By Len Lazarick

Gov. Martin O'Malley

Gov. Martin O'Malley

Gov. Martin O’Malley told reporters Thursday that “yes, perhaps” tax hikes would be part of next year’s proposed budget as part of a “balanced approach,” but he declined to be more specific.

O’Malley said that any increase in the $30 annual flush tax that funds cleanup of waste water flowing into the Chesapeake needs to be done “in a more progressive way that recognizes consumption and allows for some relief for someone that uses less.”

He said it was unfair that a senior citizen living in an impoverished area of Baltimore should pay the same as someone “living in a giant McMansion.”

Meanwhile, he said some sort of increase in the gas tax might be necessary since the flat 23 cents per gallon has been in effect for 20 years. He tied the gas tax hike to plans to spend more on highway and transit construction to create construction jobs.

Enhanced job creation “will be a product the art of the possible in the arena of political compromise,” O’Malley said, “where the legislature certainly understands and feels the pain that people feel from this recession, but also appreciates that a better tomorrow requires investments.” In other words, legislators might be reluctant to pass tax increases.

“Ever since this recession hit, we have been relying almost exclusively, with some exceptions, on cuts,” O’Malley said. “That’s why we racked up almost $6.8 billion in cuts.”

In past years, the O’Malley administration has sometimes referred to this as reductions in increased spending. The overall state budget has actually grown since O’Malley took office in 2007 from $28.7 billion to $34.2 billion in fiscal 2012, a 19% increase. But in order to balance the budget each year as required by the constitution, the governor has had to ask the legislature to cut mandated and automatic increases in spending or entitlements by a cumulative $6.8 billion.

O’Malley’s unusual roundtable with reporters covered a wide range of issues in a PowerPoint presentation focusing on the administration’s performance toward meeting its 15 major goals.

Governor defends audits

O’Malley also defended the administration’s response to a wide range of legislative audits in the past year finding millions in misspent funds, failure to collect federal dollars or identify fraud in a number of departments, especially involving the Medicaid program.

Perhaps anticipating questions about the audits, the StateStat office, which reviews the audits findings, produced a slide (not available online) showing that the number of critical findings by legislative auditors declined from 1,045 in 2007 to 844 this year. Repeat findings showing the same financial or performance problems “have steadily fallen from 45% in 2005 to 26% in 2011,” O’Malley said. “In other words, when they tell us once, they don’t have to tell us twice, or at least not as frequently.”

O’Malley said there were a number of specialized firms that “help us identify fraud and waste” with sophisticated technology, and “help us increase our recovering” of incorrect reimbursements.

Another problem is “very, very old legacy [IT] systems throughout state government,” that don’t keep track of payouts efficiently.

When he took office in 2007, “one of the biggest surprises for our team was how much further behind state government was behind city government,” said O’Malley, the former mayor of Baltimore.

“There’s still plenty of room for improvement in Medicaid and Medicaid recovery,” O’Malley said,” and a lot involves these legacy systems.”

Beth Bluer, head of the StateStat performance measuring office, said “the eligibility for Medicaid is one of the most antiquated systems we have in state government.”

O’Malley Chief of Staff Matt Gallagher said there were major appropriations in the coming budget proposal to improve Medicaid IT systems.