Regular Persons Guide To The 2011 Maryland Budget

THE REGULAR PERSON’S
GUIDE TO THE GOVERNOR’S

FISCAL YEAR 2011 BUDGET
MARYLAND BUDGET & TAX POLICY INSTITUTE
FEBRUARY 2010
This publication has been prepared by the Maryland Budget and Tax Policy Institute.
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© Maryland Association of Nonprofit Organizations, Maryland Budget and Tax Policy Institute, 2010
Contents
Fast Budget Facts…………………………………………………………………………….1

Introduction………………………………………………………………………………….2
Budget Overview……………………………………………………………………………..3
Overall Size and Growth………………….…………………………………………………..3
Balancing the Budget…………………………………………………………………………4
Spending Reductions……………………………………………………………..4
Budget Reconciliation…………………………………………………………….5
Revenues………………………………………………….…………………………………..7
Expenditures………………………………………………………………………………...9
Federal Recovery Act Funding…………………………………………….………………...11
Spending Affordability………………………………………………………………………12
State Employment…………………………………………………………………………...12
Long-Range Forecast………………………………………………………………………..13
Capital Budget……………………………………………………………………………….14
Subject Areas………………………………………………………………………………...15
K-12 Education………………………………………………………………..15
Higher Education……………………………………………………………...17
Health…………………………………………………………………………19
Transportation………………………………………………………………...20
Human Services……………………………………………………………….22
Public Safety…………………………………………………………………..23
Natural Resources and Environment………………………………………….24
Budget Process………………………………………………………………………………26
Timetable……………………………………………………………………..27
Budget Glossary……………………………………………………………………………..29
Useful Websites……………………………………………………………………………...31
Sources…………………………….………………………………………………………... 32
Fast Budget Facts
Proposed Budget for the State of Maryland

Fiscal Year 2011
• Size: $32.1 billion
o Decrease from this year: $0.2 billion (-0.8%)
• 3 biggest items:
1. Health $8.7 billion
2. K-12 Education $6.9 billion
3. Higher Education $5.1 billion
• 3 biggest revenues:
1. Federal Funds $9.3 billion
2. Individual Income Tax $6.3 billion
3. Sales Tax $3.9 billion
• 3 biggest increases:
1. Health $407 million (5.1%)
2. Higher Education $131 million (2.6%)
3. Human Resources $82 million (4.6%)
• How is the budget balanced?

o $1.0 billion in net cuts from “baseline” budget levels
o $910 million in transfers to the general fund from accounting reserves and special
funds
o $389 million assumed additional federal stimulus aid
• Budget process
o Introduced by the Governor January 20, 2010
o Legislature must enact balanced budget
o Legislature may cut from the budget, but may not add
o Governor may submit “supplemental budgets”
o Revised revenue estimates in March
o Legislature scheduled to complete budget April 5, 2010
o New budget takes effect July 1, 2010
February 2010 Regular Person’s Guide to the Fiscal 2011 Budget Page 1
Introduction
The purpose of the “Regular Person’s Guide to the Governor’s Budget,” as the name suggests, is to
provide basic, useful information about the State’s spending plan to people who normally do not
“live and breathe this stuff.”
The Guide has four main sections:

1. Overview: General information about the size, contents, and major changes in the budget.
2. Subject Areas: More specific information about the seven largest state government
functions, plus an “other” section for everything else.
3. Budget Process: A step-by-step reference to the state’s process for developing and
approving the budget.
4. References: Additional resources that might be helpful, including a glossary of technical
terms and a listing of useful Internet sites.
The trick to a document like this is to keep it simple, and still explain enough of the intricacies so as
to give you a fair understanding. To help achieve this balance, we have inserted technical
background where appropriate in boxes:
Technical Notes
The technical notes look like this. You can read them, or skip over them as you find useful.
This report draws extensively from the “Budget Highlights” book and the detailed budget books
prepared by the Department of Budget and Management (DBM), and from the “Fiscal Briefing”
presented by the Department of Legislative Services (DLS) on January 25, 2010. Maryland is
blessed to have highly dedicated, expert, and public-spirited analysis staffs at these agencies.
MB&TPI is deeply indebted to them in being able to bring you this guide.
February 2010 Regular Person’s Guide to the Budget Page 2

Budget Overview
Overall Size and Growth
• Total Budget: $32.1 billion

o Decrease from this year: $0.2 billion (-0.8%)
• General Fund Budget: $13.2 billion

o Reduction from current year: $0.3 billion (-2.0%)
Budget Totals by Fund Source
35
30 Higher Ed., 3.4 Higher Ed., 3.5
25
Federal, 9.8 Federal, 9.3
$ billions
20
Special, 5.7 Special, 6.0

15
10
General, 13.4 General, 13.2

5
0
FY 2010 FY2011
General Funds and Other Funds

“General Funds” are the monies available for the state to use for most of its functions without restrictions. They come
mostly from income and sales taxes. General funds do not include payments to the state from the federal government
(“federal funds”), fund sources that are restricted for specific purposes, like transportation or environmental programs
(“special funds”), or funds raised by state colleges and universities in student fees, grants, contracts and the like
(“higher education funds”).
Fiscal Year
The state budgets and accounts for its finances using a “fiscal year” that begins July 1 and ends June 30. It is named
for the calendar year in which it ends. We are now in fiscal year 2010, which began July 1, 2009 and will end June
30, 2009. The legislature is considering the budget for fiscal year 2011, which begins July 1, 2010.

