Monday, October 6, 2008

ANNAPOLIS | The next round of state budget cuts will likely be more stinging to Maryland residents, prompting Gov. Martin O’Malley, a Democrat, to refer to an upcoming spending-cuts meeting as a “parade of horrible.”

The O’Malley administration estimates $1.8 billion in budget reductions have been made since taking office in January 2007, though Republicans dispute the figure.

But as the financial crisis continues to grip the country, creative budget-balancing has become harder, and state finances are becoming victims of the economic downturn.

Mr. O’Malley has asked state agencies to look at hundreds of millions of dollars in budget cuts to balance state books, amid a decrease in revenue from such major funding sources as sales and income taxes. Revenue estimates updated last month showed Maryland would collect $432 million less during the current fiscal year than previously estimated.

“There’s no way that we can do $400 [million] without touching a lot of the things that we were able to spare through the special session and the other things,” Mr. O’Malley told state Treasurer Nancy K. Kopp in a meeting last week.

The governor said the challenge is to find ways to harm residents the least.

“But everybody is going to be hurt, and nobody is going to be happy,” he said.

Critics argue past cuts either didn’t go deep enough or were one-time reductions or spending transfers that shifted around money and largely avoided painful and noticeable hits to state government.

Sen. Allan H. Kittleman, Howard Republican, described the previous cuts as “not reductions of any substance.” He also criticized the administration for returning to “a tax-and-spend philosophy of government.” Mr. Kittleman, the Senate minority leader, pointed to a $25 million fund for Chesapeake Bay cleanup as an example of a worthy but unaffordable expense during tough times.

“Unfortunately, the current administration has decided that we can do everything,” he said. “And we are going to spend and spend and spend until they face the crisis that they face right now.”

More keenly felt cuts also will be needed because the fiscal 2010 budget is facing a potential $1 billion shortfall, observers say. “I think everybody agrees: The iceberg is in sight,” said Delegate Murray D. Levy, Charles Democrat, who is a member of the House Appropriations Committee.

The state Board of Public Works, consisting of Mr. O’Malley, Mrs. Kopp and state Comptroller Peter Franchot, is scheduled to address the cuts Oct. 15.

“The 15th is our meeting to do the ‘parade of horrible,’ ” Mr. O’Malley said.

The governor’s popularity plummeted after raising taxes by $1.4 billion in last year’s special legislative session, which also resulted in about $550 million in budget cuts.

Still, Mr. O’Malley said tough calls made over the last year put the state on better financial footing. Otherwise, Mr. O’Malley said, Maryland would be facing “a $2.3 billion hole instead of a $400 million hole.”

Mrs. Kopp agreed, saying some states sought to borrow money to operate over a relatively short period, hoping to replace the funds when tax revenue comes. But borrowing has become harder amid the financial crisis.

“At least we’re in better shape than that,” she said.

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