ANNAPOLIS -- Gov. Martin O'Malley's fiscal 2012 budget relies on borrowing and shifting money to help close more than a quarter of Maryland's $1.4 billion budget gap. O'Malley's plan would pull $191 million from the state's capital budget -- which funds transportation and construction projects -- as well as $100 million from the state's transportation improvement fund and nearly $20 million from the Chesapeake Bay Fund. The state would issue bonds to replace the money.
Critics of the plan were quick to label it fiscally irresponsible.
"This place is devoid of fiscal discipline," said House of Delegates Minority Leader Anthony O'Donnell, R-Calvert and St. Mary's counties. "Eventually there's only so many pots of money to raid, and the stimulus money is gone. At the end, pretty soon, you gotta pay the piper."
O'Malley has used transfers and other accounting maneuvers for several years to ease the pain of budget cuts, despite warnings from budget advisers that such "quick fixes" are prolonging the state's structural deficit.
"This is the impact that all of this shifting has had," state budget analyst Matt Klein told lawmakers at a fiscal briefing last month.
The state used more than one-third of its borrowing capacity - roughly $414 million in bonds slated for capital projects - to help fill a gap in the operating budget for fiscal 2011. One-quarter of the borrowed money was used to replace funds that were transferred from one account to another.
In the meantime, federal stimulus money has dried up, the state's rainy day fund needs a $40 million cash infusion, and falling revenues have pushed the state to its debt limit.
But O'Malley says his borrowing will not threaten Maryland's coveted Triple A bond rating.
"Without a doubt part of our balancing strategy has been to make that Triple A bond rating, that credit worthiness of ours ... work for us," he said. "And we have used it, bonding a lot of things we would otherwise [use] capital for, and yet we still have kept within the limits [of what's recommended]."
He said his proposed reforms to the state's ailing pension system, which is $35 billion underfunded, would offset concerns about the state's debt capacity.
O'Malley's pension plan returns the system to an 80 percent funding level by 2023, primarily by forcing the state and its enrollees to pay higher contributions.
The pension system, which gives retirement and health benefits to roughly 300,000 current and future state retirees, dropped from nearly full funding in 2000 to 64 percent funding in 2011.
O'Malley plans to keep the rainy day fund solvent with $40 million from the Transportation Trust Fund, which is used for road and rail improvements. His proposal shifts another $60 million from the fund to help close the deficit.
If his budget plan is approved by the General Assembly, this would mark the third straight year that O'Malley has tapped the transportation coffer for quick cash. The state has drained about $2.1 billion from the fund in the last three years.