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Maryland Board of Public Works approves $297 million in budget cuts

October 15, 2008

ANNAPOLIS (AP) -- Maryland officials, adjusting to the worsening economy, approved $297 million in state budget cuts on Wednesday, including reductions to health, education and public safety that are bound to be felt more by the public than previous cuts in the last year.

The Board of Public Works also acted to handle a drop in tax revenue and to create a $152 million cushion to prepare for the next fiscal year, when estimated budget problems are expected to bring a shortfall of more than $1 billion.

Gov. Martin O'Malley, who serves on the board with Treasurer Nancy Kopp and Comptroller Peter Franchot, said state budget cuts add up to about $2.2 billion since he took office in January 2007. The governor also said previous cuts and tax increases last year have put the state on much better financial footing than many other states.

Still, state officials are bracing for more fiscal pain, as uncertainty continues to swirl around the national economic crisis.

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"No one knows for sure when we come through this cycle," O'Malley said at the board meeting. "No one knows for sure when the national economy bottoms out."

Franchot, looking ahead to more bad financial news, said the state needs "a comprehensive long-term view of Maryland's financial books."

"Let us put our state's near- and long-term spending obligations under the microscope and figure out ways that we can be more efficient," Franchot said.

The board also approved eliminating 833 vacant state jobs. The total amount of the budget cuts approved Wednesday -- when federal and special funds are included -- adds up to about $348.7 million.

The health department, which comprises the largest portion of state funds, took the biggest hit, a decision that brought roughly 100 protesting citizen advocates to Annapolis.

John Colmers, the health department secretary, said his department lost about $85 million in general fund cuts, about 2.2 percent of the agency's general fund allocation. The biggest part came from a $20.7 million state cut to increases for health care providers. Community provider rate increases were reduced from 2.7 percent to 2 percent; nursing home rate increases were cut in half from 6.5 percent to 3.25 percent; physician rate increases dropped from 2 percent to 1 percent.

Laura Howell, executive director for the Maryland Association of Community Services for Persons with Developmental Disabilities, said the cut will affect services, because the rate increase initially approved was only about half of what had been recommended to keep pace with inflation.

"Funding has fallen way behind, and another cut will just further reduce the nonprofit providers' ability to provide transportation, to potentially give a raise to low-wage workers who provide day-to-day support to people with disabilities," Howell said.

Colmers said he was under no illusion these cuts wouldn't hurt. He said the department scoured for fund balances that could be used to soften the blow.

"But even after doing that, we've had to make some very painful decisions," Colmers said. "I also know that this is likely not the last time we will be looking at the '09 budget and so we'll continue to try to find ways to get through this ... We will get through this."

The board was reacting largely to $432 million in less-than-expected state revenue announced in September because of sagging tax collections.

In addition to the $297 million in state budget cuts, the state will use a $186 million fund balance left by the General Assembly last session.

With another $100 million on top in fund transfers, the state has created a fund balance for fiscal year 2009 of about $152 million to begin addressing a shortfall for fiscal year 2010, which new estimates by state budget analysts have put at roughly $1.3 billion.

The board members' discussion about the economy led to a skirmish over a constitutional amendment voters will decide on slot machine gambling, which state analysts estimate could bring more than $600 million in new state revenue once fully implemented.

Franchot, an adamant slots opponent, said the state shouldn't rely on gambling, which he argues preys on the poor and carries dubious economic benefits, anyway.

But O'Malley, a slots supporter, said the state's fiscal problems will be "far, far, far worse, if the slots revenues are not available to us."

Other cuts approved by the board on Wednesday include:

o A 1.5 percent reduction to the University System of Maryland, $15.6 million.

o A 50 percent cut in the increase of aid to community colleges, $8.2 million.

o Eliminating 100 vacant correctional officer positions and correctional supply officers, $2.9 million.

o A 25 percent reduction in payments for inmates housed in local jails, $6 million.

o No additional fiscal year 2009 Other Post Employment Benefits contribution, $46 million.

For a complete list of budget reductions by State agency, visit http://www.governor.maryland.gov/documents/BPWdetail081014.pdf.

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