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Governor Hogan Addresses MD Budget Shortfall by Proposing Cuts of $82 Million

In response to the significant budget shortfall, Maryland Governor Larry Hogan proposed $82 million in spending cuts which have since been approved by the Board of Public Works. The necessity of these reductions to the existing $43 billion budget began to emerge during the initial months of the current fiscal year when it was clear that tax revenue totals would be lower than anticipated.

Details of budget cuts

The current round of cuts are designed to address an overall projected budget gap of between $175 and $225 million, and the planned spending reductions touch everything from local government funding to per diem payments for juvenile detention placements.

Notable areas of cutbacks include:

  • $18 million reduction in funding to the University System of Maryland (at its own suggestion), which would involve elimination of 60 currently vacant jobs and 41 that are presently filled.
  • $20 million in payments to Medicare, which would be made up through funds taken from settlements with the tobacco industry.
  • $9 million in funding to the Maryland Department of Juvenile Services, which has seen a reduction in demand for youth placements.
  • $4 million in local government grants, with Prince George’s County seeing the largest reduction.
  • $7 million in funding for the Maryland Department of Housing and Community Development.
  • $3.4 million in cuts to tax credits for homeowners, stemming from lower rates of usage.
  • $4 million in payments to the Sellinger Program for certain categories of nonprofit, independent colleges.
  • $3.7 million reduction in temporary cash assistance for welfare recipients, reflective of smaller caseload.

According to Budget Secretary David Brinkley, the revenue shortfall will be ameliorated further upon receipt of the $12 million in settlement funds due as a result of Volkswagen’s settlement of claims related to the environmental benefits of its diesel automobiles.

Cuts approved, though permanent solution remains elusive

The proposed cuts were approved unanimously by the Board of Public Works on November 2, pursuant to its authority to slash upwards of 25 percent of the State’s budget by simple majority vote and without requiring consent of the Legislature. As mandated by state law, the Legislature had previously approved a balanced budget prior to the start of the July 1 fiscal year. However, as the likely shortfalls rapidly became evident, Governor Hogan had little choice but to take action.

According to chief budget analyst of the Legislature, Warren Deschenaux, the problem is not a new one, and it is certain to rear its head again in the near future. The State is sure to see another major shortfall for the upcoming fiscal year in relation to the budget because the Legislature increased budget mandates that will outpace revenues.  According to Deschenaux, the process in Maryland has a “Groundhog Day” quality about it in that there has thus far been an unwillingness to “get real” about making fundamental adjustments to the budgetary process so that emergency cuts of this nature no longer have to be made in such a perpetual manner.

Tax planning and controversy guidance for Maryland taxpayers

The Maryland tax attorneys at Rosenberg Martin Greenberg provide taxpayers in Baltimore and beyond with the seasoned advice and insights necessary to achieve key tax planning objectives in both personal and business contexts. Possessing vast experience in navigating the complexities of state and federal tax laws, we assist clients in all compliance, negotiation and settlement objectives, providing clarity and sound financial strategies along the way. If you would like to discuss your specific tax situation or concerns with a member of our team, contact us at (410) 727-6600 to arrange for a consultation.

Resources:

  1. NBC 4 Washington, Hogan Offers $82 Million in Cuts to Meet Maryland Shortfall, http://www.nbcwashington.com/news/local/Hogan-proposes-82M-in-cuts-as-Maryland-faces-shortfall-399046231.html
  2. The Baltimore Sun, Hogan administration says state needs to cut $82 million to close revenue gap, http://www.baltimoresun.com/news/maryland/politics/bs-md-budget-cuts-20161028-story.html
  3. WBAL TV 11, State board approves $82M in budget cuts, http://www.wbaltv.com/article/state-board-approves-dollar82m-in-budget-cuts/8103655

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