Balancing the Budget
Like 49 of the 50 states, Maryland is required to balance its budget. In 2007, the legislature met in a
special session to solve a persistent “structural deficit.” This means that ongoing expenses exceeded
ongoing revenues. The deficit was addressed by restraining the growth of expenditures (especially
for local school systems), spending down fund balances and taking advantage of one-time revenue
sources and temporary savings. Over the long range, the plan relied on revenue from slot machine
operations to keep the budget in balance after 2011.
In December 2007, the nation entered the longest and most severe economic recession since the
Great Depression of the 1930’s. The poor national economy affected income and sales taxes –
Maryland’s principal sources of general revenue. Since then, the state has acted on eight separate
occasions to reduce budgeted expenditures to meet reduced revenue projections. The legislature has
enacted two budgets with a combined $1.7 billion in cuts. Six times, the state’s Board of Public
Works has approved a combined $1.5 billion from budgets already enacted into law.
Spending Reductions
Spending Plan is $1.0 Billion below the Baseline
The Department of Legislative Services has estimated the reductions in the proposed budget
compared to an estimate of “baseline” expenditures at $965 million.
Baseline Budget
A spending plan used as a starting point for developing a budget, or a point of comparison for budget analysis. In the
case of the DLS baseline, the estimate incorporates the cost for the upcoming fiscal year of providing current services at
current levels, increases and reductions to implement statutory requirements, and funding of specific commitments.

The largest reductions from the fiscal year 2010 baseline are as follows:
State employee compensation – no raises, no deferred 275 m

comp match, reduced fringe benefit estimates
Medicaid – reduced cost estimates and reduced 170 m
hospital rates
Health and social services – reductions for children’s 63 m
services, no rate increase for community providers,
mental health and disability services below baseline
estimate
Local aid reductions – pupil transportation, 50 m
community colleges, and local health
Corrections – reduced funding for overtime and 49 m
inmate medical services. No state funding for local
jails.
State higher education and scholarships level-funded 20 m
with 2010 reduced levels
Private higher education reduced 22 m
Budget Reconciliation
Changing the rules to balance the budget
Some of the reductions would violate existing statutory funding requirements and require
authorizing legislation to be implemented.
The Governor’s budget plan includes $677 million in reductions that require separate legislative
authorization and $910 million in transfers from restricted funds. The Governor has introduced a
bill, known as the “Budget Reconciliation and Financing Act” (“BRFA” House Bill 151/Senate Bill
141) to make most of the necessary changes in law.
Money from piggy banks and under sofa cushions

On a 12-month basis, the budget for fiscal year 2011 is still not “structurally” balanced. Under the
Governor’s plan, the state will spend (in general funds) $13.2 billion and take in $12.6 billion. This
gap of $600 million is made up by spending down the general fund balance, transferring money
from the local income tax reserve fund and other special accounts, and using bond funds instead of
current revenues for capital programs.

“Balance Sheet” Analysis
Fiscal Year 2011 - General Funds - $ millions
Sources Uses
Revenues 12,678 Expenditures 13,177
2009 General Fund Shortfall -443
Transfers approved in 2009 102
session
Proposed Fund Balance 671
Transfers *
Transfers from capital 442
programs (replaced with
bonds)*
Remaining balance 273
Total Sources 13,450 Total Uses 13,450
*$701 million of these transfers are to occur in fiscal year 2010 to balance out the
projected shortfall
General Fund Balance

The general fund balance is the unrestricted, unobligated amount left in the general treasury at the end of the year. It is
available to help balance the next year’s budget. We can think of it as the state’s “checking account” balance.
Fiscal 2010 Balance

The Governor’s budget proposed $371 million in transfers from special and reserve funds during fiscal year 2010 and
$330 million is transfers from environmental and housing capital programs, to be authorized in the 2010 legislative
session. These transfers would be made after the fiscal year 2011 BRFA is enacted but before the end of the current
fiscal year on June 30, 2010. Without these transfers, fiscal year 2010 would finish with a $467 million deficit
instead of a $258 million surplus.

Revenues
Overall, individual income tax and federal payments are the state’s largest revenue sources. The bulk
of federal funds are dedicated to health, human services, education, and transportation programs.
The graph shows federal funds from Recovery Act provisions, totaling $1.3 billion, as a separate
slice. These revenues are not scheduled to continue in future years. Video lottery terminals (slot
machines) are projected to produce $85 million in revenue in fiscal 2011. This amount, about ¼ of 1
percent of the total is included in the “other” slice.
Total Revenues FY 2011

$ Billions
Total = $32.3 Billion
Other
17% Individual
income tax Corporation
20% income tax
4%
Other Federal Sales tax
25% 12%
Lottery
2%
Gas tax &
Recovery Act Higher transportation
4% Education 7%
11%
Revenue estimates are particularly important to the general fund budget. Maryland relies on income
and sales taxes for 3/4 of its general fund revenue. Since these sources are quite sensitive to
economic conditions, forecasts of the national and state economies are central to projecting
revenues.

General Fund Revenues FY 2011
Franchise &
insurance taxes
3% Other
Tobacco tax 8%
3%
Individual
Lottery income tax
4% 50%
Sales tax
28%
Corporation
income tax
4%
The Board of Revenue Estimates observes that the states revenues are “beginning to stabilize.” They
are, however stabilizing at a low level. The revenues estimated for this year are below the actual
collections in fiscal 2007. The poor national economy has essentially negated four years of regular
economic growth plus the additional revenues enacted at the 2007 special session.
Official Revenue Estimates

In December, the Board of Revenue Estimates issues official revenue estimates for the upcoming budget. The Board
consists of the Comptroller, the Treasurer and the Secretary of Budget and Management, and it is supported by a small
professional staff, economists and financial professionals in various state agencies, and an Economic Advisory Panel of
volunteer private-sector experts. In March, the Board updates its estimate to reflect any new factors in either economic
or collection data.
In Maryland we have a tradition of professional and fair-minded revenue estimating. If there is any bias, it is towards
more conservative (i.e. safer) estimates. Unlike some states, Maryland has not had issues with political manipulation
of the revenue estimates.

