December 16, 2011

Spending committee recommends halving next year’s deficit; both cuts and tax hikes possible

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By Len Lazarick
Len@MarylandReporter.com

Legislative leaders Thursday night embraced a “balanced approach” to balancing next year’s state budget, recommending that the governor halve the ongoing billion-dollar deficit using both unspecified spending cuts and possible tax hikes.

Money

Photo by Tracy Olson

The Spending Affordability Committee, dominated by Democratic fiscal leaders, rejected Republican attempts to balance the projected $15.9 billion general fund budget without any tax hikes. Republicans also failed to put a lower cap on new debt as the committee encouraged Gov. Martin O’Malley to “accelerate job-producing investment in infrastructure construction.”

House Republican Leader Tony O’Donnell said the committee’s action put no limits on spending as it was supposed to do. The fiscal 2013 budget is expected to go up by at least $700 million. “The governor could raise significant taxes,” O’Donnell said.

House Speaker Michael Busch said that the most of any increased spending would come from “natural growth of the budget” from spending mandates for education, increases in Medicaid, health care and social services.

Warren Deschenaux, the legislature’s fiscal chief, said, “The governor has to find a billion dollars somewhere.” Half of that has to carry over into the following years either through spending cuts or what he called “other mechanisms,” which include raising revenues and shifting costs to county governments, such as teacher pensions.

Under the scenario the committee approved, “revenues and spending are going to roughly grow at the same pace,” Deschenaux said.

The committee recommended that there be no growth in employees at executive branch agencies, which have seen 5,500 positions cut in the last decade. There are now 50,534 state workers.

The number of employees in higher education continues to grow, with 2,900 positions added in the decade, including 571 positions this year. University officials said the job growth is almost all funded by outside grants, not state taxpayers. O’Donnell wanted to see that documented.

Direct personnel costs make up about 20% of the state operating budget, with most of the budget being spent on education, health care and social services.

There was no discussion of transportation funding. After the meeting Senate President Mike Miller said he hoped the General Assembly would pass at least $500 million in new revenues for projects that would create jobs.