Hogan won’t release $80M in fenced-off funds

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ANNAPOLIS — Maryland’s budget director said Wednesday that Gov. Larry Hogan will not authorize the release of $80 million in funds fenced-off by the General Assembly, citing a flattening economy.

“Now is not the time to go into the rainy day fund,” said David Brinkley, secretary of the Department of Budget and Management. “We have to take a defensive posture to make sure that we can move forward.”

Hogan earlier this year drew a line in the sand, saying he would let the $80 million revert to the general fund and be used to build the state’s surplus.

Brinkley on Wednesday accused the legislature of playing politics with important programs. He cited concerns about a recently announced budget deficit in Virginia as well as concerns about what he said was lower than expected tax collections in Maryland as reasons for the administration’s caution.

Officials in Virginia announced last month that despite collecting $18.3 billion in taxes — a new record for that state — revenues were still $266.3 million short of expectations.

“We do expect that whatever we see change will carry forward to [the fiscal 2017] budget and probably the preparation for the [fiscal 2018] budget,” Brinkley said.

The announcement was met with criticism from House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr., both of whom said the governor was ignoring bipartisan compromises worked out during the 90-day session.

The decision has also cast doubts on whether Hogan, a Republican who campaigned on tax relief, will be able to provide broad-based tax cuts in the near future.

“Right now, certainly the governor would love to see additional tax relief in addition to what he had supported in the past,” Brinkley said. “But we have to deal with that as a long-term goal. Right now, we’re dealing with short-term challenges based on what we anticipate to be lower tax receipts in the short-term.”

An agency spokesman cautioned that Brinkley was “not doing previews of legislation next year. We have to look at this as we come.”

Brinkley said the flattening of the economy is likely to have a detrimental effect on the projected $360 million surplus for the current budget year but could not provide a new lower estimate.

More to spend

Hogan last month held back the nearly $80 million in state aid for teacher pensions, renovation of aging schools, Medicaid reimbursements and the demolition of the Baltimore City Detention Center. The legislature earlier this year approved a plan that fenced-off the funds, which had been moved from the state’s so-called rainy day account. Lawmakers stipulated an all-or-nothing spending requirement on the governor.

In all, there is about $174 million that Hogan had yet to spend. Of that, the governor will release more than $77 million, which includes none of the funds set aside from the rainy day account.

Busch and Miller, the leaders of the House of Delegates and Senate respectively, expressed disappointment in the announcement.

“Funding for the resources that the governor chose not to fund today are not partisan, and his choice will have ramifications in every county throughout our state,” Miller said. “I was hopeful the compromise reached during session would allow for the funding to move forward and am saddened this is not the case.”

Busch said the decisions exemplify Hogan’s lack of willingness to work with the Democratic-controlled legislature.

“The governor’s refusal to release money for critical public safety and education projects is another example of his administration’s inability to compromise with the General Assembly to help middle-class Marylanders across our State,” Busch said. “Maryland is a democracy, not a monarchy.”

A spokesman for the governor reiterated Hogan’s earlier vow not to spend the money and called the lawmakers’ tactics “the kinds of stunts that Marylanders have come to resent.”

“Unfortunately, all of this could have easily been avoided had the General Assembly opted to engage in frank conversation with the administration over budget items, instead resorting to self-admitted political tricks that ultimately don’t help anyone,” said Matt Clark in an email to reporters.

Medicaid, education

Brinkley said the administration will work to pay for some of the programs, such as Medicare reimbursements, through the existing budgets of each respective, affected agency, though some will be at lower levels than intended in the spending plan as approved. He said that would amount to about $37 million — less than half the amount earmarked by the General Assembly.

About $7 million within the existing Department of Health and Mental Hygiene budget will be used to help increase Medicaid reimbursements. That amount, along with a match from the federal government, would increase the reimbursement rates to 94 percent compared to Medicare, should the plan be approved by the federal government.

But the rates will not be retroactive to July 1, state budget officials said.

Physicians in Maryland took a 13 percent cut in rates when then Gov. Martin O’Malley announced in January 2015 a series of budget moves to reduce the budget deficit as he was leaving office.

Gene Ransom, chief executive officer at MedChi, the state’s medical association, praised the legislature for including money to help restore Medicare payments and Hogan for finding a way to partially fund that rate.

“This should not be a partisan issue and so far it hasn’t been,” he said.

Other funding, such as $6.1 million for the aging schools program, $19 million in state aid for teacher pensions, and $6.6 million for the demolition of buildings at the city detention center complex, will continue to be on hold.

The announcement Wednesday was criticized by the head of the state’s largest teacher’s union, who said she had hoped Hogan was “done playing political games with our kids’ education.”

“It appears that Gov. Hogan is more concerned with scoring partisan points than addressing overcrowded schools, lowering class sizes, and providing students and educators the support they need to be successful,” said Betty Weller, president of the Maryland State Education Association. “The change that Gov. Hogan has brought to Maryland is an increasing record of looking for every opportunity to shortchange our students and the hard-working educators who help them learn every day.”