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O’Malley slashes budget ahead of exit

(Jan. 8, 2015) Gov. Martin J. O’Malley will offer up to $400 million in budget reductions at the last Board of Public Works meeting of his eight years in office.
The reductions, which were not detailed, will be O’Malley’s last chance to erase a projected budget shortfall of about $400 million in the current year before Republican Gov.-elect Larry Hogan takes office on Jan. 21.
O’Malley said the budget reductions will total between $350 million and $400 million when presented Wednesday to the three-member panel that includes himself, Comptroller Peter V.R. Franchot and state Treasurer Nancy K. Kopp.
The proposed cuts are likely to include some of the same budgetary moves used in July when O’Malley and the board cut $84 million just two days into the fiscal year.
O’Malley said that political opponents have criticized his budgetary moves, which he said will edge toward $10 billion over his two terms, “not being real.”
In past years, O’Malley has acknowledged that what he sometimes refers to as cuts are reductions in expected spending or budget growth. Over his eight years in office, the state budget has grown by about $1 billion annually.
Kopp, the state treasurer, said a preliminary briefing given to her and other officials included reductions, transfers and some contingencies that would require some legislative action when the General Assembly returns for the 2015 session.
She said some of the proposed cuts come prior to the next Board of Revenue Estimates meeting in March, when legislators will get an updated picture of the state’s finances.
“Maybe they won’t all be needed,” Kopp said. “The cuts won’t be pain-free but it’s the prudent thing to do.”
In December, the Board of Revenue Estimates projected that state revenues would be $271 million less over the current and fiscal 2016 budget years than originally expected.
That write-down resulted in a growth of the projected budget deficit that would top $1 billion over the next 18 months including $400 million in the current year.
Following the Board of Revenue Estimates meeting, Franchot, a member of that board, called on O’Malley to make cuts prior to leaving office.
On Tuesday, Franchot said he would be “fully supportive of the governor’s proposal.”
“It’s very prudent from a fiscal standpoint that we get ahead of the deficit,” Franchot said.
Earlier this year, the legislature approved a $39 billion spending plan, a nearly 5 percent increase over fiscal 2014. O’Malley and the three-member board can cut that budget as much as 25 percent without additional legislative action.
O’Malley’s expected cuts are the second that the board has been asked to make since July.
In that month, O’Malley and state budget officials said the reductions were needed in anticipation of expected reductions in projected revenue that would be announced by the Board of Revenue Estimates at its September meeting.
Included in the unanimously approved cuts were $77.1 million in actual spending — an amount equal to about one-half of 1 percent of the state’s $16.1 billion operating budget.
Other cuts made at that meeting included:
• Nearly $19.4 million in reductions to a state health insurance funding pool.
• Nearly $17.9 million in various cuts to the Department of Health and Mental Hygiene.
• Some $11.3 million from the Department of Human Resources, including $9.5 million as the result of what the state says is a declining foster care caseload.
• $1.45 million from the Office of the Public Defender, all but $150,000 of which is attributed to “decreased caseloads and reduce funding to reflect decreased need for contractual social workers and temporary staff.
• More than $7 million in reversions and transfers from special funds.