Governor Martin O'Malley (D) released his budget proposal last week, and he is seeking to close Maryland's $1.4 billion budget gap by taking the path of least political resistance. What look like draconian budget choices mask the continued reliance on the same tactics that helped create a decade of structural deficits.

There are actual cuts to spending in local aid and higher education, including an increase in state college tuition after a three-year freeze. Spending on K-12 education, an area that has grown from $3.1 billion to $5.7 billion since 2002, was kept to last year's levels, allowing the Governor to claim a $104 million budget cut.

Of the $949 million in spending reductions in O'Malley's budget, about $104 million comes from modest reforms to the state's pension system. Current employees will be asked to either increase their contribution from 5 to 7 percent, or to agree to a reduction in future benefits.

Unfortunately, that's where spending reform stops. Despite all the "cutting" from the projected budget baseline, the budget is slated to grow by 3 percent in FY 2012. And the Governor continues to rely on fiscal sleight of hand--moving money to the general fund from the capital budget, and replacing capital funds with new bond issues--a maneuver that will fill $251 million of Maryland's budget gap.

While these small reforms to the state's pension system are a move in the right direction, they don't go far enough. Maryland's pension shortfall isn't the $19 billion it officially reports; using honest accounting, it's several times larger, with the system slated to run out of assets by 2024. While bolder reforms are needed, O'Malley has taken a move to defined-contribution pension benefits off the table.

O'Malley's budget is the archetype of an effort to "muddle through" with a patchwork of narrow cuts and accounting gimmicks, instead of real reform to unsustainable compensation practices. As a result, O'Malley earns a grade of D.

Eileen Norcross is a Senior Research Fellow at the Mercatus Center at George Mason University, where she is the lead Researcher on the State and Local Policy Project, and a regular contributor at PublicSectorInc.org. She is the author of the forthcoming paper, "Maryland's Fiscal Slide," in the Maryland Journal.