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Posted at 8:20 AM ET, 01/21/2011

O'Malley budget hits hospitals, pensions, and calls for more borrowing

By Aaron C. Davis

The state budget that Gov. Martin O'Malley (D) will propose Friday calls for closing the bulk of an estimated $1.6 billion shortfall by continuing to borrow heavily from an array of funds designed for environmental, transportation and other special projects, as well as by continuing to squeeze funds for hospitals, doctors and other health providers, according to sources familiar with the plan.

O'Malley will also propose a package of long-term reductions in pension benefits for state employees, but those moves will make up only a small fraction of the budget shortfall in the coming year.

The governor will not recommend two weeks of furloughs for most state workers, as he has done in recent years. Rather, after receiving over 1,400 applications for a state employee buy-out program last month, the budget assumes roughly 1,000 employees will be granted early buyouts, the sources said.

Combined, O'Malley's budget proposals resemble similar blueprints to close recent shortfalls. They were rarely felt directly by most Marylanders, and allowed him to claim the mantel of relative fiscal prudence compared to other states last fall during his successful reelection bid. On the campaign trail, O'Malley pledged not to raise taxes this year, though he has said he would remain open to all ideas passed by the legislature.

O'Malley's proposals also will continue to erode several state funds already being watched by Wall Street bond raters. And the continued reductions in funding for health care providers, as well as moves to generate additional state revenue from a unique Maryland assessment on hospitals could raise questions for O'Malley who has sought to position himself as a national voice asserting that federal health care reform will save states money.

O'Malley is scheduled to discuss the budget proposal Friday at 10 a.m. on WTOP. He has also scheduled a lunchtime briefing for legislative leaders at the governor's mansion and will brief reporters in the afternoon in the State House.

The Friday afternoon release of the budget details will come after most state lawmakers have left the capital for the weekend.

Legislators are scheduled to receive a briefing from the state's chief nonpartisan budget analyst on Monday afternoon. The hearing typically marks the beginning of months of budget negotiations in Annapolis.

Among the governor's proposals:

-- Close roughly $250 million of the shortfall by increasing a state assessment on hospital revenues and continuing to freeze or reduce most health-care provider rates.

-- Shift $200 million in revenue from special fees, such as those assessed on homeowners and others to fund Chesapeake Bay restoration projects, to close the general fund gap. The state will borrow money to complete the projects instead.

-- Rework pension benefits for all new and some current state employees, saving about $100 million.

-- Continue shifting hundreds of millions from holding funds and begin other budget maneuvers that some worry will erode funding for local governments.

Under a requirement put in place by the General Assembly, O'Malley must show that a third of his budget proposals will result in permanent reductions in spending. It's still unclear which proposals he has marked as permanent.

By Aaron C. Davis  | January 21, 2011; 8:20 AM ET
Categories:  Aaron C. Davis, Governor, Maryland State Budget  
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Starting this year your child (or children) cannot be denied coverage simply because they have a pre-existing health condition. If you don't have insurance for you and your children search "Wise Health Insurance" online they are the best.

Posted by: blythebarne | January 21, 2011 10:58 AM | Report abuse

OMalley is a master at shell games and no friend of public employees. He says no furloughs, but wants state workers to increase their contributions to the pension plan from five percent to seven. I am not a govt worker but this seems like a raw deal to me.

Posted by: VikingRider | January 22, 2011 12:36 PM | Report abuse

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