Expenditures
Nat. Total Budget FY 2011

Resources &
Environmen
t
2% Debt Others
Service 6%
3%
Public
Safety Human Health
6% Services 28%
7%
Transportati K-12
on Education
11% 21%
Higher
Education
16%
The largest items in the state budget are health and education. Health and all levels of education
together comprise over half of the state budget. If we add transportation, human services and public
safety then the six largest functions total 89%. The remaining 11% covers everything else, including:
environmental programs, the court system, debt payments, business development, arts and culture,
and tax collection.

The following chart shows the growth in the tot
total budget,
t, from fiscal year 2010 to 2011.
2011
Budget Growth FY 2011 over FY 2010

Total Funds
$ millions
(300) (200) (100) - 100 200 300 400
Health
Higher Education
Transportation
Human Services
Nat. Res. & Env.
Debt Service
Public Safety
K-12
12 Education
Health is the biggest gainer overall. This increase reflects increases in Medicaid caseloads as well as
increasing costs for mental health and developmental disability services
services. K-12
12 education
expenditures decline, reflecting reductions in federal Recovery Act funds directed to education.
Transportation also declines – reflecting reductions in both state and federal funds for highway
construction. The next chart focuses exclusively on general funds.

Budget Growth FY 2011 over FY 2010
General Funds
$ millions
(400) (300) (200) (100) - 100 200 300
Health
Public Safety
Higher Education
Nat. Res. & Env.
Others
Human Services
K
K-12 Education
Again, health is the large gainer, reflecting Medicaid enrollment and cost increases. Higher education
and public safety have modest gains
gains. K-12 education loses general funds, mostly because of funding
arrangements. The budget proposes to transfer $350 mil million
lion from the local income tax reserve
account to the Education Trust Fund. This source will be used for aid payments to local school
systems, in place of an equivalent amount of general funds. Environmental programs and human
services also are reduced in general funds.
The Federal Recovery Act

The American Recovery and Reinvestment Act (ARRA) directs the federal government to inject
$787 billion into the economy, including $280 billion in grants for state and local governments, to
cushion the effects of the current recession. The largest component of the program will provide
relief from taxes for individuals amounting to $288 billion. The five other largest categories of
assistance would go to infrastructure and science ($111 billion, including $48.1 bbillion
illion for

transportation), protecting the vulnerable ($81 billion), health care ($59 billion), and education and
job training ($53 billion), and $43 billion for energy-related programs. Planners anticipate that $3.8
billion of these funds will flow into Maryland, resulting in the creation of 66,000 jobs over the next
two years.
More than two-thirds of the stimulus funds will be used to support Maryland’s Medicaid program
and education (K-12 and higher education). The bulk of these funds will be distributed through
formulas that will permit the state to maintain its recent and planned levels of support to its low-
income population in these need categories. The remaining funds will be widely dispersed among
several need categories, where the state will generally have somewhat greater autonomy in targeting
the funds within each of these broad areas.
The budget for fiscal 2011 is supported by about $900 million in revenues from the Federal
Recovery Act. The budget assumed an additional $389 million from an extension to Recovery Act
funding in the Medicaid program.
Spending Affordability
Spending Affordability is a process set out in Maryland law, whereby a legislative committee annually
recommends to the Governor a limit on the amount of growth in the state budget. The Department
of Legislative Services calculates that, as defined for spending affordability purposes, the proposed
budget decreases by 2.85%. This differs from other calculations of the budget growth rates because
the spending affordability calculation contains several adjustments to capture ongoing spending
from state sources. For example, federal funds, expenditures for construction projects, and
payments to reserve funds are not counted in the spending affordability calculation, but most special
funds and current-year deficiency appropriations are. The Spending Affordability Committee
recommended no increase on a spending affordability basis: a zero percent growth limit. The
proposed budget is $594 million under the spending affordability guideline.
The spending affordability recommendation is not binding on the Governor or the legislature.
However, the legislature tends to use it as a guide in its action on the budget. DLS’ calculation
differs slightly from the Governor’s calculation of -2.90%. The legislature will use DLS’ calculation
in its decision-making process. Given that the proposed budget is far below the recommended limit,
the spending affordability process will likely not be a major factor in this year’s budget deliberations.
State Employment
The bulk of state employees, like the bulk of state expenditures, are concentrated in a few agencies.
The 10-campus University System of Maryland, the Department of Public Safety and Correctional
Services, and the Department of Transportation together employ over half of the state government
workforce.

Proposed State Employment
FY 2011 Permanent & Contractual
Total Full
Full-Time Equivalent = 88,588
Others
20% University
Juvenile Services System
3% 31%
State Police
3% Courts
4% Public Safety
Human 13%
Health
Reseouces 8%
8%
Transportation
10%
The budget provides a net decrease of 140 permanent state employees.s. The budget abolishes 187
positions. The largest numbers of abolished positions are in the Department of Human
uman Resources
and Department of Assessments and Taxation
Taxation.
The budget proposes 47 new positions are proposed, mostly in the Lottery Agency (to oversee video
lottery terminal operations) and State Police. Since the initiation of the statewide hiring freeze
fr in
October 2001, the state workforce has been reduced by 44,800 00 jobs (excluding colleges and
universities).
State employees would not receive a cost

cost-of-living
living increase, pay steps or deferred compensation
benefits provided in law.
Long-
Long-Range Forecas
Forecastt
The Governor’s budget proposal includes a five
five-year
year forecast of general fund revenues and
expenditures,
es, ending with fiscal year 2015
2015. As one-time sourcess run out after fiscal year 2011,
2011 the
forecast shows shortfalls ranging from $$1.5 billion to $2.5 billion in each year.
The forecast shows state general fund spending for K-12 education growing at 5.6%. %. This growth
rate is based the expiration of Federal Recovery Act funds after 2011. This will increase the need for
general fund spending for education beginning in 2012. However, beginning in 2013, general fund
requirements for education aid will moderate as video lottery revenue becomes substantial.

