Budget cut forensics

Our Opinion

Wednesday, Sept. 2, 2009

To begin with, O'Malley must be banking on some sort of federal health care plan passing, as the cuts heavily target health services — programs that sick, elderly and low-income residents depend on for medical care. For example, health providers that serve clients from Medicaid and several mental health agencies will see their reimbursement rates and grants drop by 2 percent, saving $21.75 million. That's doubly painful for Medicaid funding because it operates with a federal dollar-for-dollar match. Also, the state is recommending that the amount hospitals can be reimbursed for via Medicaid for various treatments return to 2004 levels, which will save $11.8 million. And O'Malley cut deeply from the Cigarette Restitution Fund, eliminating $7.5 million from cancer research and trimming $3 million from cancer prevention programs.

O'Malley has made some decisions that go beyond this budget cycle. Many fiscal notes detail eliminations or reductions, without indicating a return. However, the governor's cuts totals roughly $736 million — only about half of what he'll likely need to trim from next year's budget. By not taking steps to ensure a balanced budget less than a year away, it is increasingly evident that O'Malley is making political, rather than financial, calculations going into an election cycle.

The counties and Baltimore still have to work through their cuts, but the bulk — about $160 million worth — will be to transportation projects. O'Malley is likely thinking that the federal stimulus dollars Maryland is receiving for transportation — $610 million, including $62 million for local projects — may offset these cuts. Again, this shows O'Malley's distaste for long-term budget solutions and demonstrates a knack for sidestepping the hard choices leaders must make.

The one area on which O'Malley has remained steadfast is a tuition freeze for state colleges and universities. However, his latest cuts eliminate $10.5 million from aid to community colleges, leading to the likelihood of tuition hikes. When it comes to Marylanders seeking higher education, O'Malley is telling those in four-year institutions that he'll protect their wallets, while he turns his back on those in two-year schools.

What's more troubling is that much of the savings comes from programs that would be questionable during healthy economic times. The governor knew this fiscal year would be difficult, so it's puzzling as to why some of the changes weren't implemented when the $30 billion-plus budget was first approved.

For example, the state wants to expand Medicaid oversight to recover more funds from out-of-state hospitals, recouping $2.5 million. That's fine, but such ideas shouldn't come up only in tight budgets. It's incumbent on state leaders and staff to constantly seek cost-saving measures like this one, not only during a period of crisis.

Then there's the small reduction of $32,000 from Maryland's sponsorship of entities like the International Council of Shopping Centers, a trade advocacy group. It's minor, but O'Malley preserved $218,000 for such sponsorships. Encouraging businesses to set up shop in state is worthwhile, but Maryland already has an office of economic development, and direct sponsorship of advocacy organizations takes that concept a bit too far.

Here's a final example: the Urban Enterprise Zone Tax Credit program is being cut by 5 percent, leaving about $12.5 million. This program is useful, providing tax credits in return for job creation and investments within the zones. The problem is that the $12.5 million is 29 percent above what the state spent on the initiative in fiscal 2009. Unless the budget crunchers are predicting a significant increase in business development, that money could be better spent elsewhere.

O'Malley had the chance to effectively deal with the gap between revenue and spending. Instead, he opted for cuts that do not fully address the upcoming deficit.