The Board of Public Works is expected to take up nearly $121 million in proposed spending cuts in response to sharp declines in state revenues as a result of the COVID-19 pandemic.
State officials have roughly six weeks to decide how to close an expected decrease in revenue that will approach if not exceed $1 billion in the current year based on updated projections released last week. The reductions proposed for the Board of Public Works meeting Wednesday mark the first of what could be several rounds of proposed reductions before the fiscal year ends on June 30.
The biggest cut — $97 million — would come from the state reserve fund.
Two-thirds of that, about $62 million, would be money fenced off in the current year’s budget that Hogan has said he will not spend on the desired purposes.
Another $35 million would be taken from funding dedicated to the Washington Metropolitan Area Transit Authority.
State law allows the three-member board, comprised of Gov. Larry Hogan, Comptroller Peter Franchot and Treasurer Nancy Kopp, to trim up to 25% of an agency’s budget without legislative approval. For the last several weeks, Lt. Gov. Boyd Rutherford has presided over the meetings in Hogan’s stead as the governor focuses his efforts on the daily management of the pandemic mitigation in Maryland.
The board made similar cuts under O’Malley during the most recent recession.
Kopp said the goal is to find “a combination of cuts and, I assume, balance transfers of funds as we have to have a balanced budget.”
Those cuts should not be taken all at once but rather in phases as it becomes clearer how deep the revenue declines are and how the state is recovering, Kopp said. The treasurer said some thought will be given to how cuts could affect other issues, such as whether reductions to school construction and renovation would also mean hurting jobs in the state.
“It’s not simply a question of cutting,” said Kopp.
Kopp, speaking last week, said she hoped the cuts this time would be done over a series of time rather than all at once. State Budget Secretary David Brinkley appeared to agree and said the state will deal with the current budget year first.
“The bottom line on how that ends up sets the stage for ideas and consideration of the FY21 budget,” said Brinkley.
The Board of Revenue Estimates and outside economists project that state governments will need years to recover from the economic slowdown from the pandemic.
Businesses in the state have similar concerns as the response to the virus, which included closing a large number of non-essential businesses across the state, also threw one in five working Marylanders onto the unemployment line.
Estimates released last week by the Board of Revenue Estimates Thursday anticipate a decline in state revenues between $925 million and $1.1 billion by June 30.
Hogan enacted a budget and hiring freeze on April 10 and said it was likely the state would spend down the state’s rainy day fund even as it seeks additional federal aid to cover revenue loses. He has not ruled out furloughs or layoffs of state employees.
The proposed cuts on Wednesday’s BPW budget also include more than $10.5 million in grant funding for public schools and community colleges. About $7.6 million would come from unallocated funding for grants for public school safety projects. Another nearly $3 million comes from unallocated funds for the Community College Facilities Renewal grants. The Department of Budget and Management said no projects will be canceled.
The proposed reduction represents nearly 15% of the state reserve fund.
That funding would be replaced in future years with bonds — something that Gov Larry Hogan criticized then-Gov. Martin O’Malley for doing during the Great Recession.
Also on the chopping block is $7 million in reduced funding for the Heritage Structure Rehabilitation tax credit within the state Department of Planning. The proposed cut represents more than 24% of the department’s budget for the current year.
The board will also consider a proposed $5 million reduction to the Department of Housing and Community Development. More than $4.2 million would be taken from unallocated funds set aside for the Baltimore Regional Neighborhood Initiative. The balance would come from a strategic demolition program. The proposed cuts represent nearly 14% of the department’s budget.
None of the reductions come from state debt payments, mandated public school funding or salaries of public officials.