O’Malley Closes $1.4 Billion Shortfall but Big Holes Remain

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Gov. Martin O’Malley is proposing nearly $1 billion in spending cuts, shuffling hundreds of millions of dollars from state funds and slashing aid to local governments to close the state’s nearly $1.4 billion budget shortfall in his fiscal 2012 budget unveiled Friday.

O’Malley, who has called this his most challenging budget to balance, stayed true to his pledge to present a spending plan that does not include tax hikes, though lawmakers could take steps to change that in the coming months.

Under the proposed budget, state workers will avoid furloughs for the first time in three years and funding for K-12 education will remain flat at $5.7 billion — two bright spots in an otherwise grim spending plan that makes cuts to almost all state programs.

“This will be the first word on the budget, not the last,” said O’Malley, a theme he’s reiterated over the last couple of weeks. “None of this is going to be easy.”
O’Malley’s budget includes cuts of $264 million in Medicaid payments to hospitals, $104 million from the state employee retirement system and $52 million in aid for local governments. Another $40 million in annual savings will come through buyouts of about 1,000 state workers, O’Malley said.

The budget also proposes transferring $285 million from state accounts. That includes diverting $60 million from the state’s Transportation Trust Fund, a move that could prove to be unpopular with lawmakers.

“Transportation projects are already severely underfunded,” said Delegate Heather Mizeur, D-Montgomery County.

During a budget briefing, O’Malley lamented the need to cut into the state’s fund that helps pays for roads, bridges and construction of transit systems, saying he would have “rather not cut any” money from the fund.

Tough decisions, he said, had to be made.

“We’re trying to get through this recession and keep intact as much as we can,” he said.

Legislative analysts estimated the state’s shortfall at $1.6 billion, but O’Malley presented a deficit closer to $1.35 billion Friday. O’Malley’s budget will now go to the General Assembly, where lawmakers can make cuts but not add to it.

“On the first day of the budget it’s a fool’s errand to make prognostications about what will and won’t stand,” said Mizeur. “There are nuggets of ideas in here that will help us close the gap in interesting ways and there are other proposals we will probably part ways with from a legislative perspective.”

Among the discussions lawmakers are expected to have this session regarding the budget is one about raising taxes.

A proposed “dime-a-drink” increase on the state’s alcohol tax is being considered again this session. Lawmakers are also talking about raising the state’s gas tax, and O’Malley appeared receptive during a radio interview Friday to the idea of reinstating the state’s millionaire tax, which expired Dec. 31.

“We have to keep an open mind to all things,” he said.

Sen. David Brinkley, R-Frederick, said O’Malley’s budget could leave some lawmakers wanting to make changes.

“He may make some severe reductions to programs some legislators feel near and dear about with the expectation that if you want to restore this funding, raise some taxes,” Brinkley said. “He’s leaving any of that up to the legislature.”

O’Malley’s budget proposes a series of consolidations estimated to save the state $4 million, including merging the Higher Education Commission with the State Department of Education.

The budget also calls for closing Brandenburg Center, a state-run, residential center for adults with disabilities near Cumberland.

O’Malley on Friday also outlined plans to revamp the state’s pension and retirement program by increasing employee contributions and raising the retirement age for new hires. The plan is estimated to reduce the state’s unfunded retiree health liability by about $7 billion.

O’Malley and the American Federation of State, County and Municipal Employees, the largest union for state employees, recently reached a tentative three-year contract that includes the guarantee of no furloughs. The deal is scheduled to be ratified later this month.

But O’Malley’s plan to revamp pensions and health benefits for state workers is likely to draw strong union opposition.

“We’re going to fight like hell against it,” said Patrick Moran, the union’s state director.

David Saleh Rauf for Capital News Source

Letters to Editor

  1. Bill Parks says:

    Anyone who thinks cutting government spending is the answer to our economic problems does not know or understand our debt-based monetary and banking system. We use this system because the federal government fails to issue our nation’s money.

    The failure is not new. This year is the two hundred years anniversary of a great constitutional battle with the banks, a battle started and lead by Thomas Jefferson and championed by, then President, James Madison. Congress refused to renew the charter of the first central bank of America on the grounds that the constitution gave the power and authority to issue the nation’s money to congress, not to a privately owned banking corporation.

    On the topic of money, Jefferson wrote, “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

    But we have not listened to Jefferson. The Federal Reserve and the banks that make up the monetary system are an assemblage of privately owned corporations that create 99.9% of our money as the principal of loans. Every dollar, with the exception of coins, is borrowed money, and it all must be repaid with interest. Since no one creates the interest, there is always a shortage of money in our system. Furthermore, if there were no debt; there would be no money.

    Only government can solve our economic problems. If our government issued our money as a public utility, we would not have a national debt, we would not pay a huge amount of our tax revenue to the banks as interest, we would not have a scarcity of money in our economy, we would not have to slash needed government services, or need an income tax.

  2. While the alleged Jefferson quote reflects some of his sentiments, it is unauthentic.
    It is not in The Writings of Thomas Jefferson, of which I have the 1903-4 edition. No one has been able to find it in UVa’s extensive collection of Jefferson’s works. “Inflation” applied to economics is documented first in 1838, 12 years after Jefferson’s death. “Deflation” first appears in 1920.

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