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.

Supplemental budget includes ... a lot of different things

The Governor sent the legislature a supplemental budget on Monday, April 1, adding $218 million to the proposed budget: about 1/3 of 1 percent. Of this amount, only 1/3 is “general funds,” meaning it is funded with regular tax revenues.

The Governor maintains the balanced budget by recognizing $140 million of the cuts the legislature is expected to make in the original budget.  Even if the legislature approves all of the proposed amounts in the supplemental budget, the budget remains balanced with a cushion of over $1 billion in the state’s Rainy Day Fund plus the year-end general fund balance under either the House of Delegates or the Senate plan.

The supplemental budget includes 101 separate items ranging from a mere $75 to correct a funding formula for limited English proficient education to $83 million in additional federal Medicaid funding. Here are a few highlights (figures reflect the total of all fund sources):

Sequester Reserve

The supplemental budget places $10 million into the “Dedicated Purpose Account” to support critical programs which may be disrupted by federal “sequester” cuts. These funds would be available for release during the fiscal year following review by legislative committees.

Providing for New Legislation

Some of the supplemental budget items relate to costs associated with pending legislation.Gun control, wind energy, and the Baltimore City school building initiative all have items related to them.

Other Initiatives

A $3.3 million initiative is designed to help remedy persistent needs at Maryland’s four historically Black colleges and universities. Other items provide additional funds for low-income local governments, tourism promotion, and the men's baseball team at Towson Unversity.

Normal Operating Needs

Some supplemental items provide funds for normal operating needs of state operations, or cover shortfalls in the existing budget. Disablilty services, police, mental hospitals and juvenile services all get operating funds.

Casino dollars replace state funds for schools

New estimates of casino revenues added $10 million to the Education Trust Fund. This allowed the governor to subtract $10 million in general funds from school aid budgets. This item demonstrates that while the state share of Maryland’s casino revenue is dedicated to local schools, it does not add to the schools’ resources–it merely replaces other state funding.

Assorted Good Causes

The supplemental budget contains funding for many local organizations and projects. Often, these address particular needs and opportunities which legislators or others have brought to the governor’s attention. Some people consider these items "pork." Here is a partial list.

$2.5 million    For the Eastern Family Resource Center in Baltimore County.

$1.35 million For eastside redevelopment projects in Baltimore City.

$500,000         To the Prince George’s County State’s Attorney for violent crime prosecution.

$500,000         To assist non-public schools with textbook purchases.

$366,000         Operating cost assistance for the Hippodrome Arts Center in Baltimore City.

$160,000         For the Civic Justice Corps summer program.

$120,000         For the Historic Annapolis Foundation.

Process

The budget bill is currently referred to a House-Senate conference committee to negotiate differences between the two chambers. The conference committee will also approve, disapprove, or reduce the supplemental budget items. The House Appropriations Committee and Senate Budget and Taxation Committee will review the items, and provide guidance to their respective chambers’ conference committee members. 

The conference committee must complete its work and the House and Senate must approve the conference committee’s report by the last day of the regular legislative session, Monday April 8. Otherwise, the legislature will go into an extended session to complete the budget.

The Department of Legislative Services’ analysis and recommendations are here.

MBTPI's full briefing paper on the supplemental budget is here.

Governor proposes supplemental budget

On Monday, Governor O’Malley submitted a modest supplemental budget to the legislature. It’s easier to decode the items by looking at the Department of Legislative Services' analysis of the supplemental budget.

The budget adds a net $70 million to the budget. More than half of that amount is covered by additional federal funds ($8 million) or dedicated special revenues ($36 million).

The supplemental budget adds $27 million in general funds. This is a net number. The supplemental budget subtracts $30 million in general funds from Medicaid (making more favorable assumptions about enrollment next year) and $10 million from state employee pharmacy benefit costs (based on a re-bid of the pharmacy contract). So the amount of general fund items added to the budget is close to 27 + 30 + 10 = $67 million.

By MBTPI’s reckoning, $22 million reflects normal operating costs that are now being properly recognized in the budget. Some of the items include overtime in state correctional facilities, the costs of youth assigned to private residential facilities by juvenile courts, and increased energy and utility cost for state buildings and the state police vehicle fleet.

There are 24 items totaling $30 million that MBTPI considers “policy” items:

The $2.2 million item for Healthy Families home visiting programs is one that MBTPI has particularly called on the Governor to restore to the budget.

Another large item in the supplemental budget is $8.4 million and 85 new positions to allow the public defender system to comply with a new court ruling that requires the state to offer arrestees legal representation at bail hearings.

The budget conference committee members will consider the items in the supplemental budget as they complete action on the initial budget.