After a bruising special session to address Maryland's chronic deficits, Gov. Martin O'Malley proposed one of the leanest state budgets in the past two decades, relying on cuts in open space and road maintenance and a slowdown in an education spending initiative to place the state on sound financial footing.
The governor proposed a 4 percent increase in the state's operating budget - the lowest in five years and one of the lowest in the past 25 years. A 7.5 percent increase was approved by the General Assembly last year.
O'Malley, a Democrat in his second year in office, has been working to put his stamp on the state's government but has been constrained by a structural budget deficit, projected at $1.7 billion for the fiscal year that begins in July.
He called the General Assembly into session late last year, and lawmakers approved tax increases and proposed spending cuts to fill the gap.
"This is a fiscally responsible budget," O'Malley said. "It restrains spending, and it allows us to get back to the urgent work of making progress for the working people of our state."
Budget battles are likely to figure prominently in this legislative session and perhaps throughout O'Malley's term as the national economy is expected to slow and possibly slide into a recession.
The governor, who said he inherited the budget problems, complied with the legislature's request to trim the budget by $550 million, including eliminating 500 vacant state positions. He also trims the rate of growth in the Thornton education plan and in retiree health care expenses.
Local governments, which O'Malley had sought to hold harmless in his budget balancing, will have to swallow more than $120 million in cuts to road maintenance, parks and compensation for a property tax exemption given to power plants.
Other cuts are sprinkled throughout the state budget, affecting child support enforcement, Natural Resources Police, the Division of Unemployment Insurance and other services.
David Bliden, the executive director of the Maryland Association of Counties, said that while many local officials supported the special-session package despite an expected hit to their bottom lines, they are stretched too thin to withstand a further slashing of state funds.
"We hope that when looking at the state budget, state leaders give full credit to the counties for their contribution in the special session," he said.
Two state agencies, the Departments of Natural Resources and Agriculture, get budget cuts under O'Malley's plan, primarily because the slowing housing market led to a drop in real estate transfer tax revenues. That reduces the money available to buy land for preservation, a goal of environmentalists who nonetheless praise O'Malley for not diverting those funds for other purposes.
"It's just a sign of the times," said Dawn Stoltzfus of the Maryland League of Conservation Voters. "The real estate market just tanked."
Next year the state budget, which must be balanced annually, could be further strained if voters don't agree in a November referendum to legalize slot machines. If that measure fails, O'Malley said yesterday, money would not be available to continue a freeze on tuition at state colleges and universities or for an expansion of health care coverage through Medicaid.
O'Malley said his plan is fiscally sound for the long term. It would leave a surplus of $177 million at the end of fiscal 2009 and a balance of $739 million in the so-called "rainy day" fund, from which he pulled $967 million to balance the budget last year.
"It's a tight budget," said Del. Murray D. Levy, a Charles County Democrat who serves on the Appropriations Committee. "This is the guy who cleans up after the party, and it's not fun. But it's absolutely essential that we do it and that we do it well. Over time people will appreciate the scope of his work."
Republican Del. Anthony J. O'Donnell, the minority leader from Southern Maryland, blasted O'Malley's budget as not slowing spending enough. Using a different measure that includes aid from the federal government, he said the $31.5 billion budget represents a 6 percent increase from a year ago.
"That to me is very stunning," O'Donnell said. "This governor just fleeced taxpayers in a special session. I am very disappointed that when Marylanders are obviously angry that this administration didn't have more restraint on spending."
Del. Norman H. Conway, the Appropriations Committee chairman, said his panel would look for additional spending cuts. Legislators cannot add to the governor's budget without finding sources of revenue.
O'Malley also unveiled his budget for capital projects yesterday. He proposes $333 million for school construction on top of $400 million that he set aside to fulfill a campaign pledge last year. He would distribute nearly $76 million to areas were education is more expensive, including Baltimore City.
"Given the environment we're in now, we're certainly happy that the governor kept his promise," said Daniel Kaufman, spokesman for the Maryland State Teachers Association. "We have a lot of unmet needs in school construction and classroom needs, and we are going to keep pushing throughout this session to get whatever funding possible."
O'Malley also emphasized public safety initiatives, including $5.2 million for a case management system that would track offenders through parole and probation and $3 million to expand HIV screening and treatment of inmates. He said the state does a poor job of sharing information on repeat offenders that might be used to keep them behind bars.
The governor also would direct $800,000 to a new reintegration program to help members of the National Guard returning from overseas deployments, and $3.5 million to establish a new program for behavioral health services for veterans in rural areas.
O'Malley, who is crafting a broader energy policy to address the possibility of rolling blackouts by 2011, said he would provide funding for energy efficiency and conservation programs to help move the state toward his goal of reducing consumption by 15 percent by 2015.
"There will be no significant new power generation that will come up half as quickly as what we can do together by reducing our consumption," O'Malley said.