Public Pension Perversion

Maryland is Facing a $2 Billion Budget Shortfall for Both FY2010 and FY2011

SunshineReview.org - Maryland is facing an estimated $2 billion budget shortfall for the end of FY 2010 and a similar budget deficit for the upcoming FY 2011 budget. According to the state's Office of Policy Analysis, drops in revenue are projected for the next five years; leaving the state with more than $1 billion shortfalls each year.

On April 8, 2010, state lawmakers reached a compromise deal on a $32 billion budget.

A proposal to have counties start sharing the soaring costs of teacher pension benefits was rejected by the House. The House did, however, go along with the Senate's plan to essentially eliminate a major source of funding for local road construction and maintenance.

Gov. Martin O'Malley proposed a budget that closed a $1.9 billion shortfall in the fiscal year beginning in July, half of which would come from cuts and half through one-time transfers and other budget gimmicks, but left shortfalls projected at near-record levels of $2 billion or more annually through 2015. The budget the House and Senate conference committee agreed cuts the governor's projected deficit in 2015 from $2.2 billion to $1.5 billion.

The budget the House and Senate conference committee agreed to on April 8, 2010, was approved by the House of Delegates in a 105-34 vote down party lines with only two Republicans supporting it on April 10, 2010. The budget cut the governor's projected deficit in 2015 from $2.2 billion to $1.5 billion. The governor's signature was not required for the bill to become law. The budget relies on federal stimulus money, which some law makers said would lead to tax increases the following year when the federal funds are no longer available.

Under the budget for FY2011, the state remains responsible for nearly $1 billion in teacher pension costs after a Senate proposal to shift the costs to county governments failed. The budget states that the issue will be examined by a "super blue ribbon" commission that will address state employee retirement, Medicare prescription benefits and teacher pensions.

In addition, the budget directs Gov. O'Malley to save $18 million by eliminating 500 executive branch positions; it allocates $6 million for potential state employee buyouts.

The state will spend $10.4 million on stem cell research.

The FY2011 budget leaves $195.5 million in a fund balance, which the state can use for a midyear revenue shortfall.

State Budget for FY 2010

Gov. O'Malley cut $736 million in spending for FY 2010 to balance the budget in two rounds over the summer; $282 million July 22, 2009 and $454 million on August 26, 2009. The reductions are 60% from state agencies, 29% from local aid, and 11% from employee salary and benefits. Maryland's General Fund was $13.6 billion in FY 2007 and a little below $13.2 billion for FY 2010 after the reductions. FY 2011 projections predict a $1 billion shortfall.

FY 2010 General Fund Spending Percentages after Reductions

K-12	39.2%
Health	22.2%
Rest of State Government	19.3%
Higher Education	10.2%
Public Safety	9.1%

The State of Maryland Board of Revenue Estimates (BRE) released lowered revenue estimates in September of 2009, $682.8 million lower than the March 2009 projections the FY 2010 state budget was based. The latest BRE projections anticipate FY 2010 revenues to be $12.314 billion for FY 2010 and $12.734 billion for FY 2011.

Pennsylvania Faces $4 Billion Budget Gap 2010-2011

SunshineReview.org - Since the FY 2009 budget passed, Pennsylvania is facing a revenue shortfall including an approximately $1.1 billion general fund deficit.

Pennsylvania also faces rising pension costs and the disappearance of federal stimulus dollars. The state’s “Rainy Day” fund has also been exhausted.

Governor Rendell proposed a $29 billion General Fund budget for 2010-11, that increases businesses taxes, imposes new taxes on natural gas and tobacco products, and expands the sales tax to many goods and services currently exempt.

The House Democrats latest attempt is a $28.2 billion proposal came on June 23, 2010, and is $700 million more than Senate Republicans had put on the table the prior day. The House Democrat's plan would raise new revenues and boost the basic subsidy for public schools by $300 million, whereas the Senate Republican does not.

Pennsylvania's legislature passed its $28.05 billion FY2011 budget on June 30, 2010, marking the first time in eight years that the state has met its fiscal deadline. Gov. Rendell signed the budget into law on July 6, 2010, after a dispute regarding over the establishment an Independent Financial Office which left the state to start FY2011 without a budget.

Fiscal Year 2011

The Senate voted in favor of the FY2011 budget 37-13. Then the House passed the budget with all Democrats and more than a dozen Republicans saying yes in the 117-84 vote.

The FY2011 state budget is 0.6 percent higher than that for FY2010. The spending plan includes no tax increases. Basic education and economic development are two areas that will see increased funds; most of all other areas are subject to cuts. Areas with spending reduced by 7 percent or more include libraries, state parks, the Department of Environmental Protection, the Department of Agriculture and the Department of Labor and Industry.

