Balancing the State's Operating Budget

Balancing the State's Operating Budget
Recognizing these tough economic times, the legislature balanced the State's operating budget for next fiscal year, while protecting our priorities of education, higher education and public safety. This budget continues to constrain spending to offset significant declines in revenues due to the global economic recession.

Maryland balances its budget every year. We do not deficit spend or put future bills on the State credit card. Over the last four years, the State's General Fund budget decreased 3% while continuing to increase education funding and healthcare funding for Marylanders. Even if the American Recovery and Reinvestment Act funding, commonly referred to as stimulus money, is included, the Governor and legislature have limited increases in funding to less than a third of spending increases from the four years prior.

The FY11 budget:

• Cuts spending by $525M in spending for next fiscal year, bringing the State's General Fund budget down to $13.19B. State General Fund spending - the funding source that we fund most core programs out of - is below 2007 levels. Overall spending also decreases almost 2% from last year. (FY10= $32.2B compared to FY11= $31.9B)
  
• Makes government smaller and more efficient, with 4,000 fewer State government positions over the past four years, including eliminating 600 positions in this year's budget.
  
• Maintains our commitment to K-12 education, one of the only areas in the budget to increase. Next year, the State will provide $5.7B in education aid for teachers, textbooks, and other important education needs. This budget supports 849,000 public school children in Maryland.
  
• Continues our commitment to higher education, as well, providing $1.2B in funding to our colleges, universities and community colleges. This budget supports 121,235 students who want to attend a Maryland school next year and the 140,000 community college students.
  
• Takes prudent steps to curtail outyear increases by cutting over $1 billion from the projected 2012 structural gap.
  

The legislature leaves nearly $830M in cash reserves, including the State's Rainy Day Fund. Maryland is again one of only seven states in the country to retain the coveted triple-A bond rating, even through this global recession. The independent Fitch Ratings Agency has done a comprehensive review of the State's finances and highlighted that Maryland's “financial operations are conservative”.

Studying Teacher Pension Funding
One of the biggest cost drivers in the growth of the State's budget is the cost of teacher pensions. This year, the cost increased nearly $130 million dollars and next year, projections are that the cost of teacher pensions for the State will increase another $100 million. The Senate proposed to phase-in a cost sharing of teacher pensions with local governments, beginning in Fiscal Year 2012. The House of Delegates rejected the cost shift plan. Instead, the legislature has agreed to create a Sustainability Commission of private sector experts to take a comprehensive look at the State's retirement system - which supports State employees, current retirees and teachers - and make recommendations to the legislature by December.

Investing in the State's Capital Assets
The State will continue to have a robust capital budget in order to generate jobs in the construction sector. The construction industry in Maryland has suffered significant job losses as a result of the crisis in the housing market that began in 2007. Prior to the crisis, construction employment in Maryland was strong, exceeding 190,000 for all of 2006 and most of 2007. Since June 2007, however, employment has fallen by 24%, to 145,400 in October 2009, the latest period for which figures are available. Over this fiscal year and next (FY10 and FY11), capital budget spending will provide 44,913 direct jobs.

The capital budget includes:

• $250M in school construction funding, bringing the full funding to $1.25 billion for this term.
  
• $350M in funding for higher education facilities, including $73M for historically black institutions and over $80 million for community colleges.
• $330M for environmental programs, including $20M for the Chesapeake Bay 2010 Trust Fund, which provides funding for cover crops and other environmental programs to help restore the health of the Bay and Atlantic Coastal Bays. We funded $100M to support Maryland's agricultural economy and land preservation. The capital budget includes $16.9M in Program Open Space funding, $18M in the Maryland Agricultural Land Preservation Program and $65M in the Rural Legacy program. Maryland's agricultural economy supports 350,000 jobs and $17B in revenue, according to the Maryland Manual.
  
• $26M for new public safety facilities. This funding will help the men and women of law enforcement continue to fight crime across the State - an investment that has lead to the lowest levels of violent crime since 1986.
  
  

No Raise for Legislators
The legislature rejected a recommendation from the General Assembly Compensation Commission, a five member constitutionally mandated, citizen commission, to increase legislative pay in 2013 and 2014. In rejecting the pay raise, we tightened rules that prohibit future legislators that are convicted of a felony or misdemeanor related to their public office from collecting any pension at all. By 2014, legislative salaries will not have increased in 8 years and over 80% of legislators have participated in the voluntary furlough program over the past two years.