The forecast shows Medicaid growing
owing at an average rate of 17.4
17.4%,
%, making it the fastest growing
sector of the budget. This also reflects the expiration of federal Recovery Act funds. Underlying
growth in Medicaid expenditures is in the 8% to 9% range.
General Fund Budget Forecast

500
258 274
0
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
-500
-1000
$ Millions
-1500
-1514
-2000
-2147
-2226
-2500
-2514
-3000
Capital Budget
In a separate but related process to the operating budget, the legislature also will take
tak action on a
capital budget for fiscal year 2011.. The capital budget funds construction projects and other
expensive assets with a long life. Unlike most local governments or corporations, the state’s capital
budget is mostly given to other units of gov
government
ernment or nonprofit organizations as grants or loans.
The capital budget is funded from a combination of borrowing (by authorizing the state or
individual agencies to issue bonds) and current
current-year revenues. In 2011, to provide relief to the
operating budget,
get, the capital budget employs bond funds for programs usually funded with current
revenues. These strategies provide over $400 million of the budget balancing strategy.

Overall the capital budget totals $3.2 billion. About half, $1.6 billion, is for tr
transportation
ansportation projects.
This summary focuses on the other $1.5 billion.
FY 2011 Capital Budget

(Excluding Transportation)
Replace special
funds Other
11% 5%
Inter
Inter-Co
Connector Environment
Health &
8% & Nat. Res.
Hospitals
2% 30%
Police, Pub
Sfty, DJS
3%
Higher Ed.
Housing
21%
4% School
Construction
16%
The items in Natural Resources and Environment are principa

principally
lly water quality programs ($385
million), and land preservation prog
programs like Program Open Space ($86 million). The capital budget
provides $261 million for local public school construction. Highe
Higherr Education projects include $41
million for the Physical Sciences complex at the University of Maryland College Park, and $81
million for 14 community college projects.
Subject
Subject Areas
K-12 Education
Federal federal recovery act funds down – teacher pension
payments up – $9 million cut to student transportation and
“K-12
12 Education” includes aid to local public schools, State Department
of Education operations (except for child care subsidies and
rehabilitation services, which are included in Human Services below), the
Inter-agency
agency Committee for School Construction (including funding for
improvements to aging schools), and the Maryland School for the Deaf.

o Decrease from previous year: $200 million ((-2.9%)
o 21% of state budget

o Decrease
ecrease from previous year: -$346 million (-6.4%)
$ Billions
0 1 2 3 4 5 6
Direct Aid to local

schools
Teachers' retirement
payment
FY 2010
FY 2011
Other
• Highlights and Lowlights

o $156 million in federal R Recovery Act funds for “Title I” programs for educationally
deprived children and $107 million for educating students with disabilities in fiscal 2010
is not available in 2011.
o Direct
irect aid goes down for 5 of the state’s 24 school districts:: Allegany, Carroll, Garrett,
Kent and nd Prince George’s
o State payment for tea teachers’ retirement increases $93 million
o The budget assumes the passage of legislation to reduce student transportation aid
(“the school bus formula”) by $4.3 million.
• Special Effects
o Deficiency Appropriations – the Department of Education has $20 million of
proposed deficiency appropriations for fiscal year 2009. $10.7 million in general funds
is for costs associated with the Maryland school assessment program. $8.25 million is
federal funding which has become avai
available
lable since the budget’s original passage.
o Budget reconciliation items

A transfer of $350 million from local income tax accounting reserves would be
applied towards direct aid to local schools – a major piece of the fiscal 2011
budget balancing strategy. This transfer will replace an equal amount of general
funds. This one
one-time
time action will generate a substantial “hole” on the budget for
fiscal 2012.
The budget reconciliation bill would eliminate all $6 million in general funds
from the Aging Schools progr
program,
am, to be replaced with state bond proceeds.

The budget reconciliation bill would cut $4.3 million from student
transportation aid.
• Capital Budget
o Over $260 million for local school construction.
Higher Education
Flat funding from the state – 3% tuition growth – cuts in aid to
private colleges
“Higher Education” includes all the expenses of the state universities
and colleges: both from their state appropriations and from tuition and
other sources of the colleges’ own revenue. It also includes state
scholarships,
olarships, aid to community colleges and private colleges and
universities, and the operations of the Maryland Higher Education
Commission.

o Increase
crease over previous year: $125 million (2.5
(2.5%)

o Increase over previous year: $12 million (0.8
(0.8%)
o This increase will be wiped out once higher education agencies are allocated their share of
furloughs and other statewide reductions.
$ Billions
0.0 1.0 2.0 3.0 4.0
State inst's - state

funding
State inst's - other
sources
Scholarships
Community colleges
FY 2010
Private inst's
FY 2011
MHEC admin.
• Highlights and lowlights

o In-state tuition to increase 3%.

o In addition to the 3% in-state tuition, fees will increase to produce cost increases of up
to 5% at most campuses.
o Enrollment at state institutions to grow by only 1/3 of 1% to 128,000.
o Student financial aid is reduced $2 million. “Tolbert” scholarships, for students at
private career schools, will be eliminated. Funding for the distinguished scholar
program will be reduced by $1.05 million, a 25% cut. Overall, the state will award about
6000 fewer scholarships.
o Aid to private colleges and universities is reduced to $30 million, $8 million below the
amount for the current year and $22 million less than the amount specified by the legal
funding formula.
o Direct aid to community colleges is approximately flat-funded with current amount
(after accounting for mid-year cuts). This is $23 million below the amount specified by
the legal funding formula.
• Special Effects
o Deficiency Appropriations
There is a net transfer of $39 million from state general funds to federal
Recovery Act funds.
Reduces aid to private universities and colleges to $30 million, saving $22
million.
Holds direct aid to community colleges at FY 2009 levels, saving $23 million.
• Capital Budget
o $352 million for Higher Education Projects, including:
o University System of Maryland $226 million
$41 million for UM College Park new Physical Sciences complex.
$38 million for Towson new College of Liberal Arts complex.
$37 million for UM Baltimore County new performing arts and humanities
building.
$37 million for University of Baltimore new Law School building.
o Morgan State University $34 million
$30 million for new Center for Built Environment and Infrastructure Studies.
o Community Colleges $81 million
17 projects at 12 community colleges.
$16 million for Montgomery College – Germantown Bioscience Center.
$9 million for Howard Community College new allied health building.
$9 for Woc-Wic Tech Community College for its allied health building
o Private Colleges and Universities $4 million
Shared among 3 projects at Goucher College, Stevenson University, and Hood
College.

