Maryland Allocates Funds to offset Federal Cuts

Maryland Governor Martin O'Malley announced the allocation of $8.8 million in reserve funds to offset federal budget cuts. This action commits nearly $9 million of the $100 million set aside during the 2013 legislative session to offset the results of federal budget actions.

The Governor's statement says:

Nearly 500 low-income children will be able to participate in Head Start programs that will prepare them to enter school ready to learn ($4.1 million). Approximately 3,000 individuals will receive the substance abuse prevention and treatment services they need ($1.6 million). Approximately 3,000 older adults will receive 180,000 meals, 2,500 seniors will have access to health screenings, and 200 seniors will be provided with home and community-based services, including personal care and adult day care. ($1.4 million). Fifty individuals in need of vocational rehabilitation services will receive those services without delay ($800,000). Approximately 7,000 people will receive job placement and training assistance ($500,000). Seventy-five adult education classes serving about 800 students will be offered as planned ($400,000).

Congress will confront another set of deadlines shortly as the federal fiscal year ends without an approved budget one September 30, and the Treasury runs out of authority to issue new debt in mid-October.

The continued federal budget impasse harms Maryland in two ways. First, the direct budget cuts affect services currently received by Marylanders. Secondly, the reduced federal activity in paying salaries and in buying goods and services hurts Maryland's economy.

These temporary back-fills from state funds are helpful in reducing the hardships to families and individuals that would occur if the federal cuts took their full effect. In the long run, however, Congress must do its job of approving a regular budget for the nation on a timely basis.

Conference committee resolves budget differences

A conference committee of delegates and senators has resolved the differences between the two houses’ versions of the budget, just four days prior to the legislative session’s scheduled conclusion.

Even though the two plans were not very different, the legislature allowed the constitutional target date of April 1 to slip by before concluding the budget process. Legislative leaders may have been awaiting the resolution of other legislation (such as the firearm safety act) and a supplemental budget proposal from the governor before finalizing their budget action.

The final budget left intact 98.8 percent of the funding proposed by Governor O’Malley in January.

Key Conference Committee decisions

• One of the major differences between the House and Senate budget plans related to pension contributions and fund balances. The 2011 pension reform law called for the state to make an extra contribution of $300 million to the teachers’ and employees’ pension funds next year.  The Senate cut this to $200 million, and added the savings to the general fund balance, so it could be available if needed to absorb the effects of federal cutbacks.
  

The conference committee accepted the cut to the extra pension contribution, but placed it in the “Dedicated Purpose Account” of the state reserve fund. This way, it could be used by the governor (subject to review by legislative committees) without the need for action by the whole legislature. By using this mechanism, the governor could replace funding for critical services without either waiting for the 2014 legislative session or calling a special session.

Any unused amount would be forwarded to the pension fund after the end of this calendar year.

Counting this addition to the contingent fund  the final amount of balances ($1.16 billion) is close to the amount recommended by the Senate.

• The conference committee accepted most of the items in Governor O’Malley’s proposed supplemental budget, with these exceptions:

The conference committee rejected $432,000 in general funds to cover part of emergency management and National Guard expenditures for the derecho and Hurricane Sandy. The conference committee suggested that the agencies be allocated the funds from the state’s Catastrophic Event Fund. That fund has $1 million available.

The conference committee directed that $300,000 included by the governor for the Towson University men’s baseball team should instead be used as matching funds for an intercollegiate athletics donation incentive program. The program would provide matching funds for Division I schools in the University of Maryland System to support sports to maintain compliance with Title IX requirements.

Next steps

Update: The House and Senate have both approved the conference committee report and passed the budget bill in final form. The budget bill becomes law immediately upon passage by the legislature and does not require the Governor’s signature.

O'Malley's budget released

Governor O'Malley released his budget today. Highlights include:

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• The budget totals $37.3 billion, a 4.3% increase.
• The significant increases are in:
• Health ($406 million - mainly federal funds for Medicaid),
• Transportation ($269 million,  but this could change markedly as the legislature considers a transportation finance package),
• K-12 Education ($183 million, all in increased aid to public school systems),
• Universities and colleges ($144 million, of which $90 million is state funding and $54 million is from the institution's own revenue sources).
• $450 million of the increase is in the appropriation  to the State Reserve Fund. The Governor is proposing increasing the "Rainy Day" account in the reserve fund from 5% (where it has remained throughout the recession and its aftermath) to 6%. This is to provide a cushion against possible federal budget cuts.
• The proposed budget does not provide any new revenue for the state's transportation fund. The legislature is expected to consider a separate transportation funding initiative this session.
• At the Governor's budget briefing, state budget Secretary Eloise Foster summarized $325 million in cuts from current services "baseline" funding levels. The cuts are concentrated in Medicaid (with some related to additional federal funding in the Affordable Care Act), and a 2.5% limit in rate increases for health and human service providers, and deferring some payments to a reserve fund for local government income tax revenues.

The General Assembly will now take up the governor's budget. Our knowledgeable readers will remember that the legislature is only allowed to cut the budget in most cases.

Stay tuned for MBTPI's more detailed analysis of the proposed FY 2014 budget in the coming weeks.