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Hogan says Maryland needs 'strong medicine' to cure budget woes

Governor-elect Larry Hogan said it's hard to find places to cut Maryland's budget when 81% of the expenses are mandated. His fiscal adviser Robert Neall also discussed the state's debt. (Erin Cox/Baltimore Sun)

Republican Gov.-elect Larry Hogan on Thursday painted a grim portrait of the financial house he'll inherit next year, saying Maryland needs "strong medicine" to end an era of outsized spending.

Hogan, citing the same financial numbers released by legislative analysts last month, decried a $1 billion structural deficit expected for next year and promised not to use the "gimmicks" he said his predecessor employed to balance the budget.

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"The tough decisions have not been made, and the wrong decisions have been made for far too long," Hogan told reporters in Annapolis.

"Let me put it into simple everyday terms: We have drained our checking and savings accounts, maxed out every credit card. We tapped into the Christmas fund, the college tuition funds, and we even broke into every one of the kids' piggy banks. We are going to have to make some very difficult choices, because state government cannot continue to spend more than it takes in."

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Hogan said he gave his fiscal team 10 days to present options to carve $300 million out of this year's budget and to eliminate a projected shortfall for next year, when revenue is expected to dip by $600 million.

Next week, state officials are expected to announce that the shortfall is even larger than previously estimated, according to two people with knowledge of the process.

Outgoing Democratic Gov. Martin O'Malley also decried the financial system he inherited back in 2006, pegging the annual budget deficit then at $1.7 billion.

On Thursday, O'Malley's staff bristled at Hogan's characterization of the budget, pointing out the state has balanced its budget every year and managed to weather the recession without deep cuts.

"We've done more to constrain spending than any administration in recent Maryland history," O'Malley's chief of staff, John Griffin, said in a statement. "We made this progress notwithstanding the fact that Gov. O'Malley inherited a $1.7 billion structural deficit, and the fact that we experienced the most severe national economic recession since the Great Depression."

In a Nov. 5 memo, O'Malley's administration asked state agencies to curb spending in response to gloomy revenue projections.

Robert Neall, Hogan's fiscal adviser, accompanied Hogan on Thursday and said his team would look for ways to "rebase every major expense" in government in order to trim spending. He said the process could look at funding for colleges and Medicaid, the public health insurance program for the poor.

Neall also said that public debt has far outpaced the property taxes that normally repay it, and if the trends continue, state government would not even have enough money to buy pencils.

A leading Democrat in the General Assembly saw political maneuvering in Hogan's announcement.

"It's always politically smart to blame your predecessor, that's true no matter what party you're in," said House Majority Leader Kumar Barve, a Montgomery County Democrat.

"If Hogan wants to 'rebase' government, that's fine. But when he starts to do it, there are going to be many, many people who feel like they're going to be singled out for cuts," Barve said.

Hogan said that voters chose to go in a different direction when they elected him in November, and he promised not to bend to pleas for state funding.

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"We have to have the courage to say no," he said.

Hogan's tough budget talk may be part of the process of selling cuts to voters — and delaying the tax cuts he promised in his campaign, said Mileah Kromer, director of the Sarah T. Hughes Field Politics Center at Goucher College.

"It really does support the Hogan narrative that O'Malley and Brown mismanaged the economy. At the same time it buys his administration a little more time with Maryland voters to get their tax cuts in place, because they're not going to happen overnight," she said.

Hogan said that he would still consider tax cuts, which were the cornerstone of his bid for governor, but that getting spending under control was his first priority.

He said he did not know whether his solutions to the budget problem would ultimately involve cuts to the state's workforce.

Union leader Pat Moran said O'Malley made many tough decisions affecting the state workers he represents, including at least two years of wage freezes and furloughs. But Moran said O'Malley went about making those choices the right way.

"He came to us and said, look, we have a huge budget shortfall here and I want to work with you on this rather than make decisions in a vacuum," said Moran, an AFSCME president. "They made decisions we didn't agree with, but we had a say in the process."

Moran expressed concern that Hogan would take a different approach.

"We have reached out formally to Governor-elect Hogan and we have not heard one iota, one peep," Moran said. "Maybe that one sign of how he's going to make tough choices."

The sluggish economy in Maryland caused O'Malley and the Board of Public Works to cut more than $80 million from the state budget just two days after it took effect in July.

Next week, state officials are expected to announce that the shortfall in the budget this year and next is even larger than previously estimated, according to two people with knowledge of the process. That would further deepen the budget hole.

University of Maryland, College Park President Wallace Loh told faculty and staff this week that in anticipation of the budget shortfall, the school has imposed a campus-wide hiring freeze.

In her Nov. 5 memo to all state agencies, Budget Secretary T. Eloise Foster wrote, "We recommend that agencies immediately begin to limit all discretionary spending."

If Hogan proposes major cuts to some state programs, he would have to get the Democratic-controlled legislature to agree.

"If he wants to change the way government spends money, we're willing to work with him in ways that are reasonable," Barve said. "I'll tell you one thing we're not going to do: We're not going to cut spending so that the wealthiest in our state get tax cuts."

Hogan said his goal in speaking Thursday was to publicize the magnitude of the problem.

"We don't want to unnecessarily scare anyone, but we don't want to hide the truth from anyone either," Hogan said. "We'd rather be honest and transparent, and let people see what we're seeing."

Baltimore Sun reporters Michael Dresser and Joe Burris contributed to this article.

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