Health care providers who serve Medicaid patients will get paid less, the University System of Maryland will hire fewer faculty members and 40 state workers will lose their jobs as part of $280 million in budget cuts proposed by Gov. Martin O'Malley.
The Democratic governor has compiled a list of budget cuts to be presented today to the Board of Public Works, a three-member body that can approve midyear budget adjustments when the General Assembly is not in session.
But the cutbacks won't end there: O'Malley plans up to $470 million in further budget cuts before Labor Day. The next round of spending reductions will target aid to local governments and state employee compensation, O'Malley said during a news conference.
With tax revenues plummeting because of the recession, the governor has had to repeatedly cut spending to keep the state budget balanced, as required by law. The exercise has stirred criticism not only from those whose interests are affected but also from fiscal conservatives who say the budget is still too bloated.
"It's been a seemingly never-ending effort to try to maintain fiscal responsibility," O'Malley said, while emphasizing that Maryland's finances are in better shape than many states'.
Since taking office, O'Malley has reduced spending by more than $3 billion, but the state's operating budget has shrunk by a much smaller amount as spending on certain programs has increased. And the size of Maryland's overall budget, which includes federal funds such as the economic stimulus money received this year, has grown over the past three years.
The governor is facing a shortfall of about $1.5 billion next year, though that could be less depending on how many long-term spending reductions O'Malley makes for the fiscal year that began this month. Of the $280 million in proposed budget cuts, about $130 million would be one-time savings.
"The real problem is the gap between revenues and our commitments," said Warren G. Deschenaux, the legislature's chief fiscal analyst.
Among the hardest hit in this round of proposed budget cuts would be Medicaid providers. The governor plans to save $24 million by paying only for hospital stays of a certain length under Medicaid, $23 million by reducing Medicaid rates for nursing homes and $13 million by taking away an inflation increase for providers of community mental health, substance abuse and other services.
The limit on hospital payments would disproportionately hurt facilities that serve large numbers of poor patients, such as financially troubled Bon Secours Hospital in Baltimore, said Nancy Fiedler, a spokeswoman for the Maryland Hospital Association. Hospitals end up eating the cost to care for patients who stay longer than the Medicaid limit, she said.
Another concern is that health care providers might drop Medicaid patients, said Gene M. Ransom, executive director for MedChi, the state medical society.
"We have a network of community health facilities, doctors and other providers willing to take a loss and take Medicaid patients," he said. "But obviously at some point in time there's a breaking point, and people say they can't take it anymore."
With federal funding cuts possible on top of state cuts, some nursing homes might be forced to close, said Joseph DeMattos, president of the Health Facilities Association of Maryland, whose members care for 20,000 residents in homes and assisted-living facilities.
"The governor said these budget cuts would be difficult and unpopular, and they are," DeMattos said.
The University System of Maryland would receive a cut of more than $17 million from operating expenses and $20 million that it must transfer from its fund balance.
While the budget action does not jeopardize O'Malley's promise of extending a freeze on tuition for a fourth consecutive year, Chancellor William E. Kirwan said the system would not be able to hire as many adjunct or part-time faculty members or to offer as many courses, and that it would have to cut student services.
"There's no doubt a cut of this magnitude will have a real impact on what we can do," Kirwan said.
Other proposed budget reductions include the elimination of retention bonuses for nurses and correctional officers, a $3 million cut to funding for stem-cell research, a $2 million cut to a Chesapeake Bay cleanup fund, and a $5.5 million reduction in the Maryland Lottery's advertising budget.
O'Malley said he wanted to shield K-12 education from budget cuts, pointing to a separate report Tuesday that Baltimore public schools showed remarkable gains in test scores over the past five years. He also said that he wanted to avoid the "mass layoffs" that other states have implemented. He told legislative leaders on Monday that he is considering furloughs for state employees.
The governor also is considering cutting aid to counties and Baltimore City that is used to support police, health and other programs, though he said he wanted to sit down with local leaders before making those decisions, noting that they often have better ideas for where to trim.
In expectation of future budget cuts, Baltimore Mayor Sheila Dixon has directed agency heads to identify 5 percent reductions to their spending plans for this year, said Scott Peterson, her spokesman. Peterson stressed that Dixon wants the agencies to "start looking and preparing" for cuts, but has not ordered any yet."
Baltimore Sun reporter Annie Linskey contributed to this article.
Gov. Martin O'Malley is proposing $280 million in budget cuts. They include:
* Limiting how much Medicaid will pay for hospital stays over a certain length. Savings: $24 million
* Reducing funding for operating expenses at the University System of Maryland. Savings: more than $17 million
* Reducing the Maryland Lottery's advertising budget. Savings: $5.5 million
* Cutting funding for stem-cell research and Chesapeake Bay cleanup. Savings: $5 million
* Laying off 40 state workers