Tuesday, February 24, 2009

Obama Means Less Drama for Maryland’s Budget (Updated)

The recently passed federal stimulus package will help Maryland balance its FY 2010 budget with fewer program and aid cuts than originally proposed by the Governor. But as of right now, the FY 2011 budget is projected to have a deficit of $630 million.

We reproduce the summary documents from the Governor’s revised budget plan below:

A few notes:

1. Federal dollars free up state money
The state is applying net federal additions in the amounts of $382 million in FY 2009, $435 million in FY 2010 and $392 million in FY 2011 to its operating budget. These include writing off assumed federal stimulus of $350 million in both FY 2010 and FY 2011. The actual federal funds proved to be much larger than the Governor originally assumed. The extra federal money enables the state to avoid layoffs, support community colleges and bolster some of its departments (including the state police).

2. Medicaid and education
These are the two biggest uses of federal non-transportation money. The state received increased Medicaid assistance of $420 million in FY 2009, $560 million in FY 2010 and $300 million in FY 2011. On education, the state using $721 million of federal assistance to fully fund the Geographic Cost of Education Index, growth in broader Thornton education spending and growth in teachers retirement costs. This is a boon to the Montgomery, Prince George’s and Baltimore City governments and is greatly damaging to Senate President Mike Miller’s efforts to pass teacher pensions down to the counties.

3. More aid to the counties
All counties except Worcester and Somerset will receive more education aid. The leaders in terms of aid increases will be Prince George’s ($41.5 million), Baltimore City ($30 million), Montgomery ($26.8 million), Anne Arundel ($10 million) and Baltimore County ($9.5 million).

The budget problems may be eased for the moment, but they are hardly solved. The Comptroller is due to release more revenue estimates next month. The Governor assumes revenue writedowns of $300 million in FY 2009 and FY 2010 and $200 million in FY 2011, but the actual losses could be greater. The Governor projects a $630 million deficit in FY 2011 and outyear deficits could be exacerbated by the disastrous results of the slots bids. And the counties still have major problems. Montgomery’s $26.8 million education aid increase is nice, but it is still facing a half-billion dollar deficit.

I am sure the politicians will have great fun dealing with next year’s budget problems as they are running for re-election!

Update: Montgomery County's FY 2010 budget deficit is now $520 million.