GOV. ROBERT L. Ehrlich Jr.'s most recent effort to address the state's budget deficit rests heavily on maneuvers that shift state costs to what he hopes will be financial shock absorbers, including the federal government, hospitals, nursing homes, insurance companies and vulnerable people who won't get state services.
The governor's plan, which saves $208 million, is the best new evidence of the need for more tax revenue.
Even if the savings reduces deficit pressure, the governor must still find a cool $600 million more in further cuts or new revenue to balance the FY 2005 budget he's preparing. The deficit figure will move up to $1 billion for the year after because of increases in aid to public education.
Cutting alone, as they say, won't cut it. And the shifting of costs has a ripple effect.
Hospitals and nursing homes, for example, are operating only slightly above their break-even point. But instead of rate increases, they're going to get less money from the state under the Ehrlich plan. And the cost of any hospital stay no longer covered by the state will be shifted to private insurers who share the costs of unpaid bills.
Some $40 million of the $208 million in savings comes from higher education -- to be made up with tuition increases. Defenders of the cuts say Maryland colleges and universities still offer a bargain, but for some students and their parents, an additional $1,089 in tuition costs per year is significant.
Another $18.8 million of the cuts comes from aid to local governments -- many of which have raised taxes to reduce the impact of earlier cuts. This one will be felt in the community colleges, which rely on local governments for support. Thirteen of the 23 counties have raised taxes -- some to the maximum allowable level, so they are left to scrounge for niche taxes or fees that allow them to break even.
Just under $45 million of the $208 million comes from the Medicaid program -- which results in a total reduction of about $90 million because the federal government matches what Maryland spends dollar for dollar. The state will attempt to recoup some of these losses by shifting various costs to the federal level -- but approval will be necessary, and Washington may not cooperate.
Department of Health and Mental Hygiene economies include the shelving of a plan to include another 500 seniors in a program designed to keep them out of nursing homes. Drug treatment funds for Baltimore were cut by $600,000, meaning 513 fewer addicts can be cared for.
There may well be important economies in the governor's plan. But clearly, Maryland needs a sober consideration of various tax options. Those may not be particularly popular, but there is certainly no mandate for the alternative.