WASHINGTON — Maryland lawmakers continued negotiations on fiscal 2011 budget bills Thursday as local bond-financed projects, which some members consider earmarks, became a point of contention.

The House and Senate versions of the budget legislation include $1.0 billion of bonds for state projects. But an amendment adopted by the Senate would scrap $15 million of local bond-financed projects for fiscal 2012 and 2013 that have been labeled as earmarks for various legislators' districts. The money for the projects would be diverted to school construction projects instead.

The Senate's version of the budget still needs to be reconciled with the one approved by the House, which does not include such a ban. The issue is one of several that House and Senate lawmakers are debating as they approach the end of Maryland's legislative session on Monday.

Additionally, the Senate version of the budget includes $4.5 million of qualified zone academy bonds and would reduce bond authorization for the Intercounty Connector to $112 million from the $126.9 million proposed in the House bill.

The ICC is an 18.8-mile toll road project scheduled to open in 2013 that will link Montgomery and Prince George's counties. Gov. Martin O'Malley had opposed providing the $126.9 million for the ICC in his budget request in January. The Maryland Transportation Authority has issued $750 million of grant anticipation revenue vehicle bonds for the project.

O'Malley's budget proposal also would have closed the state's estimated $2 billion fiscal 2011 revenue shortfall. But since January, revenues have continued to slide. The February general fund revenue collections were 8.2% below the February 2009 figures. Fiscal 2010 year-to-date revenues are 5.7% below last year, Comptroller Peter Franchot reported to lawmakers in a March 29 letter. Franchot noted that February's severe snow storms contributed to the decline.

Rating analysts said they are looking for the state to close its budget imbalances. Maryland's fiscal 2010 budget relied extensively on reserves to balance operations, Standard & Poor's said in a credit report issued in February.

"Technically, the budget is out of balance because [it] is using federal money," most of which expires in the 2011 fiscal year, Richard Marino, Standard & Poor's primary analyst for the state, said Thursday. The state needs to move away "from the imbalances in this budget to a balanced budget in the next couple years" as federal funds disappear, he said.

The proposed fiscal 2011 budget relies on more than $1 billion of federal stimulus funding, according to a credit report Moody's Investors Service issued in February.

In February, Maryland competitively sold $400 million of Build America Bonds to Citi at a true interest cost of 4.37%. Jefferies & Co. bought the state's $195 million of tax-exempt refunding bonds at a TIC of 2.96%.

Maryland is one of seven states rated triple-A by Moody's, Standard & Poor's, and Fitch Ratings.

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