State budget baloney

November 03, 2006

Gov. Robert L. Ehrlich Jr. wants voters to believe he turned a $4 billion deficit into a $2 billion surplus over the past four years. The argument can be made - but it requires a rather creative approach to bookkeeping. Unfortunately for Mayor Martin O'Malley, explaining the painful reality of state finances requires more than a 30-second TV ad.

Admittedly, when Mr. Ehrlich took office in 2003, he confronted a significant shortfall, a billion-dollar gap between projected tax revenues and spending. How did this happen? There were a number of factors, the most significant of which was a slump in the economy and a resulting downturn in tax collections. But there were others: the $1.4 billion Thornton plan boost to education and Gov. Parris N. Glendening's 10 percent income tax cut (that cost the state treasury in the neighborhood of $600 million annually).

Mr. Ehrlich balanced the budget, but it wasn't pretty. He took money from vital transportation and land conservation programs, raised the state property tax as well as any number of fees, and cut aid to local governments (quite a few of which wound up raising their own property taxes to make up the shortfall).

But what happened next was sheer good fortune: The economy recovered and tax revenues rose faster than expected. Sadly, that trend is reversing. Next year's budget will have to be balanced by dipping into the extra cash. By 2008, the deficits are likely to return. And this time, it could be far worse.

That's because the easy cost-shifting has been done. Meanwhile, the state's burden of debt is growing. Borrowing, which remained steady at about $4.6 billion in the years before Mr. Ehrlich took office, has grown to $6.5 billion, a 41 percent increase. By 2012, it's expected to approach $10 billion, according to legislative auditors.

The truth is, Mr. Ehrlich hasn't reinvented anything. He hasn't curtailed the growth of government (the state budget blossomed by double digits this year alone). He has nipped and tucked and borrowed. The core problem is little changed. Like President Bush, the governor has a love for spending but not for the means of paying for it.

Mr. O'Malley has promised to address the state's structural deficit if he's elected governor. That would be a start - but the Democrat is not so clear on how he would get the job done. To be truly fiscally responsible, Maryland's next governor needs to attack the core problems: an antiquated tax structure, too much debt, and commitments to spending (most of it on public education and health care) that projected revenues simply cannot support.

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