Board of Public Works Pares Cuts, Spares Counties

BPW_meeting1The Maryland Board of Public Works (BPW) today approved $413 million in state budget cuts proposed by Governor Larry Hogan to account for increased spending and reduced revenues amid the COVID-19 public health crisis.

As previously reported on Conduit Street, the BPW — a three-member panel which includes Governor Larry Hogan, Comptroller Peter Franchot, and State Treasurer Nancy Kopp — was originally set to consider $672 million in state budget cuts as part of the effort to offset COVID-19-related economic woes, but several proposed cuts  — including $41.1 million in state aid to counties — were removed from the agenda after Franchot and Kopp said they would vote against them.

Proposals to slash the county Disparity Grant program — which promotes fiscal equity by providing noncategorical state aid to less affluent counties with proven local income tax effort — by $12.4 million, eliminate the Supplemental Teacher Retirement Grant — which helps offset the impact of shifting teacher pension costs to counties — by $27.7 million, and cut funding for local behavioral health crisis response grants by $1 million were withdrawn prior to today’s meeting.

Governor Hogan also withdrew plans to eliminate a cost-of-living increase for state employees and reduce state contributions to workers’ health insurance and retirement plans.

The BPW did approve eliminating a $36.4 million formula-driven increase in state funding for community colleges. The intent of the Senator John R. Cade funding formula is that community college costs be divided into equal thirds between the state, county governments, and student tuition/fees. Unfortunately, due to budgetary constraints over the years, the Cade funding goal has typically not been met.

The original purpose of the Cade funding formula was for the State to provide 29% of community college funding by 2012. However, the state has adjusted the formula seven times in the last ten years – delaying its commitment to fully fund the Cade formula.

But the budget cuts — shaped by a projected revenue shortfall of up to $2.6 billion in FY 21 from an economy badly battered by the coronavirus pandemic — could be a precursor to more severe reductions when the General Assembly reconvenes in Annapolis. Governor Hogan’s budget-balancing plan includes $844.9 million in future actions, including $724.6 million that will require legislation, $119.0 million that can be effectuated in the fiscal 2022 budget, and $1.3 million in revenue assumptions.

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Governor Hogan said that he would prefer not to make any budget cuts, but that not taking action is not an option. “Not making today’s proposed cuts will result in having to lay off 6,350 state employees, Hogan said. “Do we cut spending or do we cut people? I will continue to advocate for spending cuts instead of being forced to lay off state employees.”

MACo last week sent a letter to Governor Hogan, Comptroller Franchot, and Treasurer Kopp urging caution against cuts that would disproportionally impact less affluent counties.

From the MACo letter:

The State will not resolve economy-driven budget pressures by shifting costs to another level of government facing the same pressures. Cutting the disparity grant program will have a disproportionate effect on less affluent counties and exacerbating pressures at the local level by undermining county revenue structures and support for education, public health, public safety, and other essential services.

The Maryland Association of County Health Officers (MACHO), an affiliate organization of MACo, yesterday submitted a letter to BPW expressing concerns over DBM’s proposed cuts, in particular, the across the board state employee pay cuts which would impact local health departments’ staff.

From the MACHO letter:

It is widely acknowledged that local health department staff are significantly undercompensated relative to private sector professionals performing comparable work.  Cutting their pay will not only force some to resign their positions out of financial need, but it is an (unintentional) slap in the face to dedicated public health professionals who have performed above and beyond anyone’s expectations, and will almost certainly be asked to continue these efforts when a second wave of COVID hits this the fall and the virus sustains into the winter.

A letter from multiple county leaders, including MACo President Sharon Green Middleton, called on the BPW to defer action on a number of budget cuts affecting counties – as the weeks ahead are likely to reveal more clarity on the state and county fiscal plight.

From the letter:

As you prepare for the July 1 meeting, we still see major short-term uncertainties. The July income tax filings are typically a material indicator of non-wage income, among the more difficult elements to forecast, especially in difficult times. And the United States Congress continues to consider and debate various proposals to intercede in the economic disruption – including proposals to directly shield state and local governments from these immediate and abrupt revenue losses. For the State of Maryland to hastily approve budget cuts while these unknowns linger would be premature.

Under the provisions of §7-213(a), State Finance and Procurement Article, the Governor, with the approval of the BPW, may reduce, by not more than 25%, any appropriation the Governor considers unnecessary. The BPW may not reduce appropriations for the payment of the principal and interest on state debt, public schools mandated funding (including the School for the Deaf and the School for the Blind), or the salary of a public officer during the term of office.

The BPW — which reviews projects, contracts, and expenditure plans for state agencies – many of which have an effect on county governments — will hold its next meeting on July 22.

Stay tuned to Conduit Street for more information.

Useful Links

Board of Public Works: Amended List of Approved Budget Cuts

Previous Conduit Street Coverage: Franchot Says He Will Oppose Proposal to Slash County Disparity Grants

Previous Conduit Street Coverage: Counties: Hold Off On BPW Cuts, Until Things Are Clearer

Previous Conduit Street Coverage: Proposed BPW Cuts Hurt Local Health Departments, Undermine Public Health Efforts

Previous Conduit Street Coverage: BPW to Consider More than $670 Million in State Budget Cuts

Previous Conduit Street Coverage: DLS: Fully Fund Disparity Grant Formula

Previous Conduit Street Coverage: Fiscal Leaders: State Revenue Shortfall Could Hit $4 Billion by FY 2022

Previous Conduit Street Coverage: Hogan Orders State Budget Freeze Amid COVID-19 Crisis

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