Ehrlich, O'Malley used similar budget tools

Both gubernatorial candidates raised taxes, both ended terms with deficits

August 01, 2010|By Annie Linskey, The Baltimore Sun

In the first television advertisement of his reelection campaign, Democratic Gov. Martin O'Malley invited viewers back to his first year in office. Faced with a deficit left by Republican Gov. Robert L. Ehrlich Jr., the spot said, O'Malley was forced to cut spending.

Ehrlich, now running to win his job back, remembers the transition differently. He says he handed his successor a billion-dollar surplus — money Ehrlich says O'Malley then frittered away, before passing a historic tax increase.

So who is telling the truth?

A review of their records indicates that both are — up to a point. Ehrlich did set aside extra funds. But he also left the new governor with spending and revenue forecasts that were out of balance. In the end, O'Malley used the surplus to plug the hole.

The competing claims illustrate the difficulty confronting voters hoping to compare the candidates' records. But the electorate has good reason to examine past decisions: Whoever wins in November will face a $1.6 billion budget gap.

In fact, O'Malley, a Democrat, and Ehrlich, a Republican, have used many of the same tools. Both increased spending. Both covered shortfalls by shuffling money from one account to another. When recessions caused fortunes to ebb, both went to the Board of Public Works to cut spending, and both relied on federal funds and increased taxes and fees.

"They are following a classic political technique of taking one unflattering aspect of their opponent's record and emphasizing it," said University of Maryland, Baltimore County political scientist Roy T. Meyers, who is writing a paper on Ehrlich's and O'Malley's budget records. "The candidates are trying to bolster their own records by highlighting only some aspects."

While the amount of money spent to run the state government grew under both governors, the rate of growth on O'Malley's watch was markedly slower: an average of 2.7 percent annual, to 7.2 percent under Ehrlich.

That difference can be explained at least in part by slowing economic growth. This year, state spending declined slightly to accommodate diminished revenue. In Ehrlich's last year as governor, the state was "flush with cash," in the words of a legislative analysis; he increased spending that year by 9.3 percent.

O'Malley uses these numbers to paint Ehrlich as a reckless spender. But nearly 40 percent of the spending swell during Ehrlich's tenure came from an inherited unfunded mandate to put an extra 10 percent each year into the state's education system. He also expanded Medicaid to cover more individuals and granted small raises to state workers three years in a row.

In doing so, Ehrlich offered budgets that exceeded spending guidelines that the General Assembly set during three of his four years — another area that Democrats are highlighting. Cecilia Januszkiewicz, who was Ehrlich's budget secretary, called the legislature's spending affordability numbers "completely subjective," and pointed out that other governors have surpassed those figures.

Ehrlich says he socked money away in the good times, tripling the size of the state's rainy-day fund and leaving his successor with a comfortable cushion. Ehrlich left O'Malley with a $1.4 billion balance — about half of which O'Malley was able to access without permission from the legislature.

O'Malley has dipped into the rainy-day fund, but has put enough cash back in to comply with the statutory minimum. He leaves a far smaller cash balance than Ehrlich did at the end of his term — and the money might have to be spent if expected federal Medicaid dollars do not materialize.

Ehrlich and O'Malley both delivered balanced yearly budgets as required by law, but each finished out his term with projected deficits. The reason, in part, is because of a quirk in state budgeting: Cuts made one year do not carry into the next.

Januszkiewicz says that Ehrlich's plan to end the structural imbalance included legalizing gambling in the state. "He tried to pass slots for three years," she said. "He tried to solve this problem."

O'Malley also tried to solve the recurring budget problem, calling a special session in November 2007 during which he passed a gambling plan and raised taxes. The effort put projected revenue and expenditures in harmony briefly, until the recession reduced expected revenue, said Warren G. Deschenaux, the state's top fiscal analyst.

Faced with these recurring spending problems, both men turned to the same tools — raiding cash-rich accounts meant for capital projects to cover operating costs. Each tapped Program Open Space, a fund meant to let the state buy up tracts of undeveloped land. Both claimed money from gas tax and excises that had been intended to improve county roads.

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