In this election year, fiscal sanity has gone out the window in Annapolis In their haste to both cut taxes and create new appropriations, lawmakers and the governor could be setting the stage for a fiscal train wreck in later years.

March 29, 1998|By Barry Rascovar

GEORGE SANTAYANA isn't well read in the Annapolis State House. He should be.

Lawmakers and the governor ought to memorize the philosopher's oft-quoted line: "Those who cannot remember the past are condemned to repeat it."

This state's economic surge has politicians gleefully spending the resulting tax largess -- and ignoring long-range ramifications.

Liberals are the worst offenders. But conservatives are playing their own cynical game: Trying to impose big tax cuts that will force a major contraction of government down the road.

Both sides ignore history.

Spending cuts

For a decade, legislators stared at bleak fiscal forecasts as spending outstripped revenue. Thanks to a recession in the early 1990s, spending was curbed.

Now, thanks to a rejuvenated economy, revenues are sharply higher.

That ideal combination -- controlled spending and abundant tax receipts -- excites lawmakers.

But in their haste to both cut taxes and create new appropriations, lawmakers and the governor could be setting the stage for a fiscal train wreck in later years.

Take the matter of pensions for state workers and teachers.

Nearly 20 years ago, the General Assembly fought one of its bloodiest battles over reining-in runaway pension costs.

Huge future liabilities imperiled the state's triple-A bond rating.

The resulting legislation sharply cut excesses of the pension system and allowed the state to slowly eliminate unfunded liabilities.

This session, though, the teachers and state-worker unions -- and the governor -- think they can push through an election-year bill that boosts pensions by up to 66 percent. The cost: $3 billion.

Guess who winds up with a multi-billion-dollar liability? State taxpayers. Just like the old days.

The bill would cost state government $151 million next year, and a staggering $833 million over five years. In years when the stock market returns are less than projected, the state is on the hook to the pension system for millions more.

Not many legislators seem to care about the consequences. Times are so good that all they see is an easy way to make 115,000 pension members and their spouses happy on Election Day.

The same sentiment seems to hold for some delegates on another break-the-bank bill pushed by Montgomery County legislators -- and endorsed by the governor. This measure, costing $469 million over the next five years, would force Annapolis once again to pick up the local share of Social Security taxes for teachers.

Shouldering the burden

This aid program was cut off during the recession. It was a wise move. The state had no control over these expenses. It encouraged local governments and school boards to grant teachers large pay raises, knowing the state picked up the tab for additional Social Security contributions.

Yet Gov. Parris N. Glendening has jumped on the bandwagon to bring back this spending policy -- though his budget secretary previously testified against the bill because it is not fiscally responsible.

The governor's flip-flop is mainly political. Mr. Glendening needs to do well in voter-rich Montgomery County. This bill is a major objective for many county groups, still angry over the elimination of $27 million in Social Security aid.

So fiscal sanity flies out the window and a state commitment of hundreds of millions of dollars becomes administration policy.

Luckily, the Senate budget committee has rejected its version of the bill.

Meanwhile, Republicans are busy championing big tax cuts.

That's fine with the state awash in extra cash. But what happens when the economy and tax revenues slow? Then State House officials could face an ominous situation: A shrunken tax base yielding far too little to pay for all the new spending programs.

If the legislature passes the Senate-approved tax-cut plan, the pension bill and the Social Security bill, the state could face an added shortfall of more than a half-billion-dollars in a few years.

Short of a never-ending boom, there's no way this combined level of spending and tax cuts can be sustained. Let's hope fiscal sanity returns to lawmakers before they conclude their budget work April 6. Otherwise, Maryland could find itself facing some major financial crises in the next century.

Barry Rascovar is a deputy editorial page editor of The Sun.

Pub Date: 3/29/98

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.