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Governor O’Malley Presents FY 2013 Budget Focused on a Balanced Approach of Reductions and Investments to Create Jobs

Budget closes a gap of approximately $1 billion; includes $800 million of reductions; and makes investments in job creation and innovation, skills and education, health care, public safety, and sustainability

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FY 2013 Proposed Operating Budget Detail (“Budget Books”)

ANNAPOLIS, MD (January 18, 2012) – Governor Martin O’Malley today, joined by Lt. Governor Anthony G. Brown and Secretary T. Eloise Foster, presented the proposed FY 2013 budget for the State of Maryland, which focuses on a balanced approach of reductions, revenues and investment to create jobs, innovate and rebuild Maryland’s infrastructure.

“To create jobs, a modern economy requires modern investments, and that’s why our proposed budget for FY 2013 invests in job creation and its key ingredients: education, innovation and rebuilding our State’s infrastructure,” said Governor O’Malley. “We balance these modern investments with fiscally responsible revenues and cuts that will bring our six year total to $7.5 billion, the most of any six-year period in Maryland’s history. Our budget is a pro-jobs, pro-opportunity, pro-growth budget that takes a balanced approach of cuts, revenue and investment.”

To close a budget gap of approximately $1 billion, the FY 2013 budget includes almost $800 million of reductions, bring­ing total reductions during the O’Malley-Brown Administration to $7.5 billion. Additionally, the FY 2013 budget plan constrains total budget growth to just 1.9 percent, ex­cluding the appropriation to the Rainy Day Fund; reduces general fund spending, after the appro­priation to the Rainy Day Fund, below the FY 2012 level; complies with the General Assembly’s Spending Affordability Com­mittee (SAC) guideline for the sixth consecutive year; cuts the structural def­icit by more than half – 59 percent, exceeding the SAC recommendation of 50 percent; and preserves $837 million of cash resources in the Rainy Day Fund ($673 million) and unallocated fund balance ($164 million).

The FY 2013 budget proposal also includes a $3.6 billion capital budget with State infrastruc­ture and construction spending that will support over 37,000 jobs and leverage an additional $1.4 billion in local government and private sec­tor spending that will ultimately support nearly 15,000 Maryland jobs.

The budget protects the progress made in areas that promote job creation and move the State forward with:

  • Record public K-12 education direct aid of $5 billion, a $108.5 million increase over FY 2012.
  • $373 million for new construction and renova­tion for our public schools, bringing the six-year total to $2 billion.
  • Health coverage for more than one million Mary­landers who would otherwise go without insur­ance, 400,000 more than when the O’Malley-Brown Administration took office.
  • The third consecutive year of a modest three percent tuition increase, after an unprecedented four years in which tuition was frozen at the 2006 level; and
  • Full funding for Program Open Space and a record $25 million investment in the Chesapeake Bay 2010 Trust Fund, bringing the total investment over five years to $88 million.

“In Maryland, we understand that the best way to create jobs and help our families, friends and neighbors through these difficult economic times is to come together around our shared priorities,” said Lt. Governor Anthony G. Brown. “The budget that Governor O’Malley has outlined today takes the balanced approach we need to improve the health of our communities, invest in our children’s education, strengthen our infrastructure, and put more Marylanders back to work.”

The O’Malley-Brown Administration has resolved significant budget gaps each year since taking office. Facing an inherited structural deficit estimated at nearly $1.7 billion, the Administration worked with the General Assembly and the people of Maryland to make tough choices with significant budget reduc­tions and modest revenue actions. After rebalancing the State’s fiscal trajectory, the global economic downturn hit and created substantial new deficits in subsequent years. Under Governor O’Malley’s leadership, the Administration has been successful in mak­ing the tough choices that have protected the State’s long history of sound fiscal stewardship, reducing the structural budget gap.

Among the tough choices in the FY 2013 budget is sharing teachers’ retirement costs with local governments. Currently, the State pays the en­tire cost of teacher pensions, totaling $946 million in FY 2013. Teacher salaries, the key cost driver of pen­sion costs, are determined by local jurisdictions. The budget proposal requires locals to pay 50 percent of the combined costs of social security and teacher’s retirement con­tributions. Locals currently pay for social security only, which accounts for one-third of the combined costs. The Administration is proposing several measures to mitigate the impact of this cost shift, including increasing local revenue, enhancing aid to less wealthy jurisdictions, and providing targeted budget relief.

Throughout these unprecedented fiscal challenges, the Administration maintained a re­cord of fiscal responsibility by cutting State spending, eliminating positions from State government and preserving the State’s Rainy Day Fund. These choices have helped Maryland retain its Triple A bond rating, one of only eight states in the nation certified at this level by all three rating agencies.

