More News

ANNAPOLIS — As budget negotiators put the finishing touches on the state's $34.2 billion spending plan for fiscal 2012, lawmakers on both sides of the aisle are uneasy about a projected fund balance that is lower than any budget since fiscal 2004.

The budget, which was scheduled to be up for a final vote in the House late Thursday and likely in the Senate on Friday, leaves $49.8 million in the state's reserve account to guard against unanticipated revenue dips. Lawmakers preserved 5 percent of general fund revenues, or $681 million, in the state's rainy day fund, which widely is considered untouchable and to be used only in a fiscal emergency.

Still, numerous legislators say the fund balance doesn't leave the state much wiggle room in case the economy slips backward.

"You always want to see a much higher fund balance at the end because that carries you through deficiencies," said Sen. James E. DeGrange Sr. (D-Dist. 32) of Glen Burnie, a member of the budget conference committee.

The last time lawmakers adopted a budget with such a low fund balance was in fiscal 2004, when $34 million was set aside.

Last year, lawmakers built in a $154 million fund balance over and above the rainy day fund. The Board of Public Works last made mid-year cuts in November 2009 to make up for downward revenue revisions that outstripped the fund balance. The three-member panel, composed of Gov. Martin O'Malley, Comptroller Peter V.R. Franchot (D) and Treasurer Nancy K. Kopp (D), approved several rounds of reductions from the fiscal 2010 operating budget that totaled $1.1 billion.

The fiscal 2009 budget had a $239 million fund balance, the largest in the 30 years for which data could be provided.

The low savings is not worrisome to O'Malley (D).

"You'd always like a better cushion, but then again, that's probably a reflection of the confidence they have in our ability to make the decisive and quick adjustments at the Board of Public Works," he said Wednesday.

The final fund balance is contingent on an unresolved provision to increase the sales tax on alcoholic beverages.

The chambers officially can adopt the budget conference committee report before the House of Delegates decides whether to accept the Senate measure to boost the alcohol sales tax by 50 percent — and how quickly to do it. The Senate approved gradually increasing the tax from 6 percent to 9 percent during three years, but the House may consider implementing it all at once.

If delegates go along with the Senate alcohol tax plan, it would provide $21 million for additional education aid for Prince George's County and Baltimore city, $5 million to reduce the developmental disabilities waiting list, and about $3 million would go to the general fund. In future years, the Senate dedicated more money to developmental disabilities with the remainder going to the general fund.

However, if the House opts to raise the levy all at once, it could bring roughly $60 million more into the general fund, which would be added to the fund balance.

In its current posture, the fund balance puts the state on shaky ground, said House Appropriations Chairman Norman H. Conway (D-Dist. 38B) of Salisbury.

"You would like it to be higher because while things are looking up from a national perspective, you never know what a potential (federal) government shutdown or significant revenue reductions will have on the economy of the mid-Atlantic," he said.

Republicans blamed the low fund balance on O'Malley for submitting a supplemental budget that reduced the state's reserves by roughly $62 million.

The fund balance is similar to an individual who puts money aside for their children's college fund or a new car, but then loses their job and has to dip into their savings, said Del. Wendell R. Beitzel (R-Dist. 1A) of Accident.

"Sometimes, you have to dip into the piggybank," he said. "It looks like we've balanced it, but until we move forward a year or two, we're not sure of that."

The last and only time the state dipped into the rainy day fund was in the early 1990s, when a recession eroded state revenues, forcing lawmakers to drain the entire $127 million fund, which has been in place since the late 1980s, said Warren G. Deschenaux, the General Assembly's chief budget analyst.

Even with a lower-than-usual fund balance, sunnier revenue projections mean midyear cuts are less likely, said Del. John L. Bohanan Jr. (D-Dist. 29B) of California.

"For the first time since late 2007, we're not revising our revenue projections downward," he said. "They have remained stable for several periods in a row, and we're returning to a time of growth."

The budget includes $5.7 billion for education and reduces the state's approximately $2 billion structural deficit — the long-term imbalance between revenues and expenditures — by almost 38 percent.

Deschenaux noted pension reform and several years of budget reductions made this year's discussions more challenging.

"It's always tough, but this year has been uniquely tough," he said. "Finding money after having gone through so many years of scarcity" has been especially difficult. "Working through next year will be just as hard."

abrody@gazette.net