Revenue shortfall serious; Medicaid, universities will bear most of the burden
The Hogan administration will ask the Board of Public Works to approve $82 million in spending cuts from the current state budget to meet a revenue shortfall.
The Hogan administration will ask the Board of Public Works to approve $82 million in spending cuts from the current state budget, including cuts to colleges and universities, local governments and Medicaid.
The proposal, which will go to the board next week, reflects an expected revenue shortfall. The board is made up of Republican Gov. Larry Hogan and two Democrats, Comptroller Peter Franchot and Treasurer Nancy K. Kopp.
Budget Secretary David R. Brinkley outlined the proposed reductions to the state’s $43 billion budget in a conference call Friday. He presented the action as part of Hogan’s strategy to address an expected budget gap of $175 million to $225 million.
Brinkley echoed points raised by the General Assembly’s chief budget analyst, Warren Deschenaux, at a briefing this week. Deschenaux, who has been a target of Hogan administration criticism, warned lawmakers that the state can’t continue to spend more than it is bringing in. “He’s absolutely right,” Brinkley said. Deschenaux said the move was “not unexpected.”
“The magnitude of the action nowhere near addresses the full dimension of the problems, but it’s a start,” he said. “We can expect to see further retrenchments as we move through the budget.”
Brinkley presented the proposed cuts as Hogan’s second step to address a revenue shortfall. The secretary said the first was Hogan’s decision this year to withhold $80 million the legislature had earmarked for local school systems and improved compensation for physicians who care for Medicaid patients, among other spending.
“We’d been in an $80 million deeper hole had he not done so,” Brinkley said.
Some of the cuts reflect declining needs for services or are mitigated by shifting funds from other sources, Brinkley said.
The largest single cut, $20 million for Medicaid, would be cushioned by shifting funds from the state’s Cigarette Restitution Fund, created by a legal settlement with tobacco companies.
The University System of Maryland would absorb $18.3 million in cuts. That would require the abolition of 60 vacant positions and 41 that are currently filled, officials said.
Joe Vivona, the system’s vice chancellor for administration and finance, said cutting the 41 filled positions doesn’t necessarily mean layoffs. He said the system has enough turnover that it probably can use new vacancies to avoid layoffs.
Vivona added that $4 million of the reduction will be offset by transferring money from the Higher Education Investment Fund, leaving a net $14 million reduction. “This I think we can handle,” he said. “It’s when you have repeated cuts you see a danger to academic quality and enrollment levels.”
Meanwhile, Brinkley said, a $9 million cut to the Department of Juvenile Services reflects a lighter caseload than expected.
Brinkley said the only cut to local governments would be a $4 million reduction in certain grants. Baltimore and Baltimore County would not be affected. Prince George’s County would take the largest cut, about $3.5 million.
The administration is also proposing to reduce the budget for Temporary Cash Assistance payments to the poor. According to the budget department, the need for such money has steadily declined in recent years.
Among those feeling the impact would be Maryland’s private colleges and universities. The administration is proposing to trim $4 million in state aid to those institutions. The so-called Sellinger program had received a 19 percent boost in this year’s budget. The board is being asked to cut the increase in half.
Overall, the cuts amount to a roughly 1 percent reduction in appropriations for the targeted programs. Brinkley said the revenue gap will be closed further with $12 million received as Maryland’s share of the $15 billion settlement with Volkswagen over its false claims about the environmental benefits of its diesel vehicles.
The public works board is empowered by law to make midyear budget reductions to reflect lagging revenues.
Franchot, a frequent ally of the governor, signaled approval of the administration’s plan.
“The comptroller appreciates Governor Hogan’s proactive attention to the fiscal challenges facing our state, and he’ll be reviewing the specifics in the package submitted by Secretary Brinkley as soon as possible,” said Peter Hamm, a Franchot spokesman.
A spokeswoman for Kopp said she would review the proposed cuts and be prepared to vote Wednesday.
The request to the board for budget cuts is the first by the Hogan administration. The board in January 2015 approved $205 million in cuts proposed by outgoing Gov. Martin O’Malley.