Maryland state budget (2008-2009)

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State Information


Maryland faced an estimated $691 million budget gap for fiscal year 2009. The Center on Budget and Policy Priorities projected that the deficit would rise to $1.9 billion deficit for fiscal year 2010.[1] Maryland Comptroller Peter Franchot said that a continued slide in sales tax revenue, in addition to a decline in estimated income tax payments, was draining state coffers. The result was a gaping budget hole. "We're going to recommend more than a billion dollars in state spending be reduced in this fiscal year and next fiscal year," said Franchot. Gov. Martin O'Malley noted that Maryland had already undergone a series of budget cuts and more anticipated cuts would not be easy to make. "There's nothing left that isn't important. It's very, very hard to find the dollars at this point after $3 billion we've already cut," said O'Malley. An estimated $516 million in cuts needed to be identified in order to balance the budget.[2]

Impact of budget woes

See also: State budget issues, 2009-2010
  • In January 2009 Maryland's unemployment rate climbed to a nearly 16-year high of 6.2 percent, compared to the national rate of 7.6 percent. In December 2008 the Maryland unemployment rate was at 5.4 percent. Maryland's rate jumped 2.6 percent from a January 2008 rate of 3.6 percent, losing a total of 39,000 jobs, according to the Bureau of Labor Statistics.[3][4]
  • Due to March 2009 revenue projections of nearly $1.1 billion less in revenue that originally projected for fiscal year 2010, the governor noted that the state might be forced to layoff state employees, an act that was thought to had been delayed by the influx of federal stimulus funds. Other officials had suggested furloughs or a 1 percent across-the-board pay cut.[5]
  • Members of Maryland's Board of Public Works officially slashed $82 million from the state's budget on March 4, 2009, including about 892 vacant positions and two filled jobs. The Department of Public Safety and Correctional Services would lose nearly 250 vacant positions.[6]
  • In January 2009, O'Malley introduced a budget that included $69 million in cuts to local schools. Under the draft fiscal year 2010 budget,Baltimore County would receive $23 million less than in the then-current school year and Prince George's County's budget would be cut by $35 million. However, in light of the federal economic stimulus funds, the governor emphasized that stimulus dollars would likely offset most, if not all, of his proposed education cuts.[7]
  • Applications to some state universities were rising; however, schools were likely to turn away some students who might have qualified for admission when the economy was healthier. It was estimated that 51 to 52 percent would be accepted in 2009 compared to the previous rate of 56 percent in 2008. Salisbury University and the University of Maryland, Baltimore County were reporting increases in freshman applications of 5 percent or more.[8]

Budget background

See also: Maryland state budget

Maryland's fiscal year begins July 1 and ends June 30 of the following year. Every year around August or September the Department of Legislative Services develops the fiscal forecast for the year in order to help create a balanced budget for the next fiscal year. In August the state's individual agencies submit budget requests and between October and November the governor holds hearings with each agency. By the end of December the governor completes a budget recommendation, which is presented to the legislature on the 7th or 10th day of session in January. Legislature gets the final say on the budget. The governor lacks any veto authority with respect to the budget as passed.[9]

  • Individual income tax payments and the sales tax made up 80 percent of the state's fiscal year 2009 $14.4 billion general fund.[10]

Budget figures

The following table provides a history of Maryland's expenditures and gross domestic product (GDP).

Fiscal year Expenditures (billions) GDP (billions)
2000 $30.6[11] $180.4[11]
2001 $33.2[11] $192.7[11]
2002 $35.7[11] $204.1[11]
2003 $37.1[11] $213.3[11]
2004 $38.5[11] $228.2[11]
2005 $41.4[11] $243.9[11]
2006 $44.2[11] $257.6[11]
2007 $47.3[11] $268.7[11]
2008 $50.7[11] $280.3[11]
2009 $54.3*[11] $292.4*[11]
  • NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.