Health
Increases reflect increases in Medicaid enrollment and other health needs
“Health” consists mostly of the state Department of Health and Mental
Hygiene (DHMH). DHMH includes the “Medicaid” Medical Assistance
and Maryland Children’s Health Insurance (M (M-CHIP) programs for low-
income residents, state institutions and community services for mental
health and developmental disabilities, public health and aid to local hhealth
departments, and treatment and system planning for AIDS, substance
abuse, and other health-related
related problems. The “health” category also
includes the Maryland Veterans’ Home, state aid for the University of
Maryland Medical Systems, and two programs in the Maryland Insurance Administration: the
Maryland Health Insurance Program (MHIP) and Rate Stabilization Fund.

o Increase
crease over previous year: $297 million (3.3%)

o Increase from previous year: -$234 million (-6.2%)
$ Billions
0 1 2 3 4 5 6 7
Medicaid & M-CHIP
Mental Health
Dev. Disabilities
Other DHMH FY 2010

FY 2011
Other Health

o Virtually the whole increase in the health budget is accounted for by increases in
Medicaid and Children’s Health enrollment and costs.
o The budget assumes $389 million in extra federal assistance for the Medicaid program.
pro
o No cuts to Medicaid or Children’s Health eligibility
eligibility. Provider rates reduced for
hospitals, nursing homes, Managed Care Organizations (MCO’s), and community
providers.
o Other reductions occur in local health department funding, substance abuse treatment,
tobacco cessation programs and cancer research funding.
• Special Effects

$350 million to support higher than expected Medicaid enrollment and costs.
$215 million of the $350 million is Federal funds, including $41 million in
Recovery Act funding.
$87 million in state general and special funds for Medicaid to replace fiscal 2010
reductions made by the legislature and Board of Public Works.
Authorizes $7 million in transfers from health-related special fund balances to
the general fund. Included are $2.1 million from the Spinal Cord Injury
Research Trust Fund, $1.8 million from the Community Health Resources
Fund, and $1.5 million from the Board of Physicians, among others.
$17 million from increases in nursing facilities assessment fees.
$9 million in savings in Medicaid contingent on legislation relating to false
claims.
An additional $8 million in cigarette settlement funds authorized to help fund
the Medicaid program, for a total of $112 million – 2/3 of the whole amount of
cigarette settlement funds.
• Capital Budget
o $38 million for Health and Hospital projects, including:
o $7.9 million for 9 community health-related facilities such as mental health services,
developmental disability services, primary care clinics, and adult day care.
o $7.5 million for Johns Hopkins Medicine pediatric trauma care center and
cardiovascular and critical care tower.
o $5 million for 7 projects for community hospitals.
o $3.2 million for projects at federally qualified health center.
Transportation
Highway construction and local transportation aid cut in response to reduced transportation
revenues and to help the general fund budget.
“Transportation” consists of the Maryland Department of

Transportation. The Department includes the state highway
program, mass transit, BWI Thurgood Marshall Airport, the
Port of Baltimore and local aid for transportation programs.
The Department of Transportation operates entirely on
special funds dedicated to transportation, and federal funds.
A share of the state sales tax is dedicated to Transportation
beginning in fiscal year 2009, in addition to the
Department’s traditional sources, such as gas tax and vehicle
title fees. Also unlike other state agencies, the Department
of Transportation’s budget includes the expenditure of bond funds issued by the Department for
construction projects.

o Decrease from previous year: -$88 million (-2.5%)

$ Millions
0 200 400 600 800 1000
Highway construction
Transit operation
Local aid
Transit const. & equip.
Airport
Port
Highway maint FY 2010
FY 2011
Debt service
Other transportation

o Gas as tax, vehicle titling tax and federal transportation funds continue to perform poorly
in a recessionary economy.
o Highway construction is much reduced, in response to revenue downturns, downturns reduced
federal aid, and the phasing out of federal recovery Act funding.
o Local highway aid is cut to 10% of it its statutory level for most jurisdictions. This
continues reductions approved in the 2009 session and the Board of Public Works in
fiscal 2010.
o Transit operation and construction and debt service payments show notable increases.
• Special Effects
None.
Transfers $160 million from local transportation aid funds to the state general
fund.
Shifts $30 million in general fund payments for the Inter
Inter-County
County Connector
highway project from fiscal year 2011 to 2012. In fiscal year 2011, $126 million
will still be paid toward the project from state bond proceeds.
• Capital Budget
o $713 million for highway
ighway construction includes $16 million for Interstate 70
improvements in Frederick County and $17 million to complete for intersections
around the National Naval medical Center in Montgomery County.
o In fiscal year 2011, an estimated $6oo million will be expended d on the $2.6 billion
Inter-County
County Connector (ICC) highway project in Montgomery and Prince George’s
counties. This spending is budgeted in the Maryland Transportation Authority, which
is not technically part of the state Department of Transportation
ransportation budget.
budg $127 million
– originally slated to come from state general funds – will come instead from proceeds
of state bond sales.
o $468 million in transit improvements include $54 million for engineering of the Red
Line transit project in the Baltimore area and the Purple Line in metropolitan
Washington.

