By Len Lazarick
A $36.9 billion state budget for fiscal 2014 easily passed the House of Delegates and state Senate Friday, with less Republican opposition than last year. The budget, HB 100, raises overall spending 3% and is $500 million less than Gov. Martin O’Malley originally proposed, largely by setting aside funds in case federal budget cuts impact state revenues.
There was none of the contention that led to an impasse last year and eventually a special session to resolve the budget in May. The major difference between the House and Senate budgeters was $100 million senators cut in pension contribution.
$100 million pension cut delays funding of future pension liabilities
The cut reduced the use of additional salary contributions from state employees and teachers passed in 2011 to $200 million, and the $100 million will be set aside in a “dedicated purpose account” to be used if revenues fall.
Del. John Bohanan, D-St. Mary’s and member of the House Appropriations Committee, said if the money is not needed by Jan. 1 to respond to revenue losses, $100 million will be put in the pension fund.
“The pension underfunding is still a huge burden over our head,” objected Del. Susan Krebs, R-Carroll.
The cut in pension contribution delays funding of future pension liabilities by a whole year, until 2024. Unions for state employees and teachers did not object to the move, which was designed to protect 2014 funding levels. When originally passed they had opposed increased salary contributions from their members and the limit on how those increased contributions would be used to fund future pensions.
Funds set aside for Rainy Day fund, impact of federal sequestration
The budget contains over $1 billion in fund balances, including the Rainy Day fund, surpluses and the set aside for the impact of federal sequestration.
“We’re within spitting distance of closing the structural deficit,” Bohanan said, with revenues now covering 99% of spending commitments. Five years ago, there was a $2 billion gap between revenues and expected increases in expenses.
House Minority Leader Tony O’Donnell complained that in the compromises with the Senate, Rainy Day Fund was reduced from 6% of the general fund to 5%, and the remaining structural deficit widened slightly.
Education funding, salaries goes up in budget
Among the major increases in the budget: School spending goes up $110 million or 2.2%; $25 million was added for school safety and security improvements at schools; state colleges and universities get 7% more, helping them to keep tuition increases to 3%; state employees will get both a 3% cost-of-living adjustment and merit increases.
Textbook aid to private schools, a sometimes controversial program, goes up by a third to $6 million.
Members of the House and Senate committees didn’t like the $7.2 million cut in this year’s mental health funding reported here on Friday, but “there’s nothing we could do about it,” Senate Budget and Taxation Committee Chairman Ed Kasemeyer told his Senate colleagues.
The House vote on the bill was 101-36; the Senate vote 37-8.
The final budget bill has not been posted on the Maryland General Assembly’s website. Page 169 of the latest iteration shows
all language associated with the “dedicated purpose account” has been stricken from the bill. The State can’t claim to be transparent when it fails to post the final bill in a timely manner.
The Federal sequester will have an adverse effect on Maryland for 10 years. Maryland’s initial “solution” is to borrow up to $100 million from its workers via delays in funding their future pension liabilities. Those effects have not been added to the structural deficit calculations. How does Maryland propose to fund the adverse effects during the next 9 years? What interest rate will Maryland pay
on this borrowed money?
Maryland’s CAFRs show the state has never paid its pension plan’s “required contribution” in any year since Gov. O’Malley took office. During O’Malley’s tenure, the deficiency has grown to $650 million from about $200 million; last year alone that deficiency grew by $104 million. Yet, this “dedicated purpose account” never existed until the 2014 budget year. I don’t see how this “dedicated
purpose account” can be used to justify a balanced budget in view of the fact the state has withheld pension funding for many years without this account and now it uses this account to balance its budget (??)
I won’t even get into the bond rating agency criticisms of the state’s underfunded pension plan or the recent “constitutional amendment” designed to rein in the state’s need for creative borrowings. However, I suggest another constitutional amendment may be in order to curtail borrowing from the state’s workers.
Another year, another increase in MD’s budget. But heck, why not? Taxpayers still have a few cents rolling around in their pockets. The legislature is flush with funds for special projects thanks to 25+ revenue increases & gambling proceeds. O’Malley delivered the expansion of mass transit in the state at the expense of drivers unable to utilize these “public transportation systems” due to the limited areas that will be served by these two lines. He also got his windmills that every utility user will be on the hook at the low, low, low price of $1.50 per month estimated (we all know it WILL be higher). More money for “the children” & benefits for illegals. Less money for mental health (geez, where is Vinnie DeMarco’s mouth when he is needed). What a sad, sad joke on all MD taxpayers. Our august legislature should be so proud of the job they have done to MD. At least we don’t have an expensive special sesssion hanging over our heads giving these spend thrifts another chance to add even more regressive taxes.