ANNAPOLIS – Gov. Parris Glendening Tuesday presented Maryland’s largest capital budget, $1.5 billion for the 2002 fiscal year, just one week after issuing his largest operating budget.
The budget is a 15 percent increase from last year’s $1.3 billion capital budget and more than twice the $720 million budget of Glendening’s first year as governor. The capital budget pays for construction projects, while the operating budget covers ongoing expenses, including salaries.
The big winners in the capital budget, education and the environment, came as no surprise after Glendening’s Jan. 16 presentation of his proposed operating budget, which totaled $21.3 billion and allocated significant funds to elementary, secondary, and higher education and to Smart Growth projects.
The proposed capital budget allocates $667.1 million, or 44.5 percent, for the construction and improvement of Maryland schools. Environmental projects, including $40 million to establish the GreenPrint program to preserve open land, account for 28.2 percent of the capital budget, or $422 million.
The $1.5 billion does not include transportation, a major recipient of state funds. The governor announced Jan. 12 that he was adding $1.5 billion to the state’s Capital Transportation Program, bringing it to $9.4 billion.
Two large transportation projects – construction of the Metrorail extension to Largo and replacement of the Woodrow Wilson Bridge – will get $45 million in general funds.
Glendening said the state needs funding for education, and his budget reflects that need.
“I think his priorities are in line with what Marylanders want,” said Sen. Christopher Van Hollen Jr., D-Montgomery, vice chairman of the Senate Budget and Taxation Committee.
There is a great demand for school construction and modernization across the state, including his own district, Montgomery County, Van Hollen said. However, Van Hollen warned the budget cannot address all the projects in the pipeline.
“The capacity of the budget to sustain expectations is limited,” he said.
Both Glendening’s capital and operating budgets this year are records – a personal one for the operating budget and a state record for the capital budget.
“Obviously it’s up fairly substantially,” said Steve McCulloch, capital budget manager in the Department of Legislative Services.
The governor has more flexibility to spend the state’s surplus on one-time capital projects than on operating items, which are subject to the joint Spending and Affordability Committee’s recommended limits, McCulloch said.
The committee’s limits would require a $208.6 million reduction in the governor’s operating budget, according to the Office of Policy Analysis in the Department of Legislative Services.
The state’s dwindling surplus also concerns legislators worried about the unprecedented spending. The state surplus was nearly $1 billion last year, is expected to be $375 million this year. Glendening plans to add this year’s surplus to $557 million in reserve funds to create a $932-million pool for one- time projects.
Although Republican lawmakers would prefer to reduce spending, the increase in capital spending does not worry them as much as the increase in the governor’s proposed operating budget.
Senate Minority Leader Martin G. Madden, R-Howard, said Republicans would rather see money spent on one-time capital projects than on projects requiring years of funding.
“Our preference as a caucus . . . is to keep it in our reserve fund,” he said. “We should be adding to our reserve fund, not depleting it.”
Glendening’s budget would leave a reserve fund balance of $663 million at the end of the 2002 fiscal year, $168 million more than necessary to maintain the state’s AAA bond rating.
Cash is the largest source of revenue for the capital budget, said Glendening. His budget allocates about $604 million from pay-as-you-go funds for capital projects for the 2002 fiscal year; 40 percent of the budget would come from those funds.
The 2001 budget used $594.5 million in pay-as-you-go funds, while the 2000 fiscal year budget had $306.5 million in cash general funds.
“I believe this is what we should be using the surplus for,” said the governor, adding that cash payments save the state the cost of interest payments.
The general fund for capital projects is projected to decrease significantly for the 2003 fiscal year – from $603.7 million to about $109 million, McCulloch said.
However, McCulloch said, that’s not a dire prediction for the state’s future.
“It’s going to decrease to more normal levels,” he said. “We’ve had an unusual amount of construction funding in the last few years.”
Using cash payments from the general fund prevents the state from incurring more debt. The state’s outstanding debt stands at nearly $3.6 billion, according to David Juppe, manager for the operating budget in the Department of Legislative Services, and it is not projected to increase significantly.