Human Services
Increases for food stamps, energy assistance - Jobs cut in already-understaffed
understaffed social
service offices.
“Human Services” includes programs operated by the Department of Human Resources (DHR) and
local Departments of Social Services, including public assistance, foster care, and child welfare. In
this category, we also include childcare subsidies, rehabilitative services provided through the State
Department of Education, family and children’
children’ss services funded through the Children’s Cabinet
Interagency Fund, and the Governor’s Office for Children and programs funded by the Department
of Aging and Department of Disabilities.

o Increase
crease over previous year: $142 million (5.9%)
• General Fund Budget: $616 million

o Decrease from previous year: -$80 million (12.8%)
$ Millions
0 200 400 600 800
Assistance payments
Food Stamps
Foster care
Local child welfare
Local family…
Home energy…
Other DHR
FY 2010
Child care
FY 2011
Rehab. Services
Other human services

o Federal “food stamp” funding (now known officially as the Supplemental Nutrition
Assistance
ssistance Program) increases $1
$189 million, reflecting increased caseloads spurred by
the economic recession and Recovery Act funding.
o Home energy assistance programs decrease $30 million, reflecting the expiration of
temporary Recovery Act funding.
o An $80 million reduction in general funds largely reflects accounting changes related to
the Temporary Assistance for needy Families (TANF) program.
o The budget includes $7 million in undetermined cuts from the Department of Human
Resources’ operating programs.
• Special Effects
$19 million in state general funds for assistance payments in the Temporary
Disability Assistance (TDAP) pprogram.
rogram. Caseloads have increased from about

13,000 recipients in July 2008 to nearly 18,000 in December 2009 – more than a
38% increase
increase.
$64 million for home energy assistance. $40 million is federal funding, and $24
million is special funds from greenhouse gas license auction proceeds.
The Department of Aging gets $3 .3 million in additional federal funding for
community services.
The Department
partment of Education – Division of Rehabilitation Services (DORS)
gets $7.9 million for rehabilitation services for disabled individuals.
None.
Public Safety
Prisons and police see modest growth
“Public Safety” includes the Department of Public Safety and Correctional Services (DPSCS), the
Department of State Police (DSP) and the Department of Juvenile Services (DJS). DPSCS operates
the state prisons and the Baltimore City Detention Center and th
thee state’s adult parole and probation
system. DJS includes case management, community supervision, juvenile detention, and residential
facilities for delinquent youth committed by the courts.

o Increase over previous year: $44 million (3.1%)

o Increase
ncrease over previous year: $19 million (1.1%)
$ Millions
0 200 400 600 800 1000 1200
Correctional
institutions
Parole & Probation
Other DPSCS
State Police FY 2010

FY 2011
Juvenile Services

o Corrections
ctions institutions increase $22 million (about 3%); principally reflecting increases
in personnel expenses.
o The administration
dministration intends to save $3.6 million in overtime in correctional institutions.
There may be ann impact on security staffing as no new correctional officer positions
are added.
o Expenses for medical care for inmates total $159 million, an increase of $7 million.

o The budget would eliminate at least 383 positions in Public Safety, 25 in Juvenile
Services and 21 in State Police.
o The budget adds 10 troopers for the Maryland State Police.
o State Police vehicle replacement, equipment and travel costs are reduced by $3.5
million.
• Special Effects
Juvenile Services: $6 million including staff overtime, payments for private
providers, and to offset an overestimate of federal funding in the current
budget.
o Public Safety and Correctional Services: $16 million including staffing costs, and
inmate medical care. $570,000 in federal recovery Act funds will go towards victim
compensation payments.
None.
• Capital Budget
o $18 million for DPSCS, mostly for a 180-bed youth detention center in Baltimore City,
for minors who are under the jurisdiction of the adult Division of Corrections.
o $23 million for 3 local jail projects.
o $5.5 million is included for work on a minimum-security addition to St. Mary’s
County’s local detention center.
o $2.5 million for State Police to complete the new barracks and garage in Hagerstown.
o $4.7 million for Juvenile Services for land acquisition and design of a new 48-bed
detention center for youth from Anne Arundel County and southern Maryland.
Natural Resources and Environment

Water Quality Programs Increase
“Natural Resources and Environment” includes the Department of Natural Resources (DNR) and
Maryland Department of the Environment (MDE). DNR includes the state park and forest
operations, Program Open Space land preservation program, and the Natural Resources Police.
MDE includes programs that monitor and regulate air and water quality and hazardous substances,
and provide assistance to business and communities in controlling
pollutions.
• Total Budget: $493 million

o Decrease from previous year: -$181 million (-27%)
o 2% of state budget.
• General Fund Budget: $86 million

o Decrease from previous year: -$5 million (-5.5%)
o Funding for water quality projects falls $164 million as temporary federal Recovery Act
funding lapses.
o Program Open Space, Maryland’s signature program for preservation of land for
environmental and recreational purposes is normally funded from state real estate
transfer payments. With the downturn in the housing market, this dedicated revenue

source has been severely reduced. In fiscal year 2011, the budget provides state $70
million in bond proceeds to replace the transfer tax funds.
o The budget provides $20 million for the Chesapeake Bay 2010 Trust Fund for projects
to reduce pollution. Although the Fund was targeted to provide $50 million annually, it
received only $10 million in fiscal year 2009 and $8 million in 2010.
• Special Effects
Department of Natural Resources: $1.8 million. $550,000 in federal funds for
controlling the spread of invasive species. $810,000 in special funds for non-
point source pollution control, and $254,000 in special funds for the “Forest
Brigade” program, which involves correctional inmates in reforestation
projects.
Fund transfers: $577 million in environment-related special funds and capital
programs.
• Capital Budget
o $478 million for environmental programs in the largest component of the capital
budget.
o MDE includes $384 million in water quality programs.
o Program Open Space and other land preservation programs total $86 million. Funding
for these programs peaked at over $360 million in fiscal year 2007.
o Maintenance and improvement projects at parks and forests total $19 million

Budget Process
• The state constitution requires a balanced budget.

