Governor O’Malley Releases FY 2015 Budget

This morning, Governor O’Malley released his FY 2015 Budget in a speech at the statehouse. In his proposed $39 billion budget, the Governor seeks to close Maryland’s $584 million revenue shortfall with no tax or fee increases while also increasing investments in education, innovation, public safety, and healthcare.

Addressing the Gap between Revenue and Spending

To close Maryland’s $584 million revenue shortfall, Governor O’Malley’s budget seeks to close the deficit without raising taxes. Instead, 74 percent ($457 million) of the revenue is made up through spending cuts while 26 percent (163 million) comes from the sale of old helicopters and other transfers and payments. The budget also leaves $800 million (5 percent of the General Fund balance) in Maryland’s Rainy Day fund and leaves $37 million unallocated.

Over the longer term, the O’Malley administration projects that with this budget, the state will close its structural deficit by FY 2017 with a $31 million surplus.

Making Investments in Public Services and Economic Development

In addition to closing the budget gap, Governor O’Malley proposed making targeted investments in a number of areas. According to the Governor, 48 percent of General Fund spending goes to education, 25 percent to health, and 11 percent to public safety.

(Click to enlarge)

Source: The Office of Governor Martin O’Malley

The Governor’s proposal emphasizes education, and includes $6.12 billion in K-12 education (which the Governor describes as an increase of 37% since his FY 2007 budget), $4.3 million to phase in universal pre-k education by 2010, and $289 million in school construction. Finally, Governor O’Malley intends to increase the university system’s funding by 6.7 percent while capping tuition increases at 3 percent and freezing tuition at Morgan State University and St. Mary’s College. The Governor also proposes to increase funding for community colleges by $297.5 million, including a 4.9 percent increase in direct aid.

Governor O’Malley also calls for investments in innovative industries through increases in specific tax credits, including a 20 percent increase ($12 million) in the Biotech tax credit, a 33 percent increase ($4 million) in the Cyber Tax Credit, and a 12.5 percent increase ($9 million) in the Research and Development tax credit.  The Governor’s budget also proposes targeted investments in healthcare, including $13.25 million to Academic Health Centers for cancer research and $30 million for a Prince George’s County medical center.

Regarding public safety, Governor O’Malley plans to increase police aid by $67.9 million and spending on correctional facilities by $20.3 million, which includes funding for 100 additional corrections officers.

Finally, Governor O’Malley hopes to add $42.4 million to the Bay 2010 Trust Fund.

Overall, Governor O’Malley argues that the FY 2015 budget will create 48,000 jobs in areas such as school construction (7,400 jobs), Bay cleanup (280 jobs), the Rental Housing Works program (2,500 jobs), corrections (100 jobs), and transportation projects through the capital budget (16,300 transportation jobs and 21,600 additional jobs through capital spending).

Check back here at Maryland’s Money Matter for more information and analysis of the Governor’s Budget, including our Instant Analysis, which we will release on Friday, January 17.

The Week Ahead

Last week on the blog, we celebrated the end of the state fiscal year by reviewing last year's budgetary process. The new fiscal year for the state begins today, and the state's gas tax and toll increases are now in effect.

On Thursday of last week, the Bureau of Labor Statistics released their employment and wage figures for the fourth quarter of 2012, covering the nation's 329 largest counties. Each of the eight Maryland counties included in the report saw employment growth during that period, with Baltimore City seeing the most growth (a 6.1 percent increase over the quarter). A summary of the report can be found here.  

A few weeks ago, Neil Bergsman presented to the Community Foundation of the Eastern Shore about the effects of sequestration on that region of the state. Coverage from WMDT of that presentation can be found here.

There are few events this week due to the July 4th holiday. Have a happy and safe Independence Day.

For the week of July 1st through 7th:

• On Monday, July 1st (the first day of fiscal year 2014), the Task Force to Study Economic Development and Apprenticeships hosts an organizational meeting at 3pm in room 230 of the House Office Building at 6 Bladen Street in Annapolis. They will also provide a background on current apprenticeship programs.
• On Tuesday, July 2nd, the Bureau of Labor Statistics will release its Metropolitan Area Employment report for May at 10am.
• On Wednesday, July 3rd, the Board of Public Works meets at 10am in the Governor's Reception Room on the second floor of the State House in Annapolis. The meeting's agenda can be found here. It includes approval for an upcoming $475 million sale of state bonds; $6 million in local library projects; and a $71 million 5-year contract for lottery advertising, marketing and related services. 
• Thursday July 4th is Independence Day. Most government offices are closed. Have fun and be safe.
• On Friday, July 5th, the BLS will publish its Employment Situation figures for June. MBPTI's offices will be closed on Friday.

The Week Ahead

Last week Neil Bergsman blogged about this week's Food Stamp Challenge, which he is participating in, while I blogged about the falling national unemployment rate. Neil also broke down Question 7 (the expanded gambling referendum) for Fox 5 DC. And last but not least, Greg Cantori officially joined the team as CEO of our parent organization Maryland Nonprofits last Monday.

