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Ehrlich orders cuts by Cabinet

Launching an ambitious effort to reduce state spending by $800 million over two years, Gov. Robert L. Ehrlich Jr. has ordered Cabinet secretaries to scrutinize every program they run and eliminate "less significant" functions.

"There is no organized process for the state to evaluate all of its programs. This is the first attempt to do that on a statewide basis," state Budget Secretary James C. "Chip" DiPaula Jr. said, describing the top-to-bottom review unveiled yesterday and to be completed by September. "Underperforming programs or unnecessary programs could be trimmed back or eliminated if they don't meet the mission and the key outcomes for the agency."

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Some agencies could see reductions of up to 12 percent, after cost-of-living adjustments are factored in, he said. But education - both kindergarten-through-12th grade and the university system - would be spared, DiPaula said.

The analysis comes as state officials grapple with projections of continuing budget shortfalls despite an improving economy.

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Mandated education and health care spending increases are driving the anticipated gap between tax revenues and expenditures, and administration officials now say they must prepare to close the shortfall without new money from expanded gambling.

The General Assembly has twice rejected a slots plan favored by the governor that could raise several hundred million dollars annually. The governor does not support increases in sales or income taxes, offered as an alternative by Democrats in the House of Delegates.

"It used to be our expectations that we would be able to close the gap through video lottery revenue, but that no longer seems to be the case," DiPaula said.

DiPaula began distributing to agencies yesterday a 52-page "strategic budgeting guide" that includes detailed worksheets for evaluating programs. Department managers are to determine whether a program "directly serves critical life, health or safety need" and whether it is necessary "to achieve the key agency outcome goals."

"Programs directed towards key agency outcomes or significant parts of the agency's mission should have a higher priority than those directed towards less significant outcomes," the workbook reads.

In completing the forms, managers are given the option of asking for the same funding level as in the past year, or reducing or eliminating the program. Increases are not allowed.

The effort received a cautious response yesterday from Democratic lawmakers, who said they need to see specifics before determining the value of the exercise.

Del. Melony G. Griffith, a Prince George's County Democrat and member of the House Appropriations Committee, wondered if personal biases of Cabinet secretaries and agency heads would influence whether a program was deemed critical.

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"If the process were to eliminate ineffective programs, that certainly makes sense," she said. "I become concerned when a prioritization takes place, because there is a danger it could become subjective."

"The devil is in the details. Everyone has their pet hobbyhorse that they don't want to see cut," said Senate President Thomas V. Mike Miller, adding that higher-than-anticipated tax collections and the continuing potential for a compromise slots plan could make deep reductions unnecessary.

Program reductions would take effect in the 2006 fiscal year that begins July 1, 2005, and would be spelled out in the spending plan the governor submits in January. The budget for the 2005 year, which begins next month, has been balanced by relying heavily on one-time transfers, among other maneuvers.

The $800 million savings target, DiPaula said, would be achieved over two budget years. Much of the reductions, he said, could come from curtailing planned spending growth. Even after the review, Maryland will spend more than $24 billion in the 2006 budget year, DiPaula predicted, the most ever.

DiPaula said the budget office developed the review plan after speaking with management experts, including David Osborne, author of the 1992 book Reinventing Government.


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