ANNAPOLIS — Gov. Martin O’Malley’s budget would once again raid transportation funds, but protect the state’s economic development programs in overcoming a $1.6 billion shortfall.
O’Malley described the $34.2 billion spending plan for fiscal 2012 as his toughest yet. But after winning reelection in November in a campaign that centered on jobs and the economy, the governor stressed pro-business aspects of his budget in a briefing Friday.
“The solution as people look down the road at the budget problems we face, the biggest variable is how quickly the economy recovers,” O’Malley said. “That’s why our top priority needs to be creating jobs, saving jobs, retaining jobs and improving the conditions that allow our businesses to save and create jobs.”
Donald C. Fry, CEO of the Greater Baltimore Committee, said the proposal is a good start in the eyes of the business community.
“Whenever you have this sort of budget challenge, you get pain spread to every category,” said Fry, a former lawmaker who served on budget committees in both houses of the General Assembly. “I think he’s done a good job of minimizing the impact on what I think are the categories that are key to economic development.”
Chief among those, said Fry, are public schools and higher education.
O’Malley cut $94 million in anticipated K-12 education spending in his plan, holding funding steady at $5.7 billion. Public colleges and universities would see $5.3 billion, and tuition would increase by 3 percent.
“We do invest a lot in education,” O’Malley said, “and I think that’s a sound economic development strategy.”
The bottom line at the Department of Business and Economic Development would grow by $4.9 million under the governor’s proposal, and many of the key business incentives run by the department are shielded from cuts under the plan.
DBED’s stem cell research fund would return to $12.4 million after a $2 million cut this year. Another fund that doles out small business loans and lines of credit would increase slightly to $11.3 million and the biotechnology tax credit would once again total $8 million.
The Maryland Economic Development Assistance Authority Fund, which offers a variety of grants, would see $3 million more in state funding in fiscal 2012. And the film production tax credit would be held steady at $1 million.
Grants to minority- and women-owned businesses would see the biggest boost next year, the increase from $1.9 million this year to $6 million due to a dedicated stream of slot machine revenues.
“Anything that helps promote job growth is important to Maryland’s economy right now,” Ron Wineholt, a Maryland Chamber of Commerce vice president. “Especially in hard times, we need to encourage businesses to come here, or stay in Maryland.”
On Thursday, a well-known Maryland economist told a Senate committee the state could take advantage of the economic downturn by ramping up business incentives at DBED.
“Other states are going to slash their other business development budgets significantly,” said Anirban Basu, chairman and CEO of Sage Policy Group Inc. “They’re going to be weaker in business retention and attraction.”
O’Malley’s proposal would maintain the 90 percent reduction in local highway aid, sending $134 million to the counties and Baltimore in 2012.
Howard County Executive Ken Ulman said the cuts, if they continue, will mean “more potholes.”
“You can do that for a couple years, but you start going much further, and you’re talking about rebuilding roads,” he said.
The budget includes a $34 million for the Red Line light rail system planned for Baltimore, and $30 million for the Purple Line in Montgomery and Prince George’s counties. There would also be $47.4 million for improvements to MARC in the $639 million for transit projects. Road projects would total $815.9 million.
The proposal would, however, transfer $60 million from state highway funds, which would be replaced by bonds.
“It’s just another hit to the money that is available,” Fry said of the transportation proposal. “It doesn’t move the needle forward. At best, it holds the line.”
Requiring state employees to contribute more to their retirement plans and other changes to health care costs would save $132 million. Wineholt called those changes “encouraging.”
One of the largest cuts in O’Malley’s budget would lower Medicaid reimbursements to hospitals by $264 million could.
“That reduction could very well be passed on to the private sector in the form of higher health insurance cost,” Wineholt said.
KEY GENERAL FUND REDUCTIONS
-Medicaid payments to hospitals, $264 million
-Employee retirement reforms, $104 million
-Level fund K-12 education, $94 million
-Higher education, $55 million
-Local aid, $52 million
-Early retirement program, $40 million
-Employee and retiree prescription health costs, $28 million