Assembly’s last-minute maneuvers could leave state $70M in the red

The state’s chief fiscal analyst warned Gov. Martin O’Malley on Tuesday to not sign any bills that impact state revenues or spending until Maryland’s out-of-balance “doomsday” budget is repaired.

A budget containing some $500 million in cuts was enacted last week when the General Assembly failed to pass two companion bills that shifted the burden of teacher pension costs to local jurisdictions and raised taxes for the wealthiest Marylanders.

Despite the cuts, the fiscal year 2013 budget spends almost $700 million more than the fiscal 2012 budget and is not balanced. Maryland’s coffers would be $70 million in the red on July 1 unless a special legislative session is called to increase revenue. Maryland’s constitution requires a balanced budget.

If a special session is not called, the Board of Public Works would have to approve an additional $70 million in cuts to state agencies.

Warren G. Deschenaux, director of the state Office of Policy Analysis, said the governor should refrain from signing bills that reduce revenue or increase spending until the operating budget gap is closed, one way or the other.

The budget passed by the legislature included contingencies in case lawmakers could not agree on one of two revenue bills, but Deschenaux said analysts were not prepared for both measures to fail.

“Part of the contingent deductions depended on some part of [budget reconciliation and financing act] passing,” Deschenaux said. “No one would have imagined that both the revenue bill and the BRFA would fail.”

The “doomsday” budget, crafted as a warning to tax-leery members of the General Assembly, was never meant to be enacted. Instead, it was supposed to act as a warning to legislators who were reluctant to approve tax hikes.

But the clock struck midnight and the session ended last Monday before the entire budget package could be passed in both chambers.

Budget negotiations were stymied by disagreement over a bill that could have put a casino in Prince George’s County and table games, like blackjack, in all Maryland gambling facilities.

Deschenaux said the gambling issue complicated matters but added it wasn’t his place to tell legislators whether it was a good idea to link gambling legislation with revenue negotiations.

“Whether they come back and try to implement what they were considering or not, I hope they’ll look at it with a fresh eye, and look to improve on it and not just repeat it,” Deschenaux said. “If they go back and do the same thing [we may end up back here].”

“It would be a ghoulier place, that’s for sure” with the cuts, he said.

But not everyone is convinced the “doomsday” budget is aptly named.

In a Tuesday morning press conference, members of the House of Delegates’ Republican caucus said the budget enacted by the assembly did not warrant a special session.

“Our caucus offered a well thought-out plan that reduced the budget and avoided tax increases, but it was solidly rejected on party lines,” House Minority Whip Jeannie Haddaway-Riccio, R-Talbot, said in a statement released by the caucus.

“Now, we have the Democratic majority’s budget that was haphazardly crafted as a coercion tool for tax hikes … This scheme backfired and now they want a do-over.”

The “do-over” would cost about $20,000 a day, including hotel accommodations and meals for lawmakers, Deschenaux said.

House Minority Leader Anthony J. O’Donnell, R-Calvert and St. Mary’s, said the budget was not one the Republicans would have crafted but that it did “not demand a special session.”

If a special session is ultimately demanded by O’Malley or jointly called by House Speaker Michael E. Busch, D-Anne Arundel, and Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s, Deschenaux said fiscal analysts would be ready. Staff are already preparing for the lawmakers’ return, in case they decide to seek an alternative to “doomsday,” he said.

Until that decision is made, O’Malley should be careful about what he signs, Deschenaux said. Maryland still has about a $500 million structural deficit, which won’t be dealt with until next year.

“Even afterwards, whether they implement the contingent reductions or they go with the plans they were proceeding with, [there will] still be a half-a-billion-dollar problem next year,” Deschenaux said. “They shouldn’t be in any rush to add to that.”