Gov. Parris N. Glendening outlined yesterday how he would fix this year's $500 million budget deficit through a plan that eliminates any pay increases for some state employees this year, cuts nearly 5 percent from most state agencies and takes $190 million from Maryland's "rainy day" fund.
Though the governor wants to avoid layoffs, he said he can't guarantee all employees will hold onto their jobs because some agencies might have trouble meeting targeted cuts through other means.
"We need to balance our budget, but we should not do so on the backs of employees," Glendening said.
The proposal, which has received preliminary support from legislative leaders and Gov.-elect Robert L. Ehrlich Jr., aims to fulfill Glendening's pledge to leave office in January with a balanced budget.
After the announcement, some employee groups quickly warned that the proposed cuts threaten crucial state services.
"We're stretched pretty thin right now, and truthfully, I don't know where they can make these cuts," said Jim Wobbleton, president of the State Law Enforcement Officers Labor Alliance, the union representing 2,000 officers in the state police and many other agencies. "It's a concern of ours, and I would think the citizens of Maryland would be concerned, too."
Maryland is projected to have a $498.3 million deficit this year, according to the governor's budget officials - about $90 million less than recently estimated by legislative fiscal analysts.
The state's budget for the current year is more than $21 billion. But the projected shortfall deals only with the roughly $10.5 billion "general funds" portion that covers most state services and aid to local jurisdictions for such needs as public schools.
The state constitution requires Maryland to have a balanced budget, forcing officials to make large cuts to spending or to find new revenue. Next year's budget is projected to have more than a $1.1 billion shortfall, but yesterday's plan from the governor sought primarily to deal with the current year.
"We will leave Governor-elect Ehrlich with a balanced budget for the fiscal year and also help with the projected shortfall for next year," Glendening said. "That will still leave some hard choices to be made."
As he waited for staff members to finish making copies of his plan before his afternoon State House news conference, the relaxed governor poked fun at reporters, asked a Senate chairman for his thoughts on the Washington Redskins and mingled with the audience.
Glendening defended himself against criticism from Democrats that he should have made the cuts earlier to aid Lt. Gov. Kathleen Kennedy Townsend's gubernatorial campaign. Townsend had asked him to make such cuts early in the summer - a move that would have insulated her from attacks by Ehrlich - but the governor refused.
"We talked about the issue of making the cuts before the election or after the election, and I conferred with other governors," he said. "The decision was to do it after the election. Almost all other states have done exactly that, the reason being that every decision you make becomes a major political issue."
Glendening and Ehrlich first discussed the broad outlines of the plan privately at the National Governors Association meeting last weekend in Austin, Texas. They spoke again yesterday morning, and Glendening also met with his Cabinet secretaries and legislative leaders.
"Governor Ehrlich appreciates that Governor Glendening has finally started addressing the problem," said Ehrlich spokesman Paul E. Schurick. "I don't see anything objectionable here. This is a start, but it's only a start."
Sen. Ulysses Currie, a Prince George's County Democrat and the new chairman of the Senate Budget and Taxation Committee, also praised Glendening's proposal. "It's a plan we can work with," Currie said. "This is a good, fair start."
But Del. Howard P. Rawlings, a Baltimore Democrat and chairman of the House Appropriations Committee, said the governor should have made deeper cuts to state agencies, rather than digging so deeply into the state's reserve funds.
"What we need are budget reductions that are going to carry into fiscal year 2004, where we're looking at over a billion-dollar deficit," Rawlings said. Because much of the governor's proposal will require approval from the General Assembly, legislators could seek to require deeper cuts instead, he said.
A spokesman for Comptroller William Donald Schaefer questioned a portion of Glendening's plan that asks the comptroller's office to increase the amount of money that employers withhold for payroll taxes - a change the governor estimated would cost the average family about $1 per week.
Spokesman Michael Golden described it as a $45 million interest-free loan to the state that taxpayers would get back when they file their tax returns in April.
"The comptroller is still reviewing the proposals, but he's disinclined to pay for this all on the backs of the poor," Golden said.
Glendening's proposal would:
Take $189.4 million from the rainy day reserve fund, leaving it almost $200 million below the amount preferred by Wall Street bond-rating agencies.
Transfer $57.8 million from various other reserve funds, as well as $20.6 million from excess taxes collected from the sale of homes and other property.
Eliminate a lump-sum bonus payment for state employees making more than $60,000, saving $13.1 million. Employees making less would still receive bonus payments, which had been included in the budget in lieu of pay raises this year.
The most severe action proposed by Glendening is the 4.9 percent across-the-board cut ordered to most state agencies - budget reductions that will have to be made during the final six months of the state government's fiscal year.
"Things are getting very close to the bone in a lot of agencies," said Sue Esty, legislative director for the American Federation of State, County and Municipal Employees. "It's starting to get very difficult to figure out what can be cut without jeopardizing services."
Glendening did not make any cuts to aid to local governments and local school systems, and he imposed somewhat lesser cuts on health and human services, public safety, the environment and higher education.
"While I would like to have protected all of these areas, they obviously cannot be totally exempt from cuts," Glendening said. "I realize this requires some hard choices on the part of the agencies."
William E. Kirwan, chancellor of the University System of Maryland, said the cuts will be difficult, even though higher education faces only a 3.5 percent reduction.
"I am pleased that the governor expressed once again his priority for higher education by giving higher education a lesser cut than some of the other agencies," Kirwan said.
Kirwan said the system intends to draw up a plan within the next week or so, though the hiring freeze across state government already has left the system with many vacant positions.