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Hogan administration eyes rainy day fund to avert deep cuts — for now

Secretary of Budget and Management David Brinkley on Jan. 14, 2020. (The Daily Record / Bryan P. Sears)

Secretary of Budget and Management David Brinkley on Jan. 14, 2020. (The Daily Record / Bryan P. Sears)

Maryland Budget Secretary David Brinkley told the Board of Public Works that the state could rely on savings from hiring and spending freezes as well as the state’s rainy day fund to cover this fiscal year’s revenue shortfalls driven by the COVID-19 pandemic.

In the meantime, some $121 million in cuts approved by the three-member panel Wednesday set the state up to finish out the current budget year and set the stage for what are seen as tougher decisions in the future. Maryland is required to finish the year with a balanced budget.

“We have the resources to do that,” Brinkley told the board.

“We’re trying to identify what we have to do to get across to the starting line for (fiscal) 21,” Brinkley told the board. “Then at that point and time, once we have a picture for what that is, we can then wrap our arms around some of the decisions that need to come to your attention. ”

In April, Gov. Larry Hogan announced hiring and spending freezes. He has also not ruled out possible furloughs or layoffs of state employees. Another option being considered is draining the state’s approximately $1.2 billion rainy day fund as well as using $350 million that has been amassed because of a larger than anticipated match of federal Medicaid funds and some unspent accounts.

“We don’t know what our final balances will be,” said Brinkley. “We have sufficient funds in the rainy day fund to get us to move forward through this year and the beginning of next year. That is when we’re going to have to see some critical decision making moving forward.”

The three-member Board of Public Works, chaired by Lt. Gov. Boyd Rutherford, voted unanimously to approved nearly $121 million in budget cuts from the current year that will be used to offset projected revenue shortfalls.

“That’s just the beginning,” said Comptroller Peter Franchot, one of the board’s members. “We’re going to have significant reductions  down the road. I don’t want to leave any false hope for people that this is going to be a minor bit of surgery. It’s the new fiscal reality that we’re going to have for the next several years.”

State law allows the three-member board, comprised of Gov. Larry Hogan, Franchot and Treasurer Nancy Kopp, to trim up to 25% of an agency’s budget without legislative approval.

“It’s $120 million so it’s not nothing,” said Kopp, who compared the initial round to searching the sofa cushions for loose change.

“Coming in 2021, I fear will be very different sorts of cuts than these,” she said.

Rutherford said many of the tougher decisions, including whether to make cuts to aid to local governments, have not yet been necessary but warned that will likely not hold.

“We’re going to have to look at virtually everything for the (fiscal) 21 budget and how we address that,” Rutherford said. “So the counties and the locals are likely to be asked to participate in all this, as well. It’s going to be a challenging year.”

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. Some cuts to the budget year that begins July 1 could come as early as this summer.

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. That panel, which includes Franchot, Kopp and Brinkley, projected even sharper declines in the coming two budget years as the state attempts to claw its way back to pre-pandemic revenue levels.

“We still do have a way to go,” Brinkley said. “We’re committed to doing what is necessary and using the tools at our disposal in order to continue providing essential government services and to get our citizens and state on a glide path to recovery.”

 

 


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