Both Democrat and GOP legislative leaders are expressing reservations about the governor’s proposal to use more than $1 billion in fund transfers and one-time adjustments to balance the state’s FY 2010 budget.
“I’m against transfers. I’m sort of tired of gimmicks,” Senate Majority Leader Edward J. Kasemeyer, D-Baltimore and Howard, told 300 GBC members and guests who attended the GBC’s 2009 Legislative Forum on January 26. “I’m against doing that all the time. It doesn’t really solve the problem on a long-term basis.”
House Minority Leader Tony O’Donnell, R-Calvert and St. Mary’s, noted that proposed use of almost $900 million in accounting and fund transfers, combined with $350 million in anticipated federal stimulus funding, accounts for more than half of the strategy to close the state’s projected $1.9 billion deficit.
“We’re looking at $1.2 billion of one-time, temporary, one-shot deals,” said O’Donnell. The state is still “postponing the pain,” he added. “We’ve got to quit acting like we don’t have a $2 billion deficit staring us in the face.”
“I don’t like them either,” House Majority Whip Talmadge Branch, D-Baltimore City, said of proposed one-time fund transfers. “But we have to balance this budget year by year, and certainly we want to do the tough things. We want to make sure that we don’t have ’one-timers’ within it,” he added. “But there are times that you have to do what you have to do and, quite frankly, these are tough times.”
The governor’s proposed overall $31.6 billion budget represents a 2.1 percent increase over the current year’s budget, but his proposed $14.4 billion in expenditures from the General Fund, the state’s primary operating fund, represents a decrease of more than 1.3 percent compared to the FY 2009 budget.
All speakers at the forum voiced concerns that the state will face extraordinary budget challenges in this and future General Assembly sessions.
Branch commended Governor Martin O’Malley for submitting a budget that preserves education funding, and continues strong funding for school construction, public safety, the environment, expansion of access to health care, and other services to the poor. He conceded, however, that “structurally, we have not solved our problem.”
House Speaker Pro Tem Adrienne Jones, D-Baltimore County, noted that House leaders are looking at unfunded mandates that the General Assembly has passed over the years. “Some of these mandates may have made sense 20 or 30 years ago, but we’re in the 21st century and we’re looking at those to see how we can achieve more efficiency.”
She also pointed out that, for one fund transfer being proposed — borrowing $380 million from a Comptroller’s Office reserve fund in order to help fund local teacher pensions — local governments will be expected to pay it back over the next 10 years.
Jones, who chairs the House capital budget subcommittee, defended the more than $1.1 billion in capital projects funded by general obligation bonds in this year’s budget. More than 75 percent is targeted for education, health and environment, or public safety projects.
Jones’ committee is applying “shovel ready” criteria to potential capital budget items to help jumpstart the economy, she said, noting that state bonds have funded excellent projects in the past, including hospices and homeless shelters. “So, when you hear about bond bills, they’re not like pork,” Jones said.
Several speakers warned that the state is not likely to continue to be able to fund the pensions of teachers in local jurisdictions, which this year will cost the state $635 million.
The “elephant in the room,” however, could be the state’s funding of health care for retired state workers, said Kasemeyer. Maryland currently pays about $350 million per year on a “pay-as-you-go” basis, but funding formulas project that the state should be paying as much as $850 million per year.
The state probably will be faced with cutting state funding of retirees’ health benefits “to some degree over the years to bring it down to a number that we can afford,” Kasemeyer said. “We have to be realistic.” he added. “I think the commitment that we make should be one we feel we can keep and not just keep offering what we have, and then have it fall apart 20 years out.”
Senator E. J. Pipken, R-Upper Shore, argued that the fiscal challenge the state faces is more than a usual economic recession. “This is not just a recession. This is a reset of how we do business in this country,” he said.
Pipken said he has been “stunned” that among many lawmakers in Annapolis “there’s virtually no change in a lot of attitudes” and “no new understanding of the reset that is going on.” As business leaders go to Annapolis this year, “it’s important to communicate that things are different.