House Appropriations Looks to Shift up to $250M to Fund Schools, Reinstate Pay Raises

By Anjali Shastry

ANNAPOLIS (March 13, 2015)—The Maryland House of Delegates Appropriations Committee on Friday sought to redistribute up to $250 million in the upcoming state budget to reinstate employee raises and fully fund K-12 education, among other changes.

They proposed to find the money in the budget, which cannot grow past Gov. Larry Hogan’s $40 billion proposal for fiscal year 2016, by revamping pension contributions and shifting other funds.

Hogan’s proposed budget took back mid-year a 2 percent cost-of-living raise to state employees that went into effect in January—a raise that House Minority Leader Nicholaus Kipke, R-Anne Arundel, said should never have been offered in the first place.

“We just can’t make promises we can’t afford, and that’s what’s been happening in Maryland,” Kipke said.

To maintain the cost-of-living salary adjustments, it would cost about $60 million, said Secretary of Budget and Management David Brinkley.

The committee also sought to reinstate supplemental education funding that was slashed in Hogan’s budget. Hogan cut the funding—which uses a formula to give additional monies to 13 school systems—by 50 percent, and General Assembly Democrats have been looking for a way to get it back. While the committee cannot directly reinstate the funding, since it uses a specific formula, they opted to find about $63 million for inflationary education costs, Brinkley said.

In order to fully fund education and state employee salaries and other services, the committee first looked to the state’s pension fund contributions for money to redistribute.

The pension fund is doing well right now because it has been overfunded, an aide to Senate President Thomas V. “Mike” Miller, D-Prince George’s, Charles and Calvert, said.

The goal is for the fund to be at 80 percent of the state’s obligation by the mid-2020s, and it is at 67 percent now. Even if the pension formula is tweaked and some money is redistributed to education, the fund’s ability to reach 80 percent on schedule should not be affected, the aide said.

The pension fund holds $46 billion, but the money to fund education, employee raises and other social services would come out of $150 million slated for the pension fund in Hogan’s budget. The committee would not take the full amount, but about $70 million. The fund cannot be used for anything other than pensions once the money is in there, Brinkley said.

The House Appropriations Committee cannot add money to the budget, but they can cut from specific programs and add money to the general fund, which can be redistributed as the committee sees fit, Brinkley said.

“They can make changes to our plan,” Brinkley said. “Just as long as they can find the money.”

In addition to dipping into the pension contributions, the committee looked for places to shift more than $100 million into funds for social services and other programs.

The committee was able to restore $4.8 million to care for pregnant women and $2.1 million for adult day care, among other social programs.

The committee also restored cuts in Hogan’s budget to provider-pay for physicians who accept Medicaid, “which means that someone could have insurance but no doctor would be willing to take them,” Delegate and Health and Human Resources Subcommittee Chair Craig Zucker, D-Montgomery, said. “So we’ve bumped that up to about $16 million, so that’s about making sure people have access to healthcare.”

The committee was also looking for funds statewide simply to have a cushion that was not necessarily going to any program in particular, Brinkley said.

Some of the changes the committee makes have to be approved by Hogan, or the funds set aside for those programs go back to the general fund, Zucker explained.

Dipping into the pension fund shouldn’t have too many long-term repercussions, Miller said.

“What we’re doing is reverting to paying the actual cost of the pensions. In the past, they’ve had what they call corridor funding, and they would estimate what the pension costs were,” he said. “But we’re moving to a sounder actuarial practice of putting in the money actually required to meet the pension obligations.”

Kipke disagreed about the long-term effects.

“Maryland has a very large pension obligation … considerable money is being taken out of that fund to pay for today’s expenses,” he said. “That’s probably not the wisest thing we should be doing.”

Even with these budget changes, House Republicans are reasonably happy with the budget at this point in the process, Kipke said.

“I think it gets us to about 88 percent of where the governor wants to be, and that’s pretty good. While it’s not exactly the product many of us would have liked to seen, it’s close.”

The budget is proposed by the governor at the start of the legislative session, and the first edit alternates between the House of Delegates and the state Senate each year. This year, it is in the House first.

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