Federal Funds

The budget relies on $850 million in federal funds for Medicaid that had not been approved by Congress at the time the legislature passed the state budget. Gov. Rendell said through his spokesman on July 2010 that he was not optimistic that the state would receive the money from the federal government. Should the funds not materialize, the state would face layoffs at all levels of government, as well as teachers and emergency workers, in numbers much higher than the 1,000 layoffs anticipated at the time the legislature passed the budget. He said that the layoffs could number as high as 20,000 between the state and local levels.

In addition, the $250 million increase in basic education funding in the budget would likely be eliminated if the federal funds do not materialize. Republicans criticized the budget because it increases spending in difficult and uncertain economic times. Democrats countered that by saying the budget is $1 billion less than what Gov. Ed Rendell requested in February.

Go to SunshineReview.org to see details of your state's budget.

Total FY2011 Budget Gaps by State:

TABLE 1: Gaps States Have Faced in FY2011
	Pre-Budget Adoption Gap in States with Biennial 09-11 Budgets	Pre-Budget Adoption Gap in States With Annual Budgets/New Gap in Biennial States	Total FY11 Shortfall Closed When Budget Adopted*	Total Shortfall as Percent of FY11 Budget
Alabama	0	$586 million	$586 million	8.3%
Arizona	0	$3.1 billion	$3.1 billion	36.6%
California*	0	$17.9 billion	$17.9 billion*	21.6%
Colorado	0	$1.5 billion	$1.5 billion	21.6%
Connecticut	$4.4 billion	$700 million	$5.1 billion	28.9%
Delaware	0	$377 million	$377 million	11.5%
DC	0	$104 million	$104 million	1.7%
Florida	0	$4.7 billion	$4.7 billion	20.2%
Georgia	0	$4.2 billion	$4.2 billion	26.2%
Hawaii	0	$594 million	$594 million	12.0%
Idaho	0	$84 million	$84 million	3.4%
Illinois	0	$13.5 billion	$13.5 billion	41.5%
Indiana	0	$1.3 billion	$1.3 billion	9.4%
Iowa	0	$1.1 billion	$1.1 billion	18.9%
Kansas	0	$510 million	$510 million	8.7%
Kentucky	0	$780 million	$780 million	8.8%
Louisiana	0	$1.0 billion	$1.0 billion	12.5%
Maine	$765 million	$174 million	$940 million	34.7%
Maryland	0	$2.0 billion	$2.0 billion	14.4%
Massachusetts	0	$2.7 billion	$2.7 billion	9.6%
Michigan*	0	$2.0 billion	$2.0 billion*	9.2%
Minnesota	$2.8 billion	$1.2 billion	$4.0 billion	26.0%
Mississippi	0	$716 million	$716 million	16.1%
Missouri	0	$730 million	$730 million	9.4%
Nebraska	$150 million	$179 million	$329 million	9.6%
Nevada	$1.3 billion	$504 million	$1.8 billion	54.0%
N.H.	$250 million	$115 million	$365 million	24.1%
New Jersey	0	$10.7 billion	$10.7 billion	38.3%
New Mexico	0	$333 million	$333 million	6.2%
New York*	0	$8.5 billion	$8.5 billion*	15.9%
North Carolina	$4.4 billion	$1.4 billion	$5.8 billion	30.3%
Ohio	$2.5 billion	$463 million	$3.0 billion	11.3%
Oklahoma	0	$725 million	$725 million	14.8%
Oregon*	Yes	$577 million	See Table 2	See Table 2
Pennsylvania	0	$4.1 billion	$4.1 billion	15.6%
Rhode Island	0	$395 million	$395 million	13.9%
South Carolina	0	$1.3 billion	$1.3 billion	25.6%
South Dakota	0	$102 million	$102 million	8.8%
Tennessee	0	$1.0 billion	$1.0 billion	9.8%
Texas	$3.3 billion	$1.3 billion	$4.6 billion	10.2%
Utah	0	$700 million	$700 million	14.6%
Vermont	0	$338 million	$338 million	30.2%
Virginia	0	$1.3 billion	$1.3 billion	8.8%
Washington*	$2.1 billion	Yes*	$2.1 billion	12.9%
West Virginia	0	$134 million	$134 million	3.6%
Wisconsin	$3.4 billion	0	$3.4 billion	23.9%
Wyoming	0	$147 million	$147 million	10.3%
States Total	$25.3 billion	$95.9 billion	$121.2 billion	18.7%
Note: California, New York, and Michigan have not completed their FY11 budgets so these gaps remain open. California’s shortfall does not include $1.2 billion in proposed reserve replenishment. Oregon and Washington have two-year budgets. See Table 3 for additional gap information