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2007 Special Session of the Maryland General Assembly

At the behest of Governor Martin O'Malley, the Maryland General Assembly began a special session on Monday, October 29, 2007, to deal with a looming deficit of $1.7 billion in the state budget in the 2009 fiscal year. The governor called the session despite the lack of a clear consensus with legislative leaders on a package of spending cuts, tax increases, and revenues from slot machine gambling to fill the budget gap.

The initial version of the governor's deficit elimination plan, rolled out over several weeks in September and early October, would realize its greatest savings by freezing spending on direct state aid to the public schools for two years--a proposal that, if enacted, would impose the greatest costs on the Prince George's County Public Schools (PGCPS).  

The Bridge to Excellence in Public Schools Act of 2002, which ratcheted up state spending on the public schools by $1.3 billion over a six-year period, ending in the current fiscal year, requires that the amount of aid be adjusted annually to reflect increases in the cost of providing education. That figure is estimated at 5.2 percent in fiscal years 2009 and 2010.

In addition to the two-year freeze, the governor's plan would cap the inflation adjustment, known as the Implicit Price Deflator (IPD), at 2.5 percent in subsequent years.

The Thornton Commission, whose 2002 report formed the basis for the Bridge to Excellence Act, recognized that rising prices for items such as energy, textbooks, supplies, and health care, as well as salary increases for employees, tend to erode the value of state aid over time unless it is adjusted to reflect such costs. For this reason, and to insulate school aid from the annual tug-of-war of the state budget process, the commission recommended a mandatory annual inflation adjustment.

The projected 2009 deficit is based on budget calculations that include the IPD. Thus, freezing education spending nets substantial savings for the state--almost $188 million next year alone, counting some other forms of direct aid the governor would cut. Those savings then would carry over into subsequent years and be magnified when the frozen IPD eventually is applied to the lower base.

As the biggest recipient of state aid, PGCPS would take the heaviest hit: almost $37 million next year alone.

Governor O'Malley has proposed to soften the blow--and fulfill a campaign promise--by phasing in the Geographic Cost-of-Education Index, a feature of the Bridge to Excellence Act that his predecessor, Robert L. Ehrlich, and the General Assembly refused to fund over the past five years. The GCEI would provide extra help to counties where the cost of goods and services is higher. In Prince George's case, that would amount to about $12.5 million in the first year of a three-year phase-in of the GCEI.

Recent indications are that the governor may modify his original proposal to allow some increases in state aid in 2009 and 2010. This would mollify counties that stood not to benefit from the GCEI, some of which could have seen their allocation of state education aid actually decline.

Whether this new approach will be palatable to the General Assembly remains to be seen. Many legislators have expressed reluctance to raise taxes--or at least specific taxes proposed by the governor--and opposition even to approving a referendum on slots remains strong. Thus, there’s no guarantee that the legislature, in search of additional savings, will fund the GCEI.

In addition, both the governor and legislative leaders have been whispering the threat that, if they can’t find adequate revenues elsewhere, they might force local governments to pick up the contributions now made by the state to the teacher retirement fund.

Those contributions are expected to total almost $318 million next year--about $28 million in Prince George's alone.

Anticipating the worst possible outcome, PGCPS Superintendent John E. Deasy has told his staff to develop an alternative budget with cuts of $65 million: $37 million from the inflation factor plus $28 million from retirement costs, with no provision for new funds from the GCEI.

Despite Dr. Deasy's assurance that, should such a scenario come to pass, he will cut "from the outside in," sparing as much as possible programs that serve students in the classroom, the impact of such reductions could be devastating.

Resistance to cuts in state education aid is being led by the Maryland Coalition for Excellent Schools (MCES), of which the Alliance is a member. MCES has called on the governor and legislative leaders to develop a balanced budget plan that includes:

  • No cuts in the direct state aid to local schools systems mandated under current law, including not reducing or eliminating the implicit price deflator or the Aging Schools Program.

  • Full funding of the Geographic Cost-of-Education Index.

  • Funding for school construction and modernization of at least $400 million, as provided in the 2007-2008 budget.

  • No shifts of pension costs to local governments.

(Click here to read a PDF version of the MCES letter to Governor O'Malley and legislative leaders.)

Following its initial session on Monday evening, the General Assembly recessed for the remainder of the week to allow various committees to conduct hearings on parts of the governor's plan. Legislative leaders hope to conclude the special session before Thanksgiving.

(Click here to read an op-ed article by Alliance Executive Director David Merkowitz on the challenge facing Prince George's legislators in the Prince George's Gazette on Thursday, October 25, 2007.)


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P.O. Box 73
College Park, MD 20741-0073
Phone: (301) 277-8042 Fax: (301) 864-2977
E-mail: alliance@pgbea.org