Maryland must learn from past budget mistakes

January 14, 2003|By D. Bruce Poole

WHEN ROBERT L. Ehrlich Jr. returns to Annapolis as governor tomorrow, it's ironic that his biggest policy challenge will be the budget.

Budget problems and solutions dominated during the eight years Mr. Ehrlich was in Annapolis before he left for eight years on Capitol Hill. Now he will find a budgetary challenge so severe that it will sorely test his administration, determine whether Republican legislators are fully in his corner and define his relationship with the Democratic leadership.

In a twisted way, it also provides a great opportunity to have Maryland break free of a cycle that repeatedly causes trouble.

The big picture is relatively simple. The combination of spending cuts and tax hikes enacted in 1991-1992 was maligned by many but was effective in stabilizing the budget. As the economic recovery of the 1990s grew, however, money gushed in and spending was ratcheted up. In 10 years, spending grew 40 percent. But revenue increases largely were in capital gains, so long-term commitments were based on short-term revenue sources.

It is a familiar story in Annapolis: The real damage in budgeting is done several years into an economic boom, when the end to good times is nowhere in sight. When the inevitable slowdown hits, we end up increasing the tax burden on businesses or decreasing spending when the reverse is most needed.

Limiting government won't be easy. We taxpayers have a relationship with state government akin to the ownership of a big SUV. We always buy more than we can afford but then we expand into it. Going to economy class is hell.

But certain tenets from the early '90s still apply. When the administration cuts, it should give itself some leeway. Sixty percent of the budget is now mandated spending. Mr. Ehrlich needs the authority to lift those mandates so he can spread reductions. Local government spending shouldn't be held harmless, either; the locals gobble a lot of state money, and their own primary revenue source - real estate taxes - is relatively stable in a recession.

Budget problems are temporary, and so budget medicine can be temporary, too. Maryland's economic base is incredibly strong, and when the recession wanes, money will gush in again and allow the state to make up lost ground.

Maryland should be positioned now so that it can build larger reserves for use when the next slowdown hits. The notion that government should be run as a business is wrong. Government should do what businesses can't or won't; it should provide strength and stability in bad times and then contract in good times.

The new administration is banking on slot machines as its source of extra revenues. It shouldn't.

Mr. Ehrlich will have a heck of a time dislodging many Republicans from their anti-slots positions. Without Republicans walking into those swirling waters with him, Democrats will stay out. The administration will need to be careful, too. The temptation for others to stray on this issue will be enormous. It won't take much to cause a cracking good scandal that could reverberate for years.

In the likely event that Mr. Ehrlich fails to get legislative authority for slots, he may have to increase taxes. If he does, tax repeals or tax shifts should be built into the legislation so that they occur at preset dates.

None of this is pretty, but it has to be done. Mr. Ehrlich will spend much of his first legislative session not trying to get a majority to do the right thing, but just trying to do anything. Those who vote for cutbacks, taxes or slots will be criticized at home for years, encountering the same problems the leadership had a decade ago. Those who talk about cutting government get queasy when handed the knife. Those who want to tax, want to tax someone else.

The group of legislators to count on to govern is compact and will make for, at best, narrow margins of victory. Annapolis will be full of players who will be omnipresent when the photos are taken, only to disappear when the heavy blocking and tackling starts.

Although much has changed in Annapolis while Mr. Ehrlich was serving in Washington, the laws of human nature were not amended. When this session is over, that may be the change Mr. Ehrlich will want the most.

D. Bruce Poole served with Gov.-elect Robert L. Ehrlich Jr. in the House of Delegates and was the House majority leader from 1991 to 1993.

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