Message to GBC Members:

Expect more budget cutting in Annapolis

In the wake of the October 15 Board of Public Works’ approval of $345 million in FY 2009 budget cuts proposed by Governor Martin O’Malley, leaders in Annapolis are echoing one dominant theme: the budget cutting is probably not over – not by a long shot.

In making this latest round of budget cuts to address lagging revenue in the fiscal year that started on July 1, the governor appeared to be striving for a gentle approach in making programmatic funding cuts to state departments, and an especially targeted approach when it came to eliminating jobs.

Of more than 800 state jobs cut from the General Fund budget, all but 35 were vacant.

Budget cuts totaled $297 million in savings to the General Fund and more than $50 million in special and federal fund cuts. Eliminating state jobs accounted for less than $28 million in savings to the General Fund, while programmatic funding cuts accounted for the rest.

Despite the Governor’s efforts to try to identify relatively painless cuts to budgeted General Fund spending, he faces looming prospects of more fiscal pain later in this budget year.

Meanwhile, the Maryland Transit Administration’s proposed cuts to commuter bus and MARC service, announced on October 16, will inflict real pain when they take effect in January by reducing these services at a time when long-distance commuter use of them is increasing dramatically. And with BRAC jobs coming, we need to strengthen commuter options, not diminish them.

The MTA cites shortfalls in FY2009 revenue to the state’s Transportation Trust Fund, and will restore the service as quickly as possible, according to Maryland Transportation Secretary John Porcari.

Maryland’s baseline increase in General Fund revenue so far this fiscal year is only 1.3 percent, when adjusted for the impact of new taxes, the Department of Budget and Management reported to the General Assembly’s fiscal committees on October 14. DBM is forecasting significant structural deficits for the next five years, including shortfalls of $1.3 billion in FY 2010, and $1.5 billion in FY 2011.

The Board of Revenue Estimates adopted “an exceedingly weak revenue forecast for fiscal year 2009, and collections to date have fallen below those pessimistic expectations,” Comptroller Peter Franchot reported in his October 10 revenue letter to Governor O’Malley, Senate President Mike Miller, and House Speaker Michael Busch.

The ongoing stock market crash and recession “will have a severe and far-reaching effect on the Maryland economy,” Franchot warned.

The biggest overall hits to state programmatic funding in Governor O’Malley’s October 15 reductions in General Fund spending included:

• $70 million in cuts to the Department of Health and Mental Hygiene budget including $39.3 million in reductions to budgeted rate increases for community providers, nursing homes, residential treatment centers and physicians. The Department also must cut 189 positions – 181 of which are vacant.

• $20 million in cuts to Intercounty Connector funding, which will be shifted to FY 2011.

• $16.5 million in cuts to local aid, including a 50 percent reduction in the budgeted increase in aid to community colleges. Nevertheless, community colleges will still receive more aid in FY 2009 than in the previous year, according to budget documents.

• $15.6 million in funding reductions to the University System of Maryland – a 1.5 percent cut. No jobs were cut.
  
  
• $15.4 million in cuts to the Department of Education, including $5.3 million in savings through a fund swap and realized savings in child care expenses.

• $9.8 million in cuts to the Department of Business and Economic Development, including cuts of $2.3 million to the State Arts Council, $2.2 million to the Maryland Tourism Development Board, and a $600,000 reduction in nano-biotechnology grants.

For specific details on Governor O’Malley’s most recent budget cuts, click here.

What’s in store for us in Annapolis in the next session and beyond? I have a couple of thoughts.

First, it’s worth noting that, for the most part, the budget cuts so far have been cuts in budgeted spending increases—not absolute cuts in spending. State government is still spending more this year than last year.

Second, the building fiscal pressures, both outside and within Maryland, will make the passage of the slots plan even more important to leaders in Annapolis. The Greater Baltimore Committee is strongly supporting slots passage.

The reality is: it’s time for serious belt tightening and fiscal priority-setting.  And we need to be very observant, particularly regarding transportation’s place on the priority list.

Congress passes, and president signs, Amtrak bill; including planning funds for Baltimore tunnels

A bill that will channel $13 billion in capital and operating funding to Amtrak over the next five years has passed Congress and has been signed by President Bush.

The bill includes $60 million to plan a new rail tunnel alignment in Baltimore to replace two 19th-century tunnels that are critical bottlenecks to the Amtrak system. One-fifth of Amtrak’s passenger trips now depend on the Union Tunnel northeast of Penn Station, and the B&P Tunnel southwest of Penn Station – both of which were built in the late 1800s.

The Amtrak funding bill, which cleared the U.S. Senate on October 2, calls for Amtrak and federal officials, working with Baltimore City and the state of Maryland, to select and approve a new rail tunnel alignment that will “permit an increase in train speed and service reliability.”

The Greater Baltimore Committee, an active member of the Business Alliance for Northeast Mobility, urged members of Congress to pass the Amtrak bill that included funding to address the need to replace the existing Baltimore tunnels.

Most recently, I joined business leaders from the northeast corridor in a Sept. 10 lobbying effort to voice strong support to members of the Senate for the Amtrak bill.

To view a summary of the Amtrak funding bill, H.R. 2095, click here.
To view Don Fry’s September 10 remarks to lawmakers, click here.

WYPR commentaries discuss transportation funding, slots

My current commentaries on WYPR discuss how Maryland’s system of funding transportation is broken and the issue of slots gaming in Maryland.

To view "Our transportation funding system also needs fixing," click here.
To view "Slots and Maryland’s fiscal challenges," click here.

Best wishes,

Donald C. Fry
GBC President & CEO

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Greater Baltimore Committee
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