Washington Report from Annapolis Vol 5 #1

January 28th, 2015

Greetings from Annapolis! As you have probably heard already, Governor Hogan’s FY16 budget was delivered to the General Assembly last week, on January 22nd. In this week’s update, I’d like to start a conversation about our State’s Operating Budget so that you can better understand both the current and future impacts of Governor Hogan’s budget. In the case of state spending and the unprecedented cuts in this budget, there will be impacts to all of us and I think it’s worth the time to explore these together. Each of us needs to be aware of the choices this Administration is making in what it calls “essential services” so that we might take appropriate action to preserve and protect our priorities.

Let’s Start at the Beginning

In many states, the Governor proposes a budget that the legislature may use as the basis for funding its operating budget or start from scratch. Maryland is largely unique in the strength of budgetary powers granted to its Governor. In Maryland, the Governor develops and submits annual budgets for review and approval by the legislature, but the General Assembly can only remove or reduce appropriations; it cannot increase funding levels. The General Assembly can, however, write mandates into law and budget language that can restrict spending until certain conditions are met (more in this below in the discussion of the Budget Reconciliation and Financing Act).

I’m Just a Bill—Actually 2 Bills

1. Budget Bill, Fiscal Year 2016 (HB70/SB70)

The budget, or Governor’s Allowance, must be submitted to the legislature annually by the third Wednesday in January or by the 10th day of session if it is the first year of a new term of office. This budget bill, which must be a balanced budget, is introduced in both chambers. For specifics on what the “Budget Bill” must go through before it must become law, read below.

Maryland’s Budget Process in 9 Not-So-Easy Steps

  1. The Governor releases the budget for the General Assembly to consider.
  2. For each legislative session, the House and Senate alternate which chamber will move the bill first. This year the budget bill goes to the House Appropriations Committee (Chaired by Delegate Maggie McIntosh). The Appropriations Committee can make changes to the Governor’s Allowance budget by recommending alternative cuts or restrictions of funds to achieve a balance budget.
  3. The budget goes to the full House of Delegates to be debated and passed.
  4. The House version of the budget is sent to the Senate Budget and Tax Committee (Chaired by Senator Edward Kasemeyer).
  5. The Senate Budget and Tax Committee reviews the budget and can make changes just like the House Appropriations Committee and then goes to the full Senate for passage.
  6. If there are any differences between the House and Senate versions (which there almost always are), each chamber appoints members to a “Conference Committee” to hammer out the differences between the chambers’ versions of the budget bill.
  7. The budget is then amended to reflect the Conference Committee negotiations.
  8. After passage of the Conference Committee report by both chambers, the budget is enacted and does not require the Governor’s signature. The Governor may not veto the operating budget or line items within it.
  9. The budget must be enacted by the 83rd day of session. If this does not occur, the Governor issues a proclamation that serves as notification for an extended session if the General Assembly does not enact the budget by the 90th day.

To really get into the weeds, check out Maryland’s Budget Process Legislative Handbook Series http://mgaleg.maryland.gov/Pubs/legislegal/2014-LegislativeHandbookSeries-Vol-4.pdf ]

2. Budget Reconciliation and Financing Act (The BRFA).

In order to make the budget work with existing law, we also must additionally pass the Budget Reconciliation and Financing Act, or the BRFA (pronounced BUR-fa). The BRFA reconciles the difference between existing spending formulas and newly appropriated amounts in the budget. For example, if under existing law the state is making payments of $100,000 for 9 years, the BRFA may adjust that to make payments of $90,000 for 10 years.

FY 2016 Operating Budget Allowance: A Quick Glance at the Governor’s Proposal.

Where We’ve Been

Maryland is not unique in dealing with the fiscal challenges presented by declining state revenues that are a result of the recession and what appears to be a very long road to recovery. Maryland, like Virginia, has been hit particularly hard by federal cuts like Sequestration that have had a significant impact on personal and household income. Over the last eight years, the Maryland General Assembly has made difficult, necessary and strategic decisions about how and what to fund to ensure that Maryland remains a leader in the areas that matter most to our constituents and to our economic recovery. Some of those choices included state furloughs, changes to the pension and teacher retirement systems, closures of state facilities and no increase in funding for state-aided programs and institutions. As a member of the House Appropriations Committee for the last four years, I stand by those choices that protected our investments in our workforce, local public education systems, delivery of affordable healthcare, protection of the environment, improvement of transportation infrastructure and innovations in biotechnology and clean energy, all while maintaining our AAA bond rating. Compared to other states, Maryland has done very well keeping our financial house in order and yet our forecasted revenues for the upcoming years are not matching our expenditures; hence we continue to struggle with a budget gap.

