With stimulus spigot drying, Md. and Va. face budget crises

Stimulus money is slated to run dry over the next fiscal year as the economic crisis outlives the stopgap funds. The loss means legislatures in both states will reopen caustic arguments they shelved a year ago, likely eliminating jobs and dismantling services that had been expanded or saved by the $787 billion federal spending bill.

“Last year, the legislators were too optimistic,” said Maryland Sen. J. Lowell Stoltzfus, R-Somerset, who serves on the Budget and Taxation Committee. “We didn’t cut enough. We built programs on the basis of temporary stimulus money, and when it goes away, we’re in trouble. Even if the economy rebounds, the stimulus money will then be cut off, and we’re still in trouble.”

Virginia, which plots state spending two years in advance, faces a $4.2 billion shortfall through mid-2012. Gov. Tim Kaine has proposed to cut $2.3 billion, a figure almost certain to grow as a new Republican governor takes office and looks to balance state spending without tax increases.

Kaine’s budget is based on a “pessimistic outlook,” said Virginia Finance Secretary Ric Brown, forecasting an anemic recovery in employment and tax revenues that will outlast the stimulus. The state’s economy has “hit bottom rather than growing,” said Brown, who will serve in the same role under incoming Gov. Bob McDonnell.

“As long as that is extended out into the future, obviously the growth’s not there to replace the stimulus, which was designed to be temporary in nature,” Brown said.

Maryland is saddled with a comparable $2 billion shortfall for fiscal 2011, which begins in July. There, lawmakers are shying away from tax and fee increases during an election year, but taxpayers won’t be so lucky next year. Gov. Martin O’Malley has not proposed his budget.

The state received a $4.2 billion piece of the stimulus pie last year. Since February, O’Malley has focused on ongoing initiatives including a $1.6 billion expansion of Medicaid and $628 million in transportation projects.

Virginia has taken in more than $5 billion in stimulus money, spending the largest portion — $1.2 billion — on Medicaid. Accordingly, some of the most painful cuts in Kaine’s budget come in human services. A Friday public hearing at Northern Virginia Community College brought out a crowd of advocates for the mentally disabled and mentally ill who protested what they said would be a devastating loss to community-based care.

“You need to know that the very existence of that safety net is tenuous at best today,” said Lynne Crammer, co-chairwoman of the Fairfax-Falls Church Community Services Board.

Besides buttressing funds for education, health care, and public safety, the stimulus allowed state officials to pump hundreds of millions of dollars into road and rail projects that otherwise would have gone by the wayside.

But despite the stimulus, Maryland’s transportation revenues fell by one-third in the last year, said Sen. Richard Madaleno Jr., D-Wheaton. “How do you maintain and expand the current system with one-third less revenues?” he asked. “How the hell do you pay for anything?”

Tax increases are widely considered a nonstarter in Virginia. And with an eye on the upcoming elections, few Maryland legislators are seeking new revenue streams.

“There are no plans to increase taxes or fees and that is not an option being considered,” O’Malley spokesman Shaun Adamec said.

“As a practical matter, what’s gonna happen this year is that we’re gonna cut. Period.” said Sen. Brian Frosh, D-Bethesda.

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