Tuesday, October 9th

• Advisory Council for Alternative Response meets. The Council is developing alternatives to traditional responses to cases of suspected child abuse or neglect. 1pm in room 1044, Department of Human Resources, 311 West Saratoga Street, Baltimore.

Wednesday, October 10th

• House Health and Government Operations Committee goes on a site visit to the University of Maryland, College Park's School of Public Health. Members will be briefed on the Center for Healthy Families, minority health disparities, the Center for Health Information, and the Institute for a Healthiest Maryland. 9:30am to 1:30pm at University House, University of Maryland, College Park.  
• Health Services Cost Review Commission (HSCRC) meets. 10am in room 100, 4160 Patterson Ave, Baltimore.
• Maryland Nonprofits offers Now What? Sustaining Your New Nonprofit. This is a Maryland Nonprofits training. For more information or to register, go to their events page.

Thursday, October, 12th

• Maryland Economic Development Commission holds an infrastructure roundtable. 10am to noon at the Verizon office, 13100 Columbia Place, Silver Spring, MD.
• Board of Directors of the Maryland Health Insurance Plan (MHIP) meets. Topics will include findings from an audit of MHIP; the Missing Federal Application Report; updates on procurements, the Senior Prescription Drug Assistance Program, and federal enrollment; and a discussion about MHIP/Exchange messaging. Participants may attend in person or by conference call. Dial in 888-769-8761 Passcode: 7592829. 9am in suite 630, 1 Calvert Plaza, 201 E. Baltimore Street, Baltimore.

The Week Ahead

Legislators will return to Annapolis Thursday in a second special session. On the table will be adding a sixth gambling location in Prince George's County, allowing table games and internet gambling, and possibly liability issues for pet owners. The outcome of this special session is less predictable than the first, but there are some indications that whatever happens will take about a week.

One news item of note that we neglected to highlight when it happened last week was the state bond sale. On Wednesday the state sold more than $700 million in general obligation bonds at very favorable rates. The low interest rates were possible because of the actions taken by the governor and legislature to protect Maryland's AAA bond rating by drawing down the structural deficit over the last several years and responsibly balancing the budget.
 
Tuesday, August 7th

• Maryland Nonprofits offers Harnessing the Power of LinkedIn for Outreach, Networking, and Prospecting. This is a Maryland Nonprofits training; go to their website for more information or to register.

Wednesday, August 8th

• Maryland Nonprofits offers an introductory webinar about the Standards for Excellence program. This is a Maryland Nonprofits training; go to their website for more information or to register.
• Maryland Nonprofits offers Board Orientations and Handbooks. This is a Maryland Nonprofits training; go to their website for more information or to register.

Thursday, August 9th

• Senate Budget and Taxation Committee meets to discuss gaming authorization and regulation. 1pm in 3 West, Senate Office Building, Annapolis.
• Senate Finance Committee holds a briefing on interim policies proposed by the Maryland Health Benefit Exchange. 9am in 3 East, Senate Office Building, Annapolis.
• Maryland Economic Development Commission holds a board meeting. 10am to noon, Medifast Inc., 11445 Cronhill Drive, Owings Mills. 
• Maryland Nonprofits offers Special Events That Rock. This is a Maryland Nonprofits training; go to their website for more information or to register.

Friday, August 10th

• Even though the special session starts on Thursday, the House of Delegates will not convene until Friday.

DBED audit highlights need for tax credit accountability

A legislative audit has found serious problems with programs managed by the Maryland Department of Business and Economic Development (DBED).  The audit found that:

• DBED did not require eight companies applying for the One Maryland tax credit to document costs that serve as the basis for the amount of credit awarded.  Total tax credits awarded equaled $34 million.
• DBED investment agreements contain provisions to force repayment plus interest if companies leave Maryland within five years of the state investment.  Yet DBED failed to follow up when the recipient of a $250,000 investment in 2008 left the state one year later.  The audit estimated that the amount owed the state now totals $325,000.  After the legislative audit raised the issue DBED sent the company a letter demanding repayment.
• Internal users of DBEDs financing programs tracking systems were not adequately restricted.  Some DBED employees had access to many actions, such as bill initiation and payment processing, which were outside the scope of their responsibilities.  Disturbingly some former employees still had access up to 20 months after they left DBED.  The department corrected security permissions once they were brought to its attention.
• DBED did not collect required expenditure and performance reports from all grantees.  Consequently, the state does not know if the funds were used for their intended purposes.  Grantees may well be in compliance with the terms of their grants, but DBED has no way of knowing in many cases.

Encouragingly, DBED’s response to the audit (included as an appendix to the report) was generally positive.  They agreed with the auditors findings and, as noted above, took immediate action in several cases. 

MBTPI supports the Tax Credit Evaluation Act (SB 739/HB 764), because Marylanders deserve to know what they are getting for their tax dollars.  Unfortunately, this audit highlights the need for continued oversight to make sure that existing and new regulations are properly followed.