Job Creation and Innovation

To spark even greater job creation, the State’s FY 2013 budget proposes smart investments to create, save and support Maryland jobs.

Investing in 21st century infrastructure for Maryland creates jobs and prepares our schools, transportation infrastructure and more for the future. State infrastructure investments will play an important role in supporting Maryland’s economy over the coming years, which is why the FY 2013 budget includes a $3.6 billion capital budget with State infrastruc­ture and construction spending that will support over 37,000 jobs and leverage an additional $1.4 billion in local government and private sec­tor spending that will ultimately support nearly 15,000 Maryland jobs.

The FY 2013 budget includes a $23 million investment in Maryland’s knowledge-based industries throughInvestMaryland in target industries such as the life sciences, information technology and clean energy; a $10.4 million investment for Stem Cell Research, bringing the State’s total investment to $101.6 million since 2007; $8 million for tax credits to spur investment in biotechnology; a 7.5 million for Film Production Tax Credit; and $7 million for Sustainable Communities Tax Credit to promote urban redevelopment & create jobs.

Skills and Education

For the fourth consecutive year Education Week magazine has ranked Maryland the number one public school system in America. Governor O’Malley’s FY 2013 budget maintains investments in Maryland’s best-in-the-nation schools and fully funds direct K-12 education aid. In FY 2013, the O’Malley-Brown Administration is investing a total of $5.7 billion for public schools, a $1.2 billion or 27.7 percent increase over FY 2007 funding. A record $5 billion in direct education aid will be distributed among Maryland’s 24 local jurisdictions in order to maintain and build upon the progress.

The Geographic Cost of Education Index, which adjusts school funding for educational cost differences across Maryland’s jurisdictions, is fully funded at $128.8 million. The O’Malley-Brown Administration is the first administration ever to fund any part of GCEI.

Governor O’Malley’s FY 2013 capital budget allocates $373 million to build and renovate schools across the State. In addition to $351.4 million in the traditional school construction program, this includes $6.1 million for the Aging Schools Program and $15.3 million in Qualified Zone Academy Bonds (QZABs). The FY 2013 budget also includes $5 million for capital improvements at the Maryland School for the Blind.

The budget also includes $5.4 billion for higher education, keeping tuition growth at three percent for the University System of Maryland and Morgan State University- only the third increase in seven years.

A Stronger, Healthier Future

The FY 2013 budget invests in providing access to health care for over one million adults and children in Maryland. The budget includes $27 million in State funds (which leverage $20 million of matching federal dollars) for an unprecedented investment in the system of supports and services for individuals with developmental disabilities in Maryland; $27 million to expand community based-services as alternative to institutional care; $5 million to support long-term recovery and housing for substance abuse patients; and $4 million to launch a pilot program to reduce health disparities in targeted communities.

Driving Down Violent Crime

With a balanced approach of reductions and investment, the O’Malley-Brown Administration is protecting our critical investments in public safety. Violent crime and homicides have been driven down to the lowest rates in Maryland since the 1970s.

The Governor’s FY 2013 budget includes more than $2.2 billion to protect public safety, $201 million more than when the O’Malley-Brown Administration took office. The budget includes $45.4 million in police aid to local governments and municipalities; $20.8 million in local law enforcement grants to target domestic violence, substance abuse, and gun trafficking; $52 million for the continued development of Maryland’s Public Safety Communications System, which when fully implemented will provide a modern, wireless, interoperable radio system for all Maryland law enforcement, public safety agencies, and first responders; $4.4 million to bolster staffing (93 positions) and patient safety at Clifton T. Perkins Hospital; $51 million for Maryland Emergency Management Agency to oversee federal homeland security directives and Maryland’s overall security readiness. The budget also funds two new trooper classes to maintain force strength.

A More Sustainable Future

The FY 2013 includes $25 million for the Chesapeake Bay 2010 Trust Fund to support urban and storm water projects, agricultural Best Management Practices (BMPs), and targeted innovative practices within watersheds, bringing total operating spending over the first five years of the Fund to $88.1 million.

The budget includes $36.6 million to preserve approximately 8,100 acres through the Rural Legacy Program and state Program Open Space; $28 million in capital projects to improve the health of the Bay by upgrading storm water infrastructure; $23 million for State Park improvements, green projects and upgrades; $18 million for the cover crop program, which enrolled a record 567,000 acres last year; $8 million for oyster restoration; and $5 million in new operating funding to implement the Watershed Implementation Plan.

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