogan said his budget proposal for the coming fiscal year, which starts in July, eliminates a shortfall of $802 million left by former governor Martin O’Malley ● (D) in the state’s $16.4 billion general fund. He said the proposal also fixes a “structural deficit” that has plagued Maryland’s spending plans for years.
Although the governor reiterated his pledge to provide tax relief during his first legislative session, the budget proposal he outlined was silent on which taxes he intends to roll back. Those decisions will be announced in coming weeks, he said.
Hogan briefed legislative leaders and reporters separately Thursday and said the full budget proposal would be made public Friday. The information he released sent lawmakers and interest groups scrambling to learn more.
Among the details:
• Spending on higher education would increase statewide, but university officials were scrambling to figure out by exactly how much. Hogan’s budget secretary would not say whether tuition might need to be raised on some campuses as a result of the budget allocation.
• Hogan said his budget maintains funding for two planned light-rail projects — the Purple Line in the Washington suburbs and the Red Line in Baltimore. But he added that his administration is reviewing whether to move forward with those projects.
• Hogan is proposing $280 million statewide for public school construction, a level comparable to what has been passed in recent years by the Democratic-led legislature.
Senate President Thomas V. Mike Miller Jr. (D-Calvert) said that based on what he had seen so far, the cuts in Hogan’s plan “weren’t as severe as they could have been.” But Miller predicted that “there are going to be advocates screaming, whether it is in terms of Medicaid, state employees, K-12.”
Those most outraged Thursday were representatives of state employees, who starting in July would lose a 2 percent raise they received on Jan. 1. That reduction is among $156 million in “employee compensation adjustments” in Hogan’s plan.
“State employees will be mad as hell,” said Jeff Pittman, communications director for AFSCME Maryland Council 3, the largest union representing state workers. “When Governor Hogan asked us for our votes, he campaigned on eliminating ‘waste, fraud and abuse’ — not a pay takeaway from middle-class workers.”
During his news conference, Hogan stressed that he has not proposed any layoffs or furloughs. His budget would continue an O’Malley program that provides financial incentives for those who agree to early retirement.
Washington area lawmakers and educators voiced concern about a proposed reduction in an education initiative known as the Geographic Cost of Education Index, which provides additional funding to jurisdictions where the cost of providing education is more expensive. Hogan wants to reduce a planned $135 million allocation by 50 percent.
The change would cost Montgomery County about $17 million in expected funding and Prince George’s County about $20 million, education officials said. Both jurisdictions have all-Democratic delegations in Annapolis that are expected to fight the cuts.
“It will be very hard to absorb a huge reduction like that without affecting people in some way or another,” said Prince George’s County Public Schools chief Kevin M. Maxwell. “It’s a substantial reduction and it will be difficult to maintain the services.”
Montgomery County Public Schools Superintendent Joshua Starr said it was “shortsighted” for the governor to think that the education cuts will not have an impact on the economy in the long run. “Economic development rests on building a workforce,” Starr said.
Del. Maggie L. McIntosh (D-Baltimore), chairwoman of the House Appropriations Committee, said she is also concerned about proposed cuts in the rates the state pays doctors who participate in Medicaid. Under Hogan’s plan, the rates would be rolled back to what the state paid last year for a savings of $160 million.
Besides paying for health care for the poor, Medicaid also funds nursing homes and programs for those with disabilities. Those are “the most vulnerable populations we have,” McIntosh said. “When you cut physician reimbursements, they tend not to take Medicaid any more.”
Although Democrats found plenty to criticize, members of Hogan’s party rallied around their new governor. House Minority Whip Kathy Szeliga (R-Baltimore County) said she was pleased with the outline of the budget that Hogan presented.
“It is a great plan,” Szeliga said. “This is what happens when you put a businessman in the governor’s mansion. It’s a plan that shows you can’t spend more than you get and you can’t solve Maryland’s problems with budget gimmicks.”
Hogan, she said, “is taking reasonable steps to put Maryland on the path to prosperity.”