I recently wrote about the softening revenues for the State of Maryland government. More bad news has caused further downward revenue projections and more cuts. Governor O’Malley last week announced furloughs for state employees that forces several unplanned days without pay for state workers. Since the Legislature does not fall under the control of the Governor, the Speaker of the House and the Senate President have asked members of the General Assembly to voluntarily refund part of their pay in an amount equal to what other state workers are giving back. I have already taken action to return from my own salary an amount equal to 5 days pay back to the State Treasury.

I chair the State’s Spending Affordability Committee which met on December 16th and we set a rate of growth in the State’s budget for next year of only .7%. This is the lowest amount of growth ever set by this Committee since it was created 25 years ago! The Governor generally follows this recommendation when submitting his State budget in late January to the Legislature. The House and Senate will then likely further reduce the budget to zero or below zero when it passes a final state budget before adjourning in April.

It has been suggested that we should just fund the baseline budget, permitting no new programs, and only funding regular cost increases – a normal adjustment to account for price increases. Yet, even with no additional expansion of government, this would require an additional 5.65% increase to account for increased health care costs, higher energy costs, prison population increases, etc. So, the .7% increase over last year’s budget actually means our state government will decrease in size.

For the State to fund just the increases in Medicaid and Retirement costs – two obligations that must be met – the budget must grow by $450 mil. over last year. So, Marylanders can get ready for a much leaner state government that will be asked to do more with less. Again, given the national picture, this is fair. Every American is going to have to scale back and sacrifice, so government should do the same.

Critics are already saying that if the Governor had cut more spending earlier on, the serious cuts could have been avoided. In reality, the Governor has already reduced spending by $2.2 bil. since he took over. He took decisive action to protect the State’s Triple ‘A’ bond rating by making deep cuts in July, with two additional rounds since then. This past summer, who predicted that our economy would be this bad this fast?

Here’s the reality. Unemployment claims surged to their highest level in 26 years in early December - Maryland’s rate jumped 46.6%. Americans have watched their net worth decline by $2.8 trillion – the most since records started in 1952 – largely due to declines in home values, with over one million homes being lost to foreclosure.

Despite this, our Southern Maryland economy continues to outperform the State and National economy and is weathering the downturn with less damage, but still feeling the effects of a deepening recession. Consistently for almost 2 decades, this region has consistently held an unemployment rate that was lower than the state average, and Maryland’s rate was better than the national average during this time period. Good for us.

When slowdowns occur, we are not impacted as much. Since the mid 1990s, the local economy has been humming along strongly, until now when almost no one is escaping the effects of a very sour U.S. economy. This downturn will likely last for a few years, so we will have to be prepared for further belt tightening – by all of us – government included. Hang in there, we’ll weather the storm and emerge stronger once it ends.