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Committees given budget reality check

January 25, 2006|by TAMELA BAKER

tammyb@herald-mail.com

ANNAPOLIS - Last week, Gov. Robert Ehrlich touted both his generous fiscal 2007 budget proposal and the state's billion-dollar surplus.

This week, the state's lead budget analyst started making the rounds of legislative committees with a reality check.

The good news, according to Warren G. Deschenaux, director of the Office of Policy Analysis, is that there really is a surplus, which he projects at about $1.4 million for the current fiscal year.

The bad news is that spending, particularly if Ehrlich's budget is approved, will outpace new revenue within two years, according to his projections.

Part of the reason for the projected slowdown is rising interest rates and a cooling off of the region's red-hot housing market.

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"If we play it out just a little bit longer, we're back to about a $1 billion gap" by the end of fiscal year 2008, he told the House Ways and Means Committee on Tuesday.

And that's with no further "enhancements," he said.

Ehrlich's budget proposal includes salary and step increases for state employees, as well as tax cuts.

Noting the increases, Deschenaux said this year's proposal doesn't include "underfunding" issues of previous Ehrlich budgets.

But Ehrlich's proposed property tax reductions alone likely will cost the state $100 million per year beginning in fiscal year 2008, he said.

And while Ehrlich earmarked $670 million in new money for the state's "Rainy Day" emergency fund and $100 million for future health costs for state retirees, Deschenaux told the committee that "the budget sets money aside for future problems in a very timid and temporary way."

Deschenaux said the mandatory contribution to the Rainy Day fund should be increased.

Drains on the state's general fund come from a number of budget factors, including recently announced wage hikes for correctional officers, Deschenaux said.

Medicaid costs that were understated will cost the state $20 million this year and $10 million in fiscal year 2007. Stem cell research funding, horse-racing grants, higher-education grants and other discretionary items in Ehrlich's budget are adding up to more than $300 million in the budget proposal.

Any new pension reform also will add to the state's budget costs. Del. Robert A. McKee, R-Washington, noted after Tuesday's briefing that several pension bills are being discussed.

McKee said changes must be made, but the question is, "at the expense of what?"

Del. LeRoy Myers, R-Washington/Allegany, said there were no real surprises in Deschenaux's presentation, but he thinks Deschenaux's income projections are conservative.

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