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Maryland Gov. Hogan announces state budget freeze as coronavirus hammers economy, officials eye $2.8B revenue loss

With a record number of Marylander's filing for unemployment, Gov. Hogan has instructed other state agencies to assist the Department of Labor.

Maryland Gov. Larry Hogan announced Friday that he’s enacting a state budget freeze as the state continues to respond to the coronavirus pandemic that has infected nearly 7,000 Marylanders.

“The state is immediately instituting a budget freeze on all state spending across all state government agencies,” Hogan said during a news conference at the State House in Annapolis.

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The state will only spend money on coronavirus-related expenses and payroll, Hogan said. Additionally, the state will institute a hiring freeze and look for possible cuts in the budget. The Republican governor also said he was unlikely to sign into law any bills that require additional future spending.

Hogan’s announcement came as the state continued to see an increase in the number of confirmed cases and deaths due to the coronavirus. On Friday morning, the state reported that another 33 Marylanders lost their lives to the virus, bringing the state’s number of total deaths to 171.

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As tempting as it may be to visit family on the Easter weekend, Hogan urged Marylanders to continue following the state’s stay-at-home orders and to observe social distancing when going out for groceries or other essential tasks.

“We are ramping up the curve,” he said. “This is going to be one of our most dangerous times ever. … This would be the worst possible time for people to be violating executive orders and congregating.”

As warnings continue about the need to slow the spread of the virus, Hogan and other officials are starting to take stock of the financial impact of the pandemic.

Hogan’s announcement of budget and hiring freezes came on the heels of predictions from the state’s comptroller that the state could miss out on billions of dollars just in the next three months.

In one worst-case scenario developed by the comptroller, the state could lose out on $2.8 billion by the end of June, if the stay-at-home order remains in place that long.

If the order extends through May, the hit to the state could be about $1.5 billion.

Comptroller Peter Franchot said Friday that the pandemic represents “the most devastating economic catastrophe of our lifetimes.”

“This is something that’s going to take years to recover from,” said Franchot, a Democrat, during a virtual news conference on Facebook.

The pandemic comes at a difficult time for government budgets. About 44% of the state’s revenue comes in during the final three months of the budget year: April, May and June.

“We should plan for the worst and hope for the better,” said Andrew Schaufele, director of revenue estimates for the comptroller.

The general fund gets 45% of its money from income tax withholding, so when people lose jobs and face pay cuts, less money comes to the state.

More than 240,000 Marylanders have filed for unemployment benefits in the past three weeks — which is more than the state saw during all of 2019.

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Another 25% of the general fund comes from the sales tax, which has taken a hit with people staying home and buying fewer goods.

When the numbers come up short, Maryland has options for balancing its budget.

At the start of the pandemic, Maryland had about $1.2 billion in its “rainy day fund.” The Hogan administration already dipped into the fund, and the governor cautioned he may need to use all of it.

And the Board of Public Works — comprised of the governor, comptroller and treasurer — can make mid-year budget cuts.

Maryland stands to receive billions of dollars in aid from the federal government, but much of that is earmarked for specific components of the coronavirus response and to be sent to local governments — not to fill holes in the state budget created by lost taxes.

Lawmakers already approved a budget for the fiscal year that starts July 1, but Franchot suggested the entire state budget needs to be “rethought.”

Hogan said the pandemic will be costly for years to come and “substantial budget actions” will be needed.

“Responding to this crisis will likely create a multi-year budget issue,” he said.

Hogan also said he is not likely to support bills that are awaiting his signature that would affect the budget in the future.

“It is very unlikely that any bills that require increased spending will be signed into law,” he said.

The Democratic-led General Assembly passed a sweeping education bill that requires billions in additional spending on public schools in the coming years, though it inserted a provision to pause the increases if there’s a significant financial downturn.

William E. “Brit” Kirwan, a former University of Maryland chancellor who led a commission that championed the legislation, said he remains hopeful the bill might be signed. He said the state’s commitment to the education policies in the bill is more important than the timing of the funding.

Lawmakers also passed targeted tax increases on digitally downloaded products, online advertising and tobacco and nicotine products, and they made changes to corporate tax rules to generate more money.

Hogan has about one month to determine the fate of those bills.

The governor made several other announcements during his Friday afternoon news conference.

He announced that the June 2 primary elections will be conducted largely by mail, with limited in-person voting available for people who cannot vote by mail.

“In those rare cases where people must vote in person, significant social distancing practices must be implemented,” Hogan said.

The state also is encouraging people who have recovered from the coronavirus to join a new “Covid Connect” program to share their experiences and possibly sign up for involvement in research.

Fran Phillips, the deputy secretary of health, said more than 400 Marylanders have recovered and are eligible to participate. Phillips said she has spoken to many who have recovered.

“What has been so striking is their interest in giving back,” she said.

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Hogan also said the state is spending $2.5 million to launch a “large-scale” coronavirus testing program with the University of Maryland School of Medicine that could eventually process 20,000 tests per day.

He said the state will work with the Federal Emergency Management Agency to set up a decontamination site for N95 masks at BWI Thurgood Marshall Airport in Linthicum. It will use a decontamination system developed by Battelle, an Ohio-based company.

The facility will use a decontamination unit that can “clean and sterilize” up to 80,000 masks per day, Hogan said.

“This newly developed technology will allow them to be reused, which will help protect our healthcare workers and those on the front lines, while we await the new production and additional supply of PPE,” Hogan said.

Officials also offered updates on efforts to help the sick and the unemployed.

Phillips said health “strike teams” have been working with nursing homes to help with coronavirus testing and medical care for residents.

Dozens of nursing homes across the state have had outbreaks of the virus, including the Pleasant View Nursing Home in Mount Airy, where 81 residents and 31 staff had tested positive as of Thursday. Eighteen residents there have died.

The strike teams also have visited homes for medically fragile children to ensure they have appropriate medical equipment and training to handle any coronavirus cases, Phillips said.

Tiffany Robinson, the state secretary of labor, said she is working to double the staff of employees who handle claims for unemployment benefits. Many applicants have complained about their phone calls going unanswered and delays in getting their claims filed.

“We are all hands on deck to provide Marylanders the support that they need," she said.

Hogan became emotional when discussing Sunday’s celebration of Easter. The Christian holiday celebrates the resurrection of Jesus Christ, who had died by crucifixion.

“Easter really is a day of hope, which is something that all of us could desperately use right now,” Hogan said. “So this weekend, I ask all Marylanders — regardless of their faith — to reflect on that spirit of hope and carry it forward in these difficult days ahead.”

The governor did offer one bright note: The Easter bunny, Hogan declared, is an essential employee.

Baltimore Sun reporters Liz Bowie, Hallie Miller and Emily Opilo contributed to this article.

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