Ideas about why the crisis occurred

  • The Board of Revenue Estimates revised projections downward for fiscal years 2009 and 2010 by more than $1.1 billion. For fiscal year 2009, the $446 million drop was, officials said, largely due to the worst state tax collections on record for individual income tax payments.[12]
  • Maryland, along with about six other states, rely heavily on income taxes; however, in fiscal year 2009, tax revenues plunged by 15 percent to 30 percent. David Roose, director of Maryland's Bureau of Revenue Estimates, said that the state was troubled by Maryland's drop because in 2008 lawmakers increased millionaires' income tax rates. The levy rose to 6.25 percent from 4.75 percent.[13]
  • House sales declined 28 percent in November 2008 and 28 percent for the year. The median sales price had declined almost 20 percent since the peak in June 2007.[14]
  • Maryland sales tax revenues had declined seven of ten months in 2008, and light vehicle registrations fell 17.5 percent through September 2008.[14]
  • As projected in December 2008, the largest source of general fund revenue, the individual income tax, was expected to grow only 2.4 percent to $7.104 billion, slowing to 1.1 percent growth in 2010 as collections reached $7.181 billion.[14]

Proposed actions

Governor Martin O'Malley


Gov. O'Malley talks about Maryland's budget

In his state of the state address, O'Malley reminded residents that Maryland ranked 43 out of 50 in per capita state and local government employment and that Maryland was not as bad, economically, as other states. "During the past two years, we’ve made some very difficult and painful decisions to attack an inherited structural deficit by reducing $2.2 billion in spending, and by eliminating 1,500 state government jobs as they became vacant," said O'Malley. However, despite the cuts in the past and future, the governor proposed investing $5.4 billion in public schools, investing more in college affordability and investing more in public safety.[15] On October 15, 2008 Governor O’Malley and the Board of Public Works approved over $345 million in budget reductions to balance the fiscal year 2009 budget, including over $297 million in general funds, and over $50 million in special and federal funds. The board also approved the elimination of 830 state positions, bringing the total number of positions eliminated under the governor's administration to more the 1,500. O'Malley additionally directed the Department of Budget and Management to cut spending in all state agencies up to 5 percent.[16]

Republicans

Republicans across the state said that the governor's assumption that federal stimulus funds would solve Maryland's budget gap was wrong and was a sign that overspending would continue. Maryland Republicans suggested removing regulations and "toxic" tax conditions that they said "cripple economic growth and cause job loss." In reference to the governor's state of the state speech, Republican Party Chairman James Pelura said, "We need him to also be focused on the real problem of driver’s license security, something he neglected to mention in his speech."[17] However, in response to the state's budget deficit, Republican lawmakers Senator Andy Harris and Delegate Steve Schuh introduced the "Taxpayer Protection Act." The legislation would require a 60 percent vote in each chamber to raise existing taxes or create new ones.[18]

Democrats

Maryland Democratic legislators called the federal economic stimulus funds the "savior" of Maryland's budget deficit. However, revenue projections revealed that layoffs or furloughs might still be necessary to balance the state's budget.[19] In response, Senate President Thomas V. Mike Miller and House Speaker Michael Busch proposed alternative solutions to cutting the budget by an estimated $516 million. One option was to force localities to reimburse about $30 million in education aid they mistakenly received because of a miscalculation by the state. O'Malley had said those jurisdictions would be able to keep that money, but Miller said "perhaps we cannot be so generous." Another option would be adding more furlough days for state employees. Alternatively, legislators suggested shifting taxes from the transportation trust fund to general government operations. Despite any necessary budget adjustments, two areas that Miller and Busch said would likely not be affected were education and Medicaid.[20]

Economic stimulus package

Maryland was expected to receive $3.8 billion from the $787 billion dollar economic stimulus.[21] All told, the federal stimulus plan would create or save 66,000 jobs in Maryland, based on White House estimates.[22]

According to preliminary reports, Maryland was expected to receive:[21]

  • $39 million for public safety
  • $54 million towards workforce
  • $57 million towards energy
  • $123 million towards the environment
  • $193 million for housing
  • $610 million for transportation
  • $1.1 billion for education
  • $1.6 billion towards health care

Budget transparency

As of 2009, Maryland has partial transparency, thanks to the passage of the Maryland Funding Accountability and Transparency Act. The state has made a searchable database available.[23]

This database for Maryland Funding Accountability and Transparency is sponsored by Maryland's Department of Budget and Management.[24] It contains information on payments to vendors who have received over $25,000 from the state during the fiscal year. This website provides financial information for fiscal year 2008.

