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O'Malley plan to close shortfall is approved

Many state agencies will absorb 2 percent across-the-board cuts over the next six months under a plan approved Wednesday to eliminate a more than $400 million revenue shortfall in this year's budget.

The Board of Public Works approved Gov. Martin O'Malley's plan to cut $205 million, coupled with special fund transfers and other actions, to bring the budget back into balance before Republican Gov.-elect Larry Hogan takes office Jan. 21.

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Comptroller Peter Franchot and Treasurer Nancy K. Kopp joined O'Malley in approving the plan. The three make up the board.

The vote came as O'Malley presided over his final meeting of the powerful panel. He noted that it was the ninth time he had come to the board to make midyear cuts to keep the state budget in balance after revenues fell short of early projections.

It will be up to Hogan to decide how to close the estimated $750 million shortfall projected for next year's budget, which begins July 1. The state's general fund budget is about $16 billion a year.

O'Malley's decision to address this year's shortfall before Hogan takes over won praise from his board colleagues. "It's a positive step toward where the state needs to be," said Franchot, a fellow Democrat but occasional critic of O'Malley.

Budget Secretary T. Eloise Foster said $113 million of the cuts will come from across-the-board reductions in discretionary spending by agencies whose budgets are not locked in by law. Another $92 million in cuts are from accounts that include aid to local governments, reimbursements to Medicaid providers and reductions to higher education of more than 2 percent. K-12 education is not affected.

Foster said about $160 million of the special fund transfers and other actions endorsed by the board will require General Assembly approval and could be rescinded by Hogan if he chooses.

A spokeswoman for the Hogan transition team had no comment on the board's actions.

The board acted after O'Malley — in rolled-up shirt sleeves and pointing to a series of charts — delivered a summation of the steps he has taken since taking office in 2007 to keep Maryland's fiscal house in order while protecting spending priorities and the state's AAA bond rating.

O'Malley said Wednesday's cuts bring to $9.7 billion the total his administration has trimmed from projected state spending over eight years. He produced charts making the case that he has held the growth in state spending to lower levels than any of the previous five governors — Republican or Democratic — and that Maryland's state and local tax burden as a percentage of income is among the lowest in the country.

The governor appeared determined to counter the narrative that Hogan rode to victory in November over O'Malley's hand-picked successor, Lt. Gov. Anthony G. Brown. Hogan argued O'Malley had presided over a free-spending administration in a state where high taxation was crippling growth.

"Any nitwit can cut," O'Malley said. The key, he said, is to cut budgets in a way that preserves essential state goals.

"No other governor of Maryland since 1939 has governed through such very tough times," said Kopp, a staunch Democratic ally through O'Malley's two terms. Franchot presented the governor with a print of Frederick Douglass — an O'Malley hero — with a quote saying: "The thing worse than rebellion is the thing which causes rebellion."

In other action, the board unanimously approved a contested prison food service contract that state officials contend will save more than $50 million over three years compared with the No. 2 bidder. Despite a protest by incumbent provider Trinity Service Group of Oldsmar, Fla., which bid $89 million for the contract to feed inmates at most of the state detention facilities in the Baltimore area, the board awarded the contract to Crystal Enterprises Inc. of Glenn Dale, which bid $38 million.

A lawyer from Trinity argued that there were fatal flaws in the state's bid solicitation, but the board decided to go with the Maryland firm offering the lower price.

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