Cumberland Times-News

January 16, 2013

O’Malley’s budget presses job creation, boosts Rainy Day Fund

Md. governor also proposing tax credits

Brian Witte
Associated Press

— ANNAPOLIS — Gov. Martin O’Malley said his budget plan for the next fiscal year aims to boost jobs and protect the state from the financial uncertainty caused by what he described as a potentially self-destructive Congress that will consider deep spending cuts in the next several weeks.

O’Malley said he would increase Maryland’s Rainy Day Fund from 5 percent to 6 percent of the state’s $16 billion general fund. He’s enlarging the state’s fiscal cushion in anticipation of financial negotiations in Washington that have yet to play out. The increase of $153 million or more would create a Rainy Day Fund of about $921 million. Altogether, the Democratic governor’s plan includes leaves the state with about $1.1 billion in cash reserves to help adjust to federal cuts.

“The reason for doing that is a safeguard against, you know, the hara-kiri Congress down the street and what they might do to our economy because of ideology,” O’Malley said at a news conference.

The governor estimates his capital budget plan, which includes $336 million for school construction, will create 43,000 jobs. That would include about 8,200 jobs for school construction, 1,900 from a rental housing works initiative and about 16,240 jobs in transportation projects.

“This is a jobs budget,” the governor said.

O’Malley also is proposing some tax credits. They include a new cybersecurity tax credit to help bolster the governor’s goal of making Maryland a hub for developing technology in that field. The budget also expands the state’s biotech tax credit.

T. Eloise Foster, O’Malley’s budget secretary, said the budget has grown by about 3.3 percent. The state’s total budget, including federal money, is about $37 billion.

The budget also includes a 3 percent cost-of-living adjustment for state employees. The governor’s budget plan proposes no state employee furlough days, which have been used to save money in recent years.

Lawmakers will now spend most of the remaining session, which began last week and ends in April, fine-tuning the governor’s plan.

Unlike last year’s budget, O’Malley said his plan includes no new tax increases. For example, there are no new revenue proposals for transportation. The governor did not include a tax proposal specific to transportation funding in last year’s budget, either. However, he proposed a measure weeks later to phase in a 6 percent sales tax on gasoline. It did not get any traction last year. He declined Wednesday to discuss any plans to seek new transportation revenue this session.

The state’s budget is in better shape than it has been in recent years, as Maryland has slowly recovered from the recession and made budget cuts and raised taxes. However, uncertainty remains in Washington over the “sequester,” or across-the-board spending cuts that were postponed in the partial resolution of the “fiscal cliff” on Jan. 1. The cuts now would start on March 1.

Foster said she is confident the cash reserves in the plan would be enough to address cuts at the federal level.

“The earlier reports indicated that probably the impact on Maryland’s budget would be in the neighborhood of $400 million, so I think we’re going to be fine,” Foster told reporters after the governor’s news conference.

O’Malley’s plan also knocks down what was once an ongoing budget deficit of about $2 billion to about $166 million. Foster said she decided not to knock out that remaining $166 million long-term deficit due to the uncertainty in Washington.