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Hogan plan would cut budgets for years to come

Beyond spending cuts for next year, Gov. Larry Hogan is asking the General Assembly for an array of permanent, long-term budget reductions — for public schools, private colleges, libraries and economic development aid for farmers.

Beyond spending cuts for next year, Gov. Larry Hogan is asking the General Assembly for an array of permanent, long-term budget reductions — for public schools, private colleges, libraries and economic development aid for farmers.

The sweeping proposal, which would reshape Maryland's budgets for years to come, was presented to the General Assembly Monday. It comes after Hogan's release last week of an austerity budget for the fiscal year that begins July 1.

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Among the proposed changes:

• Hogan wants to hold per-pupil education spending flat next year, then put tighter limits on its growth for the next five years. State aid to local school systems accounts for almost $6 billion in Maryland's roughly $40 billion annual budget, and school aid has grown annually to account for inflation.

•The agency that helps farmers get financing to continue working in agriculture would take a one-year hit of $1.1 million this year under Hogan's budget. Under the long-term plan, that cut to the Maryland Agricultural and Resource-based Industry Development Corporation would last until 2024.

Under current law, private colleges such as Loyola and the Johns Hopkins University get $16 per student for every $100 per student the state sends to the public university system. Under Hogan's long-term plan, the ratio would be scrapped. Private schools would be funded from an account that would grow, but by a smaller amount each year.

The long-term plan — each piece of which would require General Assembly approval — marks a different approach to budgeting in Maryland. It's likely to be unpopular with key state Democrats who control the legislature and the many advocates who fought to get the automatic increases into law.

While lawmakers are required by the Maryland Constitution to pass a balanced budget for next year, they are under no obligation to legislate cuts for future years.

Hogan's long-term cuts were unveiled during a briefing with lawmakers Monday. It was the first opportunity for members of the General Assembly's budget committees to delve into the details of next year's budget as well as Hogan's long-term proposals to constrain spending growth.

When it was released last week, Hogan's budget for next year won praise from Republican lawmakers and qualified approval from some Democrats. Senate President Thomas V. Mike Miller, a Calvert County Democrat, complimented Hogan for recognizing the legislature's priorities and said the cuts were not as severe as they could have been.

But Monday, the legislature's chief budget analyst, Warren Deschenaux, told lawmakers there were flaws in Hogan's budget. In particular, he said, Hogan's proposed 2 percent across-the-board cut to agency budgets — an extension of the cut Gov. Martin O'Malley put in place before stepping down — was a "very dangerous" approach to budgeting.

"It doesn't let you see what you're doing," said Deschenaux, who urged lawmakers to demand specific spending reduction plans from each agency. "I don't think their budget's finished."

According to the Department of Legislative Services, future spending on community colleges, private colleges, and K-12 education would be untethered from the current formulas that require increases each year — and would be capped instead.

Maryland's recurring budget shortfall, estimated to be $750 million for next year, arises annually in large part because revenues don't keep pace with laws that call for increased spending governed by formulas. Each year, the legislature and the governor propose one-time exceptions to those laws. Since the laws aren't permanently changed, the cycle repeats itself every time revenues fall short.

Under O'Malley, the size of the shortfall shrank each year with permanent budget cuts. It was $1.7 billion when O'Malley took office in 2006, and $750 million when he left in 2015.

Hogan is recommending permanent reductions that would stretch far into the future in an attempt to eliminate the gap and end the cycle of shortfalls.

Per-resident funding for local libraries would be reduced until 2025. Spending for community colleges would be held to 1 percent less than the growth in the state's general fund. This year, for example, the general fund grew by 2.4 percent; under Hogan's plan community colleges would see no more than a 1.4 percent increase.

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The approach creates a permanent change to state funding that Deschenaux called "quite novel" and "quite clever." He said it would in effect prevent any formula-driven program from automatically claiming a bigger percentage of state funding than the previous year.

"It's going to give you something to think about," Deschenaux told lawmakers.

One proposal that received quick push-back from legislators is a provision that would make fewer pregnant women eligible for Medicaid coverage starting next January. The change would affect women with family incomes of more than 185 percent of the federal poverty level. For a single woman, current law provides Medicaid coverage for those who make $29,425 a year. Hogan's proposal would change the income limit for those women to $21,775 or less.

A Hogan spokeswoman said such women could instead get coverage through the federal Affordable Care Act "without direct expense to the state."

Said Deschenaux: "Whether that's accurate or fair, I'm not commenting."

Senate Budget & Taxation Chairman Edward J. Kasemeyer said it was "too early to tell" how lawmakers would react to the long-term changes.

Kasemeyer said he was concerned about a forecast released by the Governor's Office showing a policy assumption that public colleges and universities would raise tuition by 5 percent next year and 4 percent annually in the future. That would be well above the level of rate increases through most of the O'Malley administration. Kasemeyer, a Howard County Democrat, said college costs were becoming "absurd."

Budget Secretary David R. Brinkley warned against taking the prediction too literally. He said the forecast was based on the universities' historical record and wasn't a Hogan administration proposal.

Another assumption in Hogan's forecast is that there would be no tax cuts. But Brinkley said the administration is working on a tax reduction package now and that further spending cuts to accommodate those proposals are possible.

Several Republicans have praised Hogan for tackling a systemic problem in state government, while some Democrats have argued that the state's structural deficit does not need to be closed entirely in one year.

House Appropriations Chairman Maggie McIntosh, a Baltimore City Democrat, said the legislature's fiscal panel had recommended cutting the structural deficit in half this year and finishing the job the next. She suggested it wasn't necessary for Hogan to try to close it a day after he took office.

"I'm confident that the economy is going to help us lift ourselves out this situation," McIntosh told reporters last week. "That said, should we try to eliminate the deficit in 24 hours?"

However, Sen. George C. Edwards, a senior member of the Budget and Taxation Committee, said Hogan had delivered on his promise to close the state's long-term revenue shortfall.

"He's done a pretty good job," said Edwards, a Garrett County Republican. "It's going to need to be massaged like every budget we get."

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Some lawmakers suggested they're ready to put up a fight over local education aid.

Del. Benjamin S. Barnes, a Prince George's County Democrat, said he's heard estimates that an almost $20 million cut in aid to his county under a geographic formula could cost 600 teachers their jobs.

"Some of these [cuts] are scary," he said.

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