Below are some of the preliminary features of Governor Hogan’s budget proposal:

Is the Juice Worth the Squeeze?

As proposed, the budget may eliminate the estimated cash shortfall for the balance of 2015 and for 2016, but preliminary analysis of this budget projects a structural deficit in 2018 (the last year of Governor Hogan’s term). In the short run, the budget is balanced by making nearly $800 million in cuts and special fund transfers exceeding what is necessary to balance the budget. The major areas impacted are Public Education, Healthcare, and our State Workforce. Aid to local governments is impacted, as well as eliminating or delaying about $285 million in critical transportation safety and maintenance projects across the state.

Education Cuts

Reductions in public education spending across the state means increased class sizes, fewer teachers, and a potential 20% increase in tuition within the University System of Maryland over the next four years. Baltimore City Schools alone stand to lose over $35 million dollars in the proposed budget and would have to absorb the largest cuts in education aid of any jurisdiction in the state, by percentage and dollars. Direct spending for primary and secondary education to Baltimore City was cut 3.7% or $36,575,000. Additionally, Governor Hogan cut the formula called the Geographic Cost of Education Index in half which provides funding that helps 13 school districts that find it hard to attract and retain good teachers due to a high cost of living, working conditions, or other factors. This 50% reduction results in a roughly $11.5 million cut to Baltimore City School funding from that formula. Additionally Montgomery County and Prince George’s County lose $17.7 million and $20.2 million respectively.

Healthcare cuts

The budget cuts health funding for the elderly and developmentally disabled by nearly $200 million. In addition, the Medicaid provider reimbursement rate is cut which translates into less providers accepting Medicaid and decreases access to healthcare for those on Medicaid. For example, pregnant women making $22,000 per year would see a budget cut in their health coverage.

State Workforce Cuts

The proposed budget eliminates a 2% cost-of-living-adjustment or COLA for state workers that already took effect in January. This was a negotiated increase as a result of pay freezes and no COLAs for the past several years of difficult budgets.

Local Aid Cuts

Local aid is decreased to Baltimore City by 3.3% or $41,243,000, the largest cut to any county by total dollars. Baltimore also receives money from the statewide disparity grants which fund jurisdictions whose per capita income tax revenues are less than 75% of the statewide average. Our disparity grant was cut by $4,649,000, the largest cut of any other jurisdiction. This is particularly damaging because despite modest increases in personal income, we have yet to  recover from decades of a declining tax base and the relative high cost of providing services to our residents. We are not alone; Carroll County was also cut by 3.3% (the same percentage as Baltimore City) and Calvert County was cut 2.8%. This budget also cuts $2.7 million in local police aid to Baltimore County.

You can read the entire budget here: http://www.dbm.maryland.gov/agencies/operbudget/Pages/FY2016OperatingBudgetDocs.aspx

Despite the draconian approach to budgeting expressed in this budget, it is my goal and that of the House to work with the Governor and the Senate to ensure that we do not roll back the progress we have so carefully made over the last 8 years.

LET’S WORK TOGETHER! If this budget does not represent your values and priorities, please speak out! Some of the most persuasive things our colleagues can hear are your stories about how these cuts impact you personally. Send these stories to your Delegates and Senators and encourage your community members to do the same.  Stand by us as we propose reasonable paths forward that do not threaten the very things that make our State a great one.

The Beat Goes On: Committee Work

As you probably know, in my first term, I served on the Appropriations Committee and am now on the Ways and Means Committee. I am the only member from Baltimore City on Ways and Means. As such, I will be dedicating a good portion of my time to committee work to ensure Baltimore has the best representation possible and does not face disparate impacts from cuts to revenue and spending formulas without a fight.

I will continue to do my best to provide detailed updates and alerts via email and other meetings, and you can follow my daily activities and breaking news by liking my Facebook fan page facebook.com/delmarywashington43 or following me at twitter.com/DelMaryW. In addition, I encourage you to contact me with the issues that matter most to you at mary.washington@house.state.md.us or call the Annapolis office at (410) 841-3476. I look forward to hearing from you.

In partnership,

Delegate Mary Washington