Md. budget tough choices remain

Our view: The governor and legislature are poised to make progress in solving the state's long-term budget problems, but the next steps will be much harder

March 22, 2011

For all the talk of tough choices from Gov. Martin O'Malley, the outcry from education advocates, the protests by state workers and the complaints from Republicans about new fees, you might get the impression that the budget the House of Delegates is set to start debating Wednesday represents a collective biting of the bullet to put Maryland back on sustainable fiscal footing.

You'd be wrong.

Both Governor O'Malley's proposal and the revised version approved by the House Appropriations Committee make real progress on that front — more than the state has seen since the start of the recession — but a huge problem remains. Mr. O'Malley's proposal reduced what is known as the "structural deficit" by about a third, and the House proposal goes even farther, bringing that up to about 40 percent through additional budget cuts and increased fees. That meets or exceeds a goal set by the legislature's Spending Affordability Committee late last year, but it is only the first step toward getting the budget under control, and the steps to come will get harder.

According to the latest analysis by the Department of Legislative Services, the latest version of the budget proposal leaves a persistent gap between expected revenues and expenditures of about $1.1 billion a year for the foreseeable future. Despite signs of economic recovery, it is unlikely that we're going to grow our way out of that hole; the projections already assume relatively strong revenue growth of about 4 percent to 5 percent a year. If the state is to come up with a permanent solution, and not the annual muddle of fund transfers and budget gimmicks that have gotten us through the recession so far, it will need to make some significant changes to state spending or taxes or both.

The governor and legislative leaders have signaled a willingness to tackle that task, but they have offered little indication of how they would go about it. In particular, the governor, who is the most important player in any discussion of the budget, has remained somewhat detached from the debate over the spending plan for the coming year — he even appeared this month at a state employee union protest of his proposal and told the crowd he wasn't happy with it either.

In absence of direction from the governor, groups of Republican and Democratic lawmakers are presenting their own solutions.

The Republican caucus in the House of Delegates offered an alternative budget that would use extensive cuts to eliminate the structural deficit within two years without any fund transfers, and to roll back the sales tax and corporate income tax increases of 2007. But to accomplish that, they propose cutting K-12 schools and higher education funding by about $391 million this year — nearly two-thirds of their total cuts.

A proposal by a group of Democrats in the Senate is the mirror opposite of the House approach. It restores or expands funding for education, transportation projects, public health, services for the disabled and state employee benefits. To do that, the senators (Delores Kelley of Baltimore County; Karen Montgomery, Brian Frosh and Jamie Raskin of Montgomery County; and Paul Pinsky and James Rosapepe of Prince George's County) would increase taxes on alcohol, cigarettes, gas, people who earn more than $1 million a year and multistate corporations. They project that their efforts would raise $800 million a year.

It seems unlikely that a majority of the public would favor either plan, and neither is going anywhere in the legislature. Anything can happen in the final days of a General Assembly session, but right now it looks like the Senate will make relatively minor changes to the House version of the budget, not push for any sort of revolutionary shift in our priorities.

But a re-evaluation of our priorities is exactly what the state needs. We find ourselves in a position similar to the one we were in four years ago, when Mr. O'Malley took few steps in his first legislative session as governor to tackle the budget problems we had at the time. Instead, he spent the following summer and fall developing a package of tax increases, spending cuts and new revenues from slot machine gambling that he sought and won approval for in a special legislative session in November. If not for the most severe recession since the Great Depression, those actions likely would have been enough to put Maryland's finances in order.

Rather than being punished for taking tough steps on the budget in 2007, Mr. O'Malley was re-elected last fall in a landslide. And given the necessity to take up congressional and legislative redistricting before the General Assembly reconvenes in 2012, the governor has the opportunity to repeat history. He just needs to show he's willing to take the lead once again.

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