Donald Fry: Amended budget continues recession-induced fund shifts and stimulus rescue

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By Donald C. Fry

The marked-up budget legislation for FY 2011 that emerged from the Senate Budget and Taxation Committee on Monday and gained Senate passage on Wednesday contains some significant, but largely anticipated, cuts to funding for stem cell research and aid to county governments, community colleges and private colleges.

The Senate budget proposes to cut stem cell funding by 50 percent, to $6.2 million. Overall aid to county governments will be reduced by 4.3 percent from FY 2010 funding levels. State funding for community colleges would remain at FY 2010 levels of $194.4 million, a $23 million decrease from the governor’s original budget. Aid to private colleges would also be level-funded at $38.4 million – a $13.5 million reduction from the governor's original budget.

Another proposed cut would reduce the state Tourism Board’s originally-budgeted funding by $1 million, leaving the tourism agency with $5 million – slightly more than its $4.6 million in FY 2010.

The budget legislation also continues lawmakers’ recession-induced trend of substituting funds from elsewhere for spending that would otherwise be drawn from the General Fund.

For instance, the amended budget proposal reduces overall expenditures from the General Fund by more than $500 million, but that includes a $350 million General Fund “reduction” in education funding that, as proposed by the governor, is being replaced by the same amount that will go to education from a local income tax reserve fund.

The legislation calls for the General Fund to repay the reserve fund $50 million per year between FY 2014 and FY 2020.

Nevertheless, even with the accounting calisthenics, this amended budget would reduce overall state operational spending in FY 2011, including general and special funds, by $361 million – or 1.1 percent less than projected spending for the current fiscal year.

So what happened to the rest of the almost $2 billion deficit that Maryland faced at the beginning of this session? Most of it will be covered by $1.6 billion in anticipated federal stimulus funding, including $778 million in a higher federal match for Medicaid, $422 million in funds for education aid, a $315 million enhancement in support for other federally-funded programs, and $76 million to support costs traditionally paid with general funds.

Recognizing that the anticipated loss of more than $1 billion in stimulus funding next year will create substantial revenue challenges in FY 2012 and beyond, the amended budget legislation contains provisions intended to reduce out-year budget gaps by almost 50 percent.

Among other things, it would throttle down future growth in mandated spending, continue transferring highway user revenues to the General Fund, and begin passing on to local jurisdictions a portion of retirement costs for public school teachers and employees of county libraries and community colleges. The Budget and Taxation Committee’s report estimates that such actions will reduce out-year state budget gaps by $1 billion annually.

Even with these savings, the panel’s budget report projects a structural deficit of $1.4 billion in FY 2012 and similar deficits in each of the next three fiscal years.

The anxious and hopeful wait for a post-recession recovery continues in Annapolis.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Previous Center Maryland columns by Donald C. Fry:

General Assembly setting stage for combined reporting push in 2011

Wrong timing for proposal to change Baltimore City school board

Baltimore City isn’t alone in facing pension funding challenges

A government investment program that delivers

Proposed transportation fund raid -- a bad habit continues

Where's the outrage over crime?

Small business is where innovation lives
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Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.

Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.

Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.

Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.

Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.