Governor Larry Hogan unveiled his budget proposal on Thursday, January 22. The simple white on black cover was as stark as the budget challenge within. For the current fiscal year ending on June 30, the state has a total shortfall of $423 million. The estimated budget gap for the following fiscal year is $802 million. Thus, according to Hogan’s budget proposal, the cumulative FY 2015 and 2016 budget challenge is $1.25 billion.
By all accounts the Governor’s FY 2016 budget is structurally balanced. Proponents praise the bold action necessary to get spending under control while others question whether the proposal is too aggressive given the timeline. The proposed budget does however, reflect promises made during the campaign; there are no new taxes or fees, no layoffs and no furloughs.
The largest single contributor to this fiscal year’s shortfall is Medicaid. The Medicaid shortfall is largely attributed to higher than budgeted enrollment due to the Affordable Care Act, higher costs of new Hepatitis C drugs and a decline in the cigarette tax revenue. To help close the FY 2015 budget gap, Hogan proposes cutting in half an increase in the rates paid to Medicaid healthcare providers, using funds from another insurance program to fund Medicaid, as well as, a 2% agency reduction. FY 2016 solutions include reducing healthcare provider rates to the FY 2014 levels, employee compensation adjustments and aid to education. State spending on education would increase in FY 2016 but at a rate less than educators and county leaders would like.
Generally speaking economic development programs fared well. The Biotechnology, CyberSecurity, and Research and Development Tax Credits along with the Stem Cell Research Fund were all level funded or received very modest reductions sending a clear message that “Maryland is open for business”. For more information on how the budget could impact Maryland’s business climate contact Mat Palmer at firstname.lastname@example.org.
The Chamber recognizes the Governor’s budget proposal included some tough choices and the Chamber supports the Governor’s efforts to align state spending with state revenues breaking the cycle of having to deal with midyear cuts and structural deficits. The House Appropriations Committee will act first on the Budget and has already begun to have briefings on the Hogan Administration’s budget actions.