Maryland Gov. O'Malley seeks to close budget gap with cuts, savings

WASHINGTON Wed Jan 15, 2014 4:04pm EST

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WASHINGTON Jan 15 (Reuters) - Maryland Governor Martin O'Malley introduced a $35 billion budget proposal on Wednesday that tamps down on spending growth instead of raising taxes to eliminate a projected gap of $584 million.

O'Malley suggested holding spending growth below 4 percent, "achieving the lowest general fund budget growth in more than a generation," while also reducing spending in some areas by a total of $457 million and raising $163 million through the sale of old helicopters, transfers and payments.

Many of the reductions would come from public employees, with a cap on reinvesting pension reform savings at $200 million a year and lower spending on employee and retiree health.

The governor, a Democrat with his sights set on Washington, also suggested putting $800 million in the state's rainy day fund in fiscal 2015.

He added that the budget does not rely on tax or fee increases.

Maryland, one of the highest rated states in the country, is close to the nation's capital city of Washington, D.C., and recovered quickly from the 2007-09 recession because it is home to many federal workers and contractors.

However, part of its projected revenue shortfall - $193 million this fiscal year and $391 million for the fiscal year starting on July 1 - stems from Congress partially shutting down the federal government during a budget impasse last fall, according to O'Malley's office.

Also, the state suffers from a long-standing structural deficit that O'Malley aims to close by fiscal 2017.

Still, the governor is seeking the eighth annual increase in education funding to a record $6.12 billion in fiscal 2015 from $5.98 billion this fiscal year. He is also suggesting Maryland send the largest amount of aid to local governments, $7.09 billion, in its history.

Healthcare has become a budget buster for many states over the last decade, and it is the single largest spending item in the proposed budget. O'Malley expects spending on Medicaid, health insurance for the poor that was expanded under Obamacare, to increase 21.8 percent to $8.94 billion and total health spending to increase 9.7 percent to $11.4 billion.

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