o The Governor must present a balanced budget to the legislature and the legislature
must enact a balanced budget.
• Maryland is the only state where the legislature, in most cases, cannot add to the budget
proposed by the Governor.
o The legislature may reduce the amounts proposed by the Governor, and may restrict
the use of funds.
• The House of Delegates and Senate take turns each year in initiating action on the budget
bill.
o This year, it is the Senates’ turn to take action first.
• The budget is referred to the Senate Budget and Taxation Committee and the House
Committee on Appropriations.
• The Governor may propose any number of “supplemental” budgets after introducing the
initial budget and before the legislature takes final action.
o The balanced budget requirement applies to proposed supplemental budgets.
• The budget bill becomes law upon passage by both houses of the legislature. It does not
require the Governor’s signature.
o There is no veto power or item veto of the budget bill.
• If the budget is not passed by the 90th day of the session (April 5 this year), the Governor
proclaims an “extended session” and no other business may be conducted except to
complete action on the budget.
• The capital budget (bond authorizations) is a completely different process from the
operating budget.
o The legislature has much more flexibility with the capital budget.

Timetable
Maryland’s budget process is a year-round activity. The budget process for fiscal year 2011 began in
the summer of 2009. The following chart summarizes the budget timetable.
Executive Branch Legislative Branch

Summer 2009 Department of Budget and Special studies and oversight
Management (DBM) sends activities
budget instructions and
request targets to agencies.
Agencies prepare budget
requests.
August – September Agencies submit budget
requests to DBM.
Fall DBM, the Governor, and Spending Affordability
Governor’s staff meets with Committee meets to review
agencies to review budget state economy and finances.
requests. Department of Legislative
Services (DLS) prepares
“baseline budget” for
forecasting and comparison
purposes.
December Board of Revenue Estimates Spending Affordability
issues official revenue Committee issues
estimates. recommendation.
Governor makes final budget As budgets are finalized,
decisions. DLS begins review and
DBM prepares budget for analysis.
printing.
January 20 (8th day of Governor submits balanced
legislative session) budget to legislature

Executive Branch Legislative Branch
January - March State agencies and DBM DLS completes detailed
respond to issues and analysis of each agency
recommendations from DLS budget.
analysis and answer Senate and House
legislators’ questions about Subcommittees hold
budget and programs. hearings.
Governor may introduce Subcommittees and
supplemental budgets. committees make decisions
on budget actions.
Committees report
recommendations to the
Senate and House. Each
House passes its version of
the budget. A conference
committee of Senators and
Delegates resolve
differences.
April 5 (83rd day of session) Constitutional target for final
legislative action on
operating budget.
April 12 (90th day of session) Final day of regular session.
If the budget is not passed
by this date the Governor
proclaims an “extended
session” and no other
business may be conducted
except to complete action on
the budget.
April-June DBM revises detailed data to Budget Committees issue
reflect legislative action. “Joint Chairmen’s Report”
Comptroller sets up state’s (“JCR”), which explains
accounts for new fiscal year. legislative action and
requests various reports and
other information from state
agencies.
July 1 Fiscal year 2011 begins
June 30, 2010 Fiscal year 2011 ends

Budget Glossary
Appropriation – A legal authorization to expend government funds.
Allowance – A budget amount proposed by the Governor for the legislature’s consideration. In
most cases, the legislature may reduce but may not add to the allowance.
Budget – A spending plan including sources and uses of funds.
Capital Budget – The plan of proposed expenditures for construction projects, purchase of real
property and major equipment, and other long-lasting assets. In Maryland State Government, an
item usually must cost at least $100,000 and have a useful life of 15 years to be considered a capital
item. The state may issue bonds to borrow funds to finance capital items.
Budget Reconciliation and Financing Act (BRFA) – Separate legislation considered in

conjunction with the budget to make changes in statutes to permit adjustments in appropriations or
to help finance expenditures. BRFA provisions may authorize the transfer of dedicated fund
balances to the general fund, reduce the amounts of funding mandates, or allow dedicated funds to
be used for new purposes, for example.
Deficiency Appropriation – An amount included in the budget bill to supplement the

appropriation for the current year. Deficiency appropriations are typically used to provide funds for
programs that are projected to exceed their budget estimates, or to authorize the expenditure of
federal or special funds that were underestimated at the time the original budget was enacted. The
fiscal year 2010 budget bill includes deficiency appropriations for fiscal year 2009.
Federal Fund (FF) – Amounts paid to the State by the federal government, almost always for
specific uses. Federal aid for Medicaid and transportation projects are two large examples.
Fiscal Year (FY) – The time period a budget is in effect. The state budgets and accounts for its
finances using a “fiscal year” that begins July 1 and ends June 30. It is named for the calendar year
in which it ends. Thus we are now in fiscal year 2009, which began July 1, 2008 and will end June
30, 2009. The legislature is considering the budget for fiscal year 2010, which begins July 1, 2009.
General Fund (GF) - The monies available for the state to use for most of its functions without
restrictions. They come mostly from income and sales taxes. General funds do not include
payments to the state from the federal government (“federal funds”), or fund sources that are
restricted for specific purposes, like transportation or environmental programs (“special funds”).
Higher Education Fund – The state colleges and universities use a different set of fund names
from other agencies. Higher education funds are divided into “current unrestricted” (CUF) and
“current restricted” (CRF). “Current Unrestricted Funds” are most of the institutions’ revenue
sources. They include the state appropriation, tuition and student fees, and revenues from residence
halls, dining services, and athletics. “Current Restricted Funds” are those whose use is restricted by
law or by the donor. It is mostly research grants, and donations made for specified purposes.

