Federal Funds Fuel Spending Growth In O'Malley's Budget

Governor O'Malley's media package brags that his budget achieves for the "first time in at least 40 years that General Fund spending has declined over a four year period."  Most of the statewide media regurgitated that fact without any critical analysis or evaluation.

O'Malley's budgetary slight-of-hand gives the appearance that state spending is in check. From such claims, that one might believe that the operating budget actually declines in FY11.

The truth is exactly the opposite.  Overall general fund spending continues to grow under O'Malley.  The trick is that he leaves out of his media calculations the federal funds and special funds that are used to supplant state funding.

When state revenues tanked the last two years, state spending had to go down. The fix for O'Malley was to substitute other funds for the loss of state revenues and to continue state spending on an upward spiral.

Technically, state funds in the FY11 proposal are $13.2 billion. This is approximately $400 million less than the amount of state funds in the FY07 budget. That is the rationale for the claim of fiscal responsibility by the adminstration.

However, total spending in FY11 is $14.8 billion. In other words, in the harshest of economic times, O'Malley has grown the budget by over $1 billion during the past three years. He then attempts to deceive you into believing that the use of federal stimulus funds to grow the budget was actually a cut in state spending.

The overall budget breakdown is this: $13.2 billion in state funds + $900 million federal stimulus (ARRA) + $389 million federal enhance Medicaid match (wished for but not yet appropriated) + special funds swaps (of which the largest is $350 million taken from the counties' local income tax revenue fund balance for education) = $14.8 billion.  For details, the Fiscal Briefing prepared by the Department of Legislative Services is now available online from the Maryland General Assembly website (click here ).

So the "O'Malley Budget Mirage" is this: when you use federal funds for services previously paid for with state funds - chalk it up as a "budget cut" and the public won't know the difference.