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Maryland cuts $413M in state spending but delays pay cuts for workers

Maryland Gov. Larry Hogan (R). (Brian Witte/AP)

As Maryland grapples with the economic fallout from the pandemic, the Board of Public Works on Wednesday cut $413 million out of the state’s budget — one of the biggest single-day revisions in state history. It was the first in what leaders promised to be “painful” actions in the months to come.

In a 2-to-1 vote, the board stripped funding from universities, community colleges, crime initiatives and dozens of other state programs, and approved selling off state-owned aircraft and eliminating 92 vacant state jobs.

“I can tell you that I don’t like a single one of them, or the other hundreds of millions of dollars in cuts that they are going to have to bring back before us next month,” Gov. Larry Hogan (R) said. “They’re all painful.”

Possible layoffs, pay cuts or furloughs for state workers — plus deeper cuts to services — are on the horizon for as soon as next month, Hogan said.

States and cities across the country have started slicing into budgets crafted during flush economic times, laying off workers and delaying major infrastructure projects in a dash to balance the books. The economic standstill created to slow the spread of the novel coronavirus sent tax revenue nationwide into a nosedive at the same time governments have ramped up spending on the pandemic response. The recent resurgence of coronavirus cases across the South and West have further muddied hope for a prompt economic turnaround.

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“We should not sugarcoat things,” said Comptroller Peter Franchot (D), who voted with Hogan. “There are going to be very many more cuts.”

The board’s third member, Treasurer Nancy K. Kopp (D), voted against the cuts because she wanted time to build public support about why these particular cuts are necessary.

“I will be with you arm-in-arm on this,” Kopp said to Hogan and Franchot.

Hogan proposed $1.45 billion in cuts in the budget that took effect Wednesday, a 7.4 percent reduction of the state’s $19.5 billion general fund. The majority of his plan to redraft the state’s overall $49.7 billion budget would be up to the General Assembly to consider when it reconvenes next year.

But Hogan said the situation is so dire that the Board of Public Works, which oversees budget actions when the legislature is out of session, must act immediately.

“This unprecedented global pandemic has caused catastrophic damage to the American economy,” he said. “The reality is that responding to this crisis has created a multiyear budget crisis unlike anything the state has ever faced before — more than three times worse than the Great Recession. It will require further, substantial budget actions.”

The largest cut — $186.8 million — affected universities and community colleges, whose leaders must now implement their own cuts, layoffs or furloughs to absorb the impact.

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The board did not enact Hogan’s controversial proposal to skip pension payments for teachers, and both furlough state workers and eliminate a promised 2 percent raise, part of $205 million in cuts that Franchot identified as unacceptable. The list also included reducing subsidies for child care, cutting housing rental assistance, and limiting cash available to clean up mold in schools. Those proposals sparked backlash from unions and Democrats in the state’s congressional delegation.

But the recommendation will be up for a vote again in August. The governor warned that if the board cannot come up with an alternative to those cuts by next month, the state may be forced to lay off 3,157 employees.

“Do we cut spending? Or do we cut people?” Hogan said.

The two Democrats on the three-member board said they refused to endorse budget cuts that affect the paychecks of state workers until a more precise picture of the state’s unquestionably dismal finances comes into focus.

“This is a very serious situation, and it is potentially a long-lasting situation,” Kopp said Wednesday.

In two weeks, the state will receive new revenue estimates to replace the May prediction by state forecasters that Maryland would lose $1.2 billion over the next year. That estimate assumed Congress would endorse a $500 billion rescue package for state governments, but the legislation remains in limbo.

Kopp asked the panel to also delay the $413 million in cuts it approved for at least two weeks, giving the government time to educate the public about them and for her to evaluate whether these reductions were fair and just.

She was voted down 2 to 1 by Hogan and Franchot, who are frequent allies on the board and who each argued that waiting would make future cuts even deeper.

“Failing to make painful cuts now would cause a hatchet to be used on our state budget, instead of a scalpel,” Hogan said.

State and local governments in Maryland have so far received $2.34 billion in federal coronavirus aid, but that money is for pandemic-related expenses.

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