Maryland Talks Taxes, Virginia Slashes

Virginia and Maryland, despite their proximity along the Potomac River, are facing markedly different budget outlooks as the states gavel in their 2011 legislative sessions.

In 2010, Virginia closed a $4.2 billion gap in its current two-year budget, largely through deep cuts to services such as K-12 education and health care, and would have about $900 million to work with under Gov. Bob McDonnell's proposed amendments to the budget.

Meanwhile, Maryland lawmakers are fresh out of accounting tricks as they prepare to tackle a $1.6 billion budget gap, after years of borrowing and funding transfers helped the state fare better than others through the recession. Now, there's talk in Annapolis of raising taxes, a move Virginia has staunchly resisted.

Virginia lawmakers said tough choices to cut spending have left the state in relatively decent shape. State spending is now back to pre-recession 2006 levels.

O'Malley says he wants to avoid more furloughs

ANNAPOLIS: Maryland Gov. Martin O'Malley says he aims to avoid furloughing state employees after three years of forcing them to take nearly two weeks of unpaid vacation.

O'Malley made the announcement Wednesday as he prepares to submit a roughly $13 billion operating budget that slashes $1.6 billion in spending to close a projected gap.

The governor's fiscal 2011 budget bill orders more than 85 percent of the state's work force to take 10 days of unpaid vacation this year.

The state was facing a $2 billion budget gap last year.

"Three years of furloughs, I think, is enough," O'Malley said at the start of the state's 2011 General Assembly session. "I think we've got to make the adjustments and start getting back to a new normal."

O'Malley has offered to pay state workers to quit their jobs in an effort to cut back on payroll and fulfill a fiscal 2011 budget requirement to cut 500 executive branch positions this year.

Nearly 1,400 employees applied for the buyout, which includes a one-time payment of $15,000 and an additional $200 for every year of service. The payoff also provides three months of medical and dental benefits.

O'Malley said he hopes the program will help stave off furloughs and further layoffs, but the buyout is estimated to save only $40 million. - Hayley Peterson

"We're in a different situation than a lot of other states because we made major cuts last year," said Del. Dave Albo, R-Fairfax. "The governor actually has some things he can do because of the hard choices we made last year."
Virginia's situation isn't entirely due to budget-slashing, however. The state did have to dip into its rainy day fund to the tune of about $780 million. It also used more than $1 billion in federal stimulus funding to help close a $6.4 billion shortfall in its previous two-year budget.

Last year, the state also deferred more than $600 million in payments to its underfunded retirement system to help balance the current books.

Across the river, Maryland's fiscal fiasco is due in part to lawmakers' lofty promises during rosier economic times.
The legislature in 2002 committed to higher year-over-year funding levels for schools, forcing counties to top record commitments they made during good years.

Then in 2003, the state began paying less than it owed into the pension system after lawmakers promised state workers heftier retirement packages.

The state paid off its expensive pension promises for the past two fiscal years with more than $350 million in federal stimulus dollars. That money is now gone.

"This is the toughest budget that I have ever had to work on," said Gov. Martin O'Malley. "This year I think all of us will come to appreciate just how important the recovery and reinvestment dollars were."

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