Operating budget – The budget for ongoing operations, is distinct from the “capital budget.” The
balanced budget requirement applies to the operating budget.
PAYGO – “Pay-as-you-go” financing for capital projects: the practice of using current revenues for
capital items, rather than borrowing funds by issuing bonds. In years with budget surpluses, the
state sometimes uses PAYGO to fund a larger capital program.
Special Fund (SF) - Fund sources that are restricted for specific purposes, like transportation or
environmental programs.
Spending Affordability – A process set out in Maryland law, whereby a legislative committee
annually recommends to the Governor a limit on the amount of growth in the state budget. The
calculation of the growth rate for spending affordability purposes differs from other calculations of
the budget growth rates because the spending affordability calculation contains several adjustments
to capture ongoing spending from state sources. For example, federal funds, expenditures for
construction projects, and payments to reserve funds are not counted in the spending affordability
calculation, but most special funds and current-year deficiency appropriations are. The spending
affordability recommendation is not binding on the Governor or the legislature. However, the
legislature tends to use it as a guide in its action on the budget.
Structural balance, structural deficit – The difference between ongoing revenues and on-going
expenditures during a fiscal year. If on-going expenditures exceed on-going revenues, the state is in
a structural deficit. The state can have a structural deficit but still have a constitutionally-balanced
budget because of an adequate beginning fund balance to absorb the difference, or because of the
use of fund transfers or other temporary revenues.

Useful Websites
Department of Budget and Management
www.dbm.state.md.us
Click on “Public” then “Budget” for:
• Official budget documents
• Agency testimony at budget hearings
• “Fiscal Digest” - information on final budget after enactment
Maryland General Assembly

www.mlis.state.md.us
Click on “Budget Documents” for:
• Budget Bill
• Fiscal Briefing
• Budget Analyses
• Joint Chairmen’s Reports
Click on “Hearing Schedule” for:
• Budget hearing schedule.
Governor of Maryland
www.gov.state.md.us
• Press releases
• Information on Governor’s initiatives
• “State-State” Information
Comptroller of Maryland
www.comp.state.md.us
Under “News and Publications,” click on “Financial Reports” for:
• Official Revenue Estimates
Maryland.gov
www.maryland.gov
• Official State Web Site
Maryland State Archives - Maryland Manual

http://www.msa.md.gov
Click on “Maryland Manual On-Line” for:
• General Information on state agencies and officials
Maryland Budget and Tax Policy Institute

www.marylandpolicy.org
• Accurate, timely and useful information regarding Maryland’s budget, its state programs,
and their effects on regular persons.

Sources
Bureau of Revenue Estimates. Report of the Maryland Board of Revenue Estimates on Estimated
Maryland Revenues – Fiscal Years Ending June 30, 2009 and June 30, 2010. December
2009.
Department of Budget and Management. Maryland Budget Highlights, Maryland budget Books,
Volumes 1-3, FY 2011. January 20, 2010.
Department of Legislative Services. Fiscal Briefing. January 25, 2010.
Department of Legislative Services. Analysis of the FY 2011 Maryland Executive Budget (various
headings). January, February 2009.
http://mlis.state.md.us/2009RS/budget_docs/All/Operating/operating_analysis_doc.htm
Department of Legislative Services. Maryland’s Budget Process: Legislative Handbook Series Volume IV
2006, Annapolis: Department of Legislative Services.

Regular Persons Guide To The 2011 Maryland Budget

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THE REGULAR PERSON’S

GUIDE TO THE GOVERNOR’S

MARYLAND BUDGET & TAX POLICY INSTITUTE

The Maryland Budget and Tax Policy Institute is a nonpartisan

The Institute is a project of Maryland Nonprofits: www.marylandnonprofits.org.

Fast Budget Facts…………………………………………………………………………….1

Proposed Budget for the State of Maryland

• How is the budget balanced?

The Guide has four main sections:

February 2010 Regular Person’s Guide to the Budget Page 2

• Total Budget: $32.1 billion

• General Fund Budget: $13.2 billion

Budget Totals by Fund Source

30 Higher Ed., 3.4 Higher Ed., 3.5

Special, 5.7 Special, 6.0

General, 13.4 General, 13.2

General Funds and Other Funds

February 2010 Regular Person’s Guide to the Budget Page 3

February 2010 Regular Person’s Guide to the Budget Page 4

State employee compensation – no raises, no deferred 275 m

Money from piggy banks and under sofa cushions

February 2010 Regular Person’s Guide to the Budget Page 5

General Fund Balance

Fiscal 2010 Balance

February 2010 Regular Person’s Guide to the Budget Page 6

Total Revenues FY 2011

February 2010 Regular Person’s Guide to the Budget Page 7

Official Revenue Estimates

February 2010 Regular Person’s Guide to the Budget Page 8

Nat. Total Budget FY 2011

February 2010 Regular Person’s Guide to the Budget Page 9

Budget Growth FY 2011 over FY 2010

Nat. Res. & Env.

February 2010 Regular Person’s Guide to the Budget Page 10

Nat. Res. & Env.

The Federal Recovery Act

February 2010 Regular Person’s Guide to the Budget Page 11

February 2010 Regular Person’s Guide to the Budget Page 12

State employees would not receive a cost

February 2010 Regular Person’s Guide to the Budget Page 13

General Fund Budget Forecast

February 2010 Regular Person’s Guide to the Budget Page 14

FY 2011 Capital Budget

The items in Natural Resources and Environment are principa

• Total Budget: $6.7 billion

February 2010 Regular Person’s Guide to the Budget Page 15

Direct Aid to local

• Highlights and Lowlights

o Budget reconciliation items

February 2010 Regular Person’s Guide to the Budget Page 16

• Total Budget: $5.2 billion

• General Fund Budget: $1.6 billion

0.0 1.0 2.0 3.0 4.0

State inst's - state

• Highlights and lowlights

February 2010 Regular Person’s Guide to the Budget Page 17

February 2010 Regular Person’s Guide to the Budget Page 18

• Total Budget: $8.9 billion

• General Fund Budget: $3.2 billion

Medicaid & M-CHIP

Other DHMH FY 2010

• Highlights and lowlights