Hugs and kisses, handshakes and back slaps were the order of the day Wednesday as the General Assembly returned to the State House chambers for its annual 90-day session.
After a $10 million renovation finished just weeks ago, much of the pipes, wiring and carpeting in the old capitol are new. But the problems facing the 141 delegates and 47 senators seem very old: There’s not enough money to pay for the things they want to do.
Just 14 months ago, they thought they had solved a persistent “structural deficit” with $1.3 million in tax hikes. Now they are facing a recession-sparked “cyclical deficit,” as the new taxes have failed to bring in as much as expected.
The state’s economy is “as bad as it’s been for a very long while,” said Warren Deschenaux, the legislature’s top policy analyst.
Whatever adjective attached to it, there’s a $400 million hole in the current year and a gaping $2 billion hole for the fiscal 2010 budget the legislature will tackle.
“This year’s budget is going to be quite a challenge,” said House Speaker Michael Busch. “There’s probably no appetite to raise any taxes.”
“We’re probably going to level fund this year,” said Senate President Thomas V. Miller, meaning most programs would get the same amount of money as last year. But, he predicted, “there’s probably going to be some increase in education.”
Gov. Martin O’Malley agreed. “We have to make cuts of about $1.9 billion in this budget and all of those cuts will be painful, and there are very few things that will be spared from some sort of spending reduction,” O’Malley told reporters Wednesday. “There are probably only a couple of items that will actually be increased, one of them being education. If we can level fund some of these priorities, that’s about the best we can do in these difficult times. But in order to do that, we have to cut other things.”
“Everything is on the table,” O’Malley Budget Secretary Eloise Foster said, a refrain repeated by other administration officials.
Increased funding for education and health care have been driving budget growth in recent years. Busch and O’Malley on Wednesday both connected Maryland’s unemployment rate, lower than the national average, to its high level of spending on schools. Education Week’s rating of Maryland’s schools as best in the country last week (even though they got only a B grade) make any pull back unlikely, as does last week’s report on the positive impact of the increased Thornton aid.
O’Malley, legislators and even county officials are pinning their hopes on increased federal aid for health care, transportation, and possibly education, as a way out of the fiscal hole they’ve dug.
“It’s our sincere hope with a new president and Congress acting in Washington, that it will be a better budget when they finally vote on it than the one that we have to present,” O’Malley said.
The governor officially submits his budget to the legislature Wednesday. O’Malley’s four-volume, 2,000-page document has actually been at the printer for weeks, but he’s been coy about many of the details.
O’Malley’s top legislative aide, Joe Bryce, said, “These problems didn’t happen overnight, and we’re not going to get out of them overnight.”
“What we really need to is manage expectations,” Bryce told county officials last week. “Level funding is significant progress in these times.”
For the session, Busch’s hope is that the legislators will “prioritize the problem solving and minimize the political rhetoric.”
There is no lack of problems to solve:
Pensions: Three years ago the legislature increased pensions for teachers and state employees, but pensions and health care benefits for retirees are chewing up an increasing share of the state budget, $1.2 billion to advance fund pensions alone in the coming year.
“It’s a real kettle of fish and we just raised [pensions],” said Deschenaux, the legislature’s fiscal chief.
The state treasurer’s office estimates that Maryland should be socking away another $800 million a year for the cost of health care for retirees, not the $350 million currently being allocated.
“We have more generous health benefits than most of the private sector and even the public sector,” Deschenaux said.
A blue ribbon commission is due to make recommendations about the state’s retirement benefits by the end of this year. Senate Majority Leader Ed Kasemeyer, who serves on the commission, said, “What we’re down to is what benefits are we going to cut,” especially in terms of years of service for current state workers. “It’s going to get very ugly,” Kasemeyer said.
Health care: The 2007 special session increased Medicaid insurance coverage for low-income households, paid for by a doubling of the cigarette tax. The tax has not generated as much as expected, and those benefits are vulnerable.
Busch is hoping the federal stimulus package will help bail out the state on Medicaid.
“That’s a huge part of our budget,” said Del. Mary-Dulany James, D-Harford, appropriations subcommittee chair for health and human resources. “This is the first time since I’ve been elected that spending on health care could be dramatically affected by the new president. That’s a new wrinkle.”
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