Gov. Martin O’Malley unveiled his much-anticipated 2012 state budget proposal last week, apparently closing a $1.3 billion projected budget shortfall by reforming the state’s pension system, consolidating governmental offices and calling for deep cuts to Medicaid. Yet, the budget freezes K-12 funding, slightly raises college tuition, proposes no tax increases or state furloughs and somehow musters up health coverage for over 900,000 low-income children and adults.
In a budget briefing, O’Malley said the proposal mitigates the structural deficit by $730 million while keeping the rainy day fund intact and limiting new spending to three percent.
Without the convenient billion-dollar stimulus funding O’Malley leveraged last year, he plans to expand the operating budget by $1.5 billion and shift monies from state funding pots, including the Transportation Trust Fund to the General Fund.
The proposed transfers from the transportation fund have drawn opposition from some legislative analysts, who say Maryland’s needy transportation systems cannot afford to lose money. Early this week, a group of business leaders formed a coalition – the State Transportation Alliance to Restore the Trust – to oppose diversion of the funds.
O’Malley has seen similar opposition to his pension reform suggestions which would require current state workers and teachers to contribute an additional two percent toward their benefits while new workers would have to wait five extra years to retire. O’Malley’s budget team says the reforms would save $100 million.
Patrick Moran, Maryland director of the American Federation of State, County and Municipal Employees, said he is disappointed in the governor’s pension decisions. “Even in these tough times, it is essential that we remember our priorities in Maryland, and that the people of this state come first,” he said in a statement. “It’s particularly disappointing because the governor had other options to balance the budget, including closing corporate tax loopholes and finding other revenue streams.”
O’Malley described pension overhaul as one of the toughest decisions the legislature will make this year. “All of us have a vested interest in finding the most fair and equitable way to keep our pension commitments,” he said.
Since O’Malley took office, state employees have absorbed over $580 million in salary and benefit reductions, but this budget eases up on the workers, recommending no furloughs – in fact offering $750 bonuses – and allowing 1,000 to apply for early retirement. The executive ordered Voluntary Separation Program is expected to save the state $40 million a year.
On the health coverage front, O’Malley plans to set aside $7 billion in health care for 916,000 low-income, disabled and chronically-ill residents. According to the state, his dedication to improving health care access is not new – the administration has expanded coverage to more than 247,000 Marylanders to date. O’Malley proposes the most drastic cuts – $264 million – to Medicaid reimbursements to state hospitals.
The budget includes $2.18 billion in public safety funding, including millions to support an initiative targeting violent offenders and advancing law enforcement technology; increased funding for the Chesapeake Bay trust fund and more than $6 million for low-income families to improve energy efficiency in their homes.
The governor’s administration is also touting the budget’s investment in job creation, including the formation of a $100 million venture capital fund and funding for 15,000 state construction jobs. The financial plan also consolidates some state offices, including the Higher Education Commission and the State Department of Education, to save an estimated $4 million.
O’Malley has said he is committed to “a balanced budget with just cuts” but that does not stop the legislature from proposing tax hikes.
On a radio show the morning of his budget-roll out, O’Malley said he has only vetoed five bills since he’s taken office. “I work collaboratively with the state legislature,” he said.
John Rohrer, fiscal analyst for the state Department of Legislative Services commended O’Malley for reducing the general fund structural deficit by one third, but noted it was unclear how his budget accounted for about $245 million of funds.
“Within the budget we find, potentially, there’s some underfunding,” Rohrer told reporters at a recent legislative briefing.
Three days after O’Malley’s budget reveal, he presented his legislative agenda, which includes bills for job creation, green energy usage, federal health care reform implementation, pension reform, criminal offenses for child neglect and provisions for gun offenders.