By Raymund Lee Flandez
ANNAPOLIS – Gov. Parris N. Glendening Wednesday ordered $172.4 million in administrative spending cuts and nearly a 40 percent draw down on the state’s rainy day fund to close a $500 million budget deficit.
While no layoffs or tax increases are expected right now, there also will be no bonuses for state employees earning more than $60,000 a year.
“We need to balance our budget but we don’t need to do so on the backs of our employees,” said Glendening at a news conference Wednesday.
The governor said he could not promise that there would be no layoffs in the future.
Recently, legislative analysts predicted a $590 million revenue shortfall this year, up from previous estimates. But Glendening said the deficit projection is $498.3 million.
Most of this year’s deficiencies, Glendening said, result from the state’s health department, which has had to respond to more people asking for health insurance after losing benefits in the nation’s recession.
“If they turn to us for assistance, we must answer that call,” Glendening said.
Part of Glendening’s solution would eliminate the graduated withholding of income tax. Under current tax structure, the state withholds 2 percent on the first $1,000, 3 percent on the second $1,000, 4 percent on the third $1,000 and then 4.75 percent on the rest.
The change would mean all income would be withheld at the full 4.75 percent rate, said T. Eloise Foster, secretary for the state Department of Budget and Management. It’s expected to bring the state $45 million.
Taxpayers may file for a refund of any excess withheld.
His plan, Glendening said, will leave Republican Gov.-elect Robert Ehrlich Jr. with more than $600 million in cash reserves, helping ease the $1.2 billion projected shortfall for the next fiscal year beginning in July. The balanced budget should protect the state’s triple-A bond rating, Glendening said. “Much of what he outlined today will help with next year’s problem,” said Paul Schurick, Ehrlich’s spokesman. “He (Glendening) started the road in fixing the problems. It’s a long road. And this is just a start.”
Glendening and Ehrlich briefly met Saturday at a National Governors’ Association conference in Austin, Texas, to discuss the fiscal problems, but they didn’t go through all the details.
Ehrlich said he believes Glendening’s plan is “solid,” said Shareese DeLeaver, another Ehrlich spokeswoman. “They are in agreement that the budget should not be balanced in the backs of the people.”
Right now, Glendening is focused on departmental reductions, with the highest spending cut of 4.9 percent in administrative costs. Under state law, Glendening can authorize a 25 percent reduction in agencies without legislative approval.
In Glendening’s plan, higher education and public safety would be cut by 1 percent and 3.4 percent, respectively. Local aid and elementary through secondary election, however, were spared. “They can and must be protected,” Glendening said. He promised to work with the incoming administration to find more ways to shave the deficit. Some Democrats have criticized Glendening for not offering a sign that the state’s fiscal woes would improve before the November elections when it could have helped Lt. Gov. Kathleen Kennedy Townsend, who ran unsuccessfully on the Democratic ticket.
After consulting with other state governors, Glendening said he decided it was prudent to release a plan after the elections. He didn’t want his announcement to “become a major political issue.”
Glendening’s revised plan, however, still must be approved by the General Assembly.
Sen. Ulysses Currie, D-Prince George’s, praised Glendening’s “common sense” approach to balance the budget.
“I think it’s a plan we all can live with and we all can support,” said Currie, who is expected to head the state Senate’s Budget and Taxation Committee in January.