- The Washington Times - Thursday, January 18, 2007

ANNAPOLIS — Gov. Martin O’Malley said yesterday he plans to balance the 2008 budget by draining nearly $1 billion, or more than half, of the state “rainy day fund” — a move that will help him avoid budget battles on the deficit during his first year.

Mr. O’Malley, a Democrat, also said he would not discuss resolving the deficit with tax increases or legalizing slot machines, which he characterized as a political debate that has held Annapolis “hostage” during the past four years.

Mr. O’Malley plans to transfer $967 million from the reserve fund to plug the $413 million deficit, cover the $680 million in school funding required under the state-mandated Thornton initiative and increase the state operating budget by 2.5 percent.

The General Assembly will debate the budget; it must pass the final document before it adjourns in April.

The one-time transfer allows Mr. O’Malley to delay important decisions about spending, taxation and a long-term structural deficit, estimated at $4 billion over the next four years.

“The first step when you see a hole like [the structural deficit] is to not make it deeper,” Mr. O’Malley said. “This is a conservative budget that’s growing at less than the rate of inflation.”

House Minority Leader Anthony J. O’Donnell, Calvert Republican, said the transfer only makes solving the deficit problem “painful in the out-years.”

Ruling out tax increases and legalizing slot machines allows Mr. O’Malley to take the next year to review state agencies, recommend savings for the next fiscal year and implement a program he introduced in his former job as Baltimore mayor.

The program, know as CitiStat, attempts to streamline government, reduce wasteful spending and increase government accountability.

Mr. O’Malley has said CitiStat saved Baltimore more than $350 million over six years.

Senate President Thomas V. Mike Miller Jr., Prince George’s Democrat and a slots supporter, called Mr. O’Malley’s budget “more of a businessperson’s budget.”

The budget does not include the Geographical Cost of Education Index (GCEI), an optional recommendation of the Thornton Commission, though Mr. O’Malley said he plans to introduce legislation that would mandate GCEI funding.

Budget watchdogs voiced skepticism about Mr. O’Malley’s plans.

“Oh, cute,” said Maryland Taxpayers Association President Dee Hodges. “The reserve fund is for a recession. We’re not in a recession.”

Maryland lawmakers established the rainy day fund to support the state in case of an emergency. Former Gov. Robert L. Ehrlich Jr., a Republican, replenished the fund during the recent economic upturn.

Sen. Ulysses Currie, chairman of the Senate’s Budget and Taxation Committee, said Maryland lawmakers bolstered the rainy day fund last year, and that the remaining amount — $674 million, 5 percent of the state’s total budget — would be sufficient to carry the state through to the next budget.

However, Mr. Currie, Prince George’s Democrat, said Mr. O’Malley “is not ready to step up and discuss raising revenues.”

O’Malley supporters said the transfer will give him time to figure how best to fund his campaign promises.

“O’Malley has got to get his legs under him,” said Sean Dobson, acting director of Progressive Maryland. After that “it will be up to [him] to lead. He has to be the driving force.”

Mr. O’Malley also said he would defer $53 million in funding for the Intercounty Connector road project, increase stem-cell funding by $10 million and fully fund environmental programs introduced by former Gov. Parris N. Glendening, a Democrat.

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