January 25, 2011

Assembly analysts say O’Malley budget may underfund some areas

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The governor’s new budget may be $425 million to $500 million short on cash to fully fund some programs and pension costs, legislative analysts told lawmakers Monday.

In its first swipe at Gov. Martin O’Malley’s $34 billion spending plan, the Legislative Services staff fiscal briefing identified key issues the legislature has to deal with in handling the budget. The analysts noted over $200 million in bond debt that would be sold to replace money taken out of the special funds for Program Open Space, Chesapeake Bay Restoration and the Transportation Trust Fund.

O’Malley had already pointed out the diversion of these funds in his budget roll-out on Friday. He noted that $251 million in projects with “capital eligible costs” would be paid for with debt, and the money moved to the general fund.

CORRECTION: The governor’s budget also recognizes savings in fiscal 2012 from pension changes that he is recommending, but still require legislative approval. Analyst Michael Rubenstein said those change could save next year’s pension contribution could be underfunded by $180 million to $220 million.

CLARIFICATION: The governor’s plan calls for capturing $120 million of those saving to help balance the budget, according to Rubenstein. This will underfund the contribution rates certified by the Board of Trustees by $120 million, but the governor says the reduction in liabilities by his pension changes will leave the plan in the same funded status at the end of fiscal 2012 as it would be if no changes to benefits or funding were made.

The analysts also said there was “potential underfunding” of $245 million in five different programs: Medicaid ($100-$125 million); Mental Hygiene Administration ($37 million); temporary assistance for needy families after Congress rescinded some funding ($34 million); loss of funding for some foster care costs ($10 million); low income energy assistance ($25 million.)

—Len Lazarick
Len@MarylandReporter.com