Legislation

  • Maryland Funding Accountability and Transparency Act

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases
State database Searchability Grants Contracts Line item expenditures Dept./agency budgets Public employee salary Exemption level
MD's Funding Accountability and Transparency
{{{1}}}
N
600px-Red x.png
Y
600px-Yes check.png
N
600px-Red x.png
N
600px-Red x.png
N
600px-Red x.png
$25,000

Limitations and suggestions

This database provides useful information, but is limited in scope and does not provide line-item expenditures (in part due to its exemption of vendors that received less than $25,000 in any given year). The expenditures it does list are limited to those made to vendors; it does not provide information on grants, public employee salaries, or the state's departmental/agency budgets.[25] Such information would prove useful for government officials, legislators, and citizens alike as they work in concert to improve the efficiency and productivity of the state.

Support for creation of the database

Americans for Tax Reform, Americans for Prosperity, and the Maryland Taxpayers Association supported transparency. The National Taxpayers Union urged members of the Maryland House of Delegates to support the passage of the Maryland Funding Accountability and Transparency Act.[26]

Public employee salary information

See also: Maryland state government salary

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[27]
  • Maryland was expected to receive an estimated $2,586,766,501.[28]

See also

External links

Additional reading

References

  1. Center on Budget and Policy Priorities,"State budget troubles worsen," March 13,2009
  2. Fox,"Maryland dealing with budget cuts," March 11,2009
  3. Baltimore Sun,"Maryland unemployment rate climbs to 6.2 percent," March 11,2009
  4. Bureau of Labor Statistics,"Maryland economy at a glance," accessed March 17,2009
  5. Baltimore Sun,"More furloughs debated in budget talks," March 12,2009
  6. Washington Post,"Md. Public Works Board Cuts Budget, Staff Positions," March 4,2009
  7. Baltimore Sun,"Stimulus funds could offset Md. education cuts," February 20,2009
  8. Baltimore Sun,"Cost-conscious Md. families turn to state's public colleges," February 20,2009
  9. State of Maryland,"Overview of Maryland budget processes," October 24,2002
  10. Associated Press,"Md. comptroller says revenue estimates may be cut," February 17,2009
  11. 11.00 11.01 11.02 11.03 11.04 11.05 11.06 11.07 11.08 11.09 11.10 11.11 11.12 11.13 11.14 11.15 11.16 11.17 11.18 11.19 US Government Spending,"Maryland State and Local spending," accessed March 17,2009
  12. Associated Press,"O'Malley reviewing how to address lower revenue," March 11,2009
  13. Reuters,"States eye income tax rises as rich pay less," February 25,2009
  14. 14.0 14.1 14.2 Maryland Board of Revenue Estimates,"Estimated Maryland revenues: fiscal years ending June 30,2009 and June 30,2010," December 16,2008
  15. Governor Martin O'Malley,"2009 State of the State," January 29,2009
  16. Governor Martin O'Malley,"Governor O'Malley, Board of Public Works Cut Over $345 Million from FY09 Budget," October 15,2008
  17. Republican Party of Maryland,"MDGOP Responds to Governor O’Malley’s State of the State Address," January 29,2009
  18. Republican Party of Maryland,"Maryland General Assembly Republicans File Taxpayer Protection Act," February 12,2009
  19. Baltimore Independent Examiner,"State LayOffs Loom as Democratic Leaders Scramble for Answers," March 12,2009
  20. Baltimore Sun,"More furloughs debated in budget talks," March 12,2009
  21. 21.0 21.1 State of Maryland,"Maryland's Recovery & Reinvestment," accessed March 17,2009
  22. American Recovery and Reinvestment Act,"Estimated job effect," accessed March 17,2009
  23. Maryland House Bill 358 (2008)
  24. Maryland Funding Accountability and Transparency database
  25. Some budget information was made available here, however
  26. National Taxpayers Union, "An Open Letter to the Maryland House of Delegates: Taxpayers Support Spending Transparency Web Site (HB 358)," March 7, 2008
  27. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  28. Wall Street Journal,"Stimulus Spending by State," March 12,2009