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Budget News From Maryland, South Carolina and Virginia

Governor O’Malley and the Board of Public Works approved over $345 million in budget reductions to balance the FY09 budget, including over $297 million in general funds, and over $50 million in special and federal funds. The board also approved the elimination of 830 state positions, bringing the total number of position...

November 24, 2008

Maryland

Governor O’Malley and the Board of Public Works approved over $345 million in budget reductions to balance the FY09 budget, including over $297 million in general funds, and over $50 million in special and federal funds. The board also approved the elimination of 830 state positions, bringing the total number of positions eliminated to more than 1,500. 

Following the national economic downturn and the Board of Revenue Estimates projections last month projecting a revenue shortfall of $432 million for FY09, Governor O’Malley directed the Department of Budget and Management to cut spending in all state agencies up to 5 percent.

With these actions, spending has been reduced by more than $2.2 billion. Budget growth has been limited to less than 4 percent annually for both FY08 and FY09 budgets; each fell below the General Assembly’s spending affordability guidelines.

South Carolina

Governor Mark Sanford recently finished a tour with Comptroller General Richard Eckstrom, S.C. Policy Council President Ashley Landess and legislators to call for reforms aimed at increasing accountability in state government. The group stated the need for reform has never been more evident, as the state faces a $400-million shortfall.

Among the reforms that will be pushed by the governor next year are:

Spending Limits: Government spending grew by 40 percent over the past four years, a rate far faster than the growth of the underlying economy. The governor is calling for legislation to limit spending increases to the growth in population plus inflation. A similar measure has in the past passed the House and was narrowly defeated in the Senate.

Restructuring: Gov. Sanford is asking for the passage of a bill creating a Department of Administration, which would perform many administrative functions currently handled by the state Budget and Control Board. The move would give the governor responsibilities held by the Executive Branch in 49 other states. The bill unanimously passed the House last year and died in the Senate.

Transparency: The governor is supporting the S.C. Policy Council’s call for more on-the-record voting, as currently only 5 percent of bills in the General Assembly receive passage with on-the-record votes. In addition, he’s supporting their call for earmark disclosure, local government spending disclosure, a taxpayer funded lobbyist ban, public officials income disclosure, and expanded open records laws.

Ethics Laws: Gov. Sanford is supporting Rep. Nathan Ballentine’s bill that would require disclosure of all campaign contributions within 48 hours of receiving them in the two weeks prior to the election. The governor is also calling for creating an objective campaign finance enforcement entity for the House and Senate, and closing the revolving door that allows government regulators to leave government and lobby on behalf of issues they used to work on.

Virginia

Governor Timothy M. Kaine announced the official revenue reforecast and an executive spending reduction plan to meet the fiscal year 2009 shortfall. The official revenue reforecast projects a shortfall of $973.6 million for fiscal year 2009 and $1.54 billion for fiscal year 2010, or just over $2.5 billion for the biennium. Governor Kaine will balance the FY 2009 budget through state agency savings and spending reductions of over $348 million and additional steps, including a withdrawal of about $400 million from the Revenue Stabilization Fund.

The new forecast predicts a decline in the general fund budget for fiscal year 2009 of 4 percent, and very slow growth – of 3.6 percent – as the recovery begins in fiscal year 2010.

The governor’s savings actions include:

  • recovering over $40 million in balances from fiscal year 2008;
  • capturing savings of over $24 million resulting from governor’s directives to agencies in August to immediately implement a hiring freeze and cuts in discretionary spending; and
  • reducing agency spending by over $323 million, based primarily on the recommendations made by state agencies, including the delay of the planned 2-percent state employee salary increase.

The governor’s reduction strategies include:

  • $100 million in improved business practices and efficiencies;
  • nearly $32 million in the reduction or elimination of current services;
  • over $27 million in reduced personnel costs; and
  • over $13 million in reduced discretionary expenses.

Governor Kaine will propose addressing the remaining portion of the $973.6-million shortfall through bonding nearly $250 million in capital outlay that had been planned for cash payments and through a withdrawal of around $400 million from the Revenue Stabilization Fund, which currently holds over $1 billion. These actions must be approved by the General Assembly.

The governor noted that some strategies would be reconsidered as further reductions for 2010 are considered. Reductions to address the $1.54-billion shortfall in fiscal year 2010 will be announced in the coming months and are expected to include further layoffs and structural changes.

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