State cuts bite deeply

Colleges, health slashed

Friday, July 24, 2009

The cuts avoid large-scale layoffs of state employees and lay the groundwork for more than $400 million more in cuts before Labor Day.

"Our simple intention is to take the actions necessary to protect the families of Maryland and the priorities that all of us have for our kids, namely their education and their ability to be successful in this world," Gov. Martin O'Malley (D) said at the meeting.

The panel — Comptroller Peter V.R. Franchot (D) and Treasurer Nancy K. Kopp (D) as well as O'Malley — approves state spending and is authorized to slash the budget when the General Assembly is not in session.

Among the cuts are $75 million in Medicaid reimbursements that will be covered by federal stimulus aid triggered by growth in the state's unemployment rate. Other cuts include $34 million in reductions in Medicaid payments to hospitals, nursing homes, managed care organizations and other health care providers.

The board also slashed $40 million from higher education, including $20 million from the University System of Maryland's fund balance and $17.6 million from facilities renewal and operating expenses systemwide.

The system's Board of Regents held an emergency meeting on Thursday to discuss the impact of the cuts on the universities.

The cuts put off — temporarily — layoffs of state employees and reductions in local aid to counties.

O'Malley has not ruled out furloughing state workers in the future. He was scheduled to meet with cabinet secretaries on Thursday in Annapolis to discuss the cuts and the need to identify further reductions.

"It's a step in the right direction. It certainly doesn't correct the immediate problem," Del. Murray D. Levy (D-Charles) said Thursday.

This fall's cuts will come just ahead of a Sept. 17 meeting of the Board of Revenue Estimates. That meeting is expected to show further large writedowns in revenue caused by the national recession.

"I hope to avoid massive layoffs that other states have had to engage in," O'Malley said during a briefing with reporters on Tuesday in Baltimore. But cuts to employee compensation and state aid to Maryland's 23 counties and Baltimore city "has to be part of closing the gap" in the budget, he said.

Of the $6.5 billion in local aid from the state, about $5.3 billion goes to K-12 education. The remaining $1.2 billion goes to local health departments, law enforcement and grants aimed at bridging tax revenue disparities between the counties.

About $132 million of the cuts made Wednesday are one-time reductions to the $13.8 billion fiscal 2010 budget passed by the General Assembly in April. Lawmakers built a $96 million cushion into the budget, but languishing revenues are expected to grow the state's fiscal 2010 budget shortfall to $700 million.

The board eliminated 39 filled state positions, including 18 from the Department of Natural Resources. Another 18.5 vacant positions were also cut.

Avoiding cuts to K-12 public education was a top priority, O'Malley said on Tuesday.

"It is true that the big investment in public education is sustained in part by cuts to virtually every other aspect of state government," he said.

Investment in education is going to fuel the new American economy and allow Maryland to recover from the recession faster than other states, he said.

"The choices we make are choices that will allow us to come through the other side of this recession sooner than other states in the union," O'Malley said, adding that he does not know when that will happen.

Other cuts include $3 million from a fund for stem cell research, a 20 percent reduction that leaves $12.4 million in the fund.

But Levy said Wednesday's actions do not address the state's long-term fiscal woes, mostly because one-time reductions that make up a portion of the cuts fail to relieve future budget pressures.

"[Even] if they deal with this current problem, there still is a very large problem left," he said. "I think 2011 is shaping up to be a very difficult year."

This is the fifth time the Board of Public Works has made cuts since O'Malley took office in 2007. About $4 billion and more than 2,700 state positions have been slashed during his term.

O'Malley's first term has also been marked by the passage of $890 million in new taxes during a 2007 special legislative session. Those taxes, while unpopular, have allowed Maryland to maintain its coveted triple-A bond rating, one of seven states to do so.

The rating, announced Monday, allows the state to borrow money at more favorable interest rates.

Staff writer Alan Brody contributed to this report.

ssedam@gazette.net