The governor's creative bookkeeping [Commentary]

O'Malley robs Peter to pay Paul and calls it a balanced budget

December 26, 2013|By Mark Newgent

In a couple of weeks, state legislators will gather in Annapolis for the annual circus that is the Maryland General Assembly's legislative session. Given that 2014 is also an election year, the show will be even more entertaining, or depressing, depending on your point of view.

For 90 days between January and April, issues like raising the minimum wage, the rain tax, marijuana legalization (pot for tots) will suck up a lot of oxygen. However, the only requirement our legislators must fulfill is passing a balanced budget — something they just can't seem to get right.

Sure, on paper, the budget is "balanced," but it never stays balanced. Remember back during the 2007 special session when Gov. Martin O'Malley and the Democratically controlled legislature enacted the largest tax hike in state history to close a $1.3-billion structural deficit? Afterward, the Baltimore Sun editorial writers proudly proclaimed "The deficit, slain."

Yet, like a villain from a bad slasher movie, the structural deficit keeps returning to menace us. Between 2010 and 2012, Maryland faced projected structural deficits in the range of $1 billion to $2 billion. Now, according to legislative analysts, the state faces a $580-million shortfall for the current and next fiscal years.

Mr. O'Malley says he cut the state budget by $8 billion, more than any governor in history. If you believe that, I've got a BGE rate roll back I can sell you. In fact, under Mr. O'Malley, Maryland's budget has ballooned by $8 billion, a 30 percent increase. The "cuts" he claims to have made are merely reductions to the overall increase in state spending.

So how do Mr. O'Malley and the legislature "balance" the state budget even though they always end up spending more than the taxpayers can provide? They raid dedicated funds and run up the state credit card.

To plug spending gaps Mr. O'Malley has, over the years, raided various funds dedicated to Program Open Space and the Chesapeake Bay Restoration Fund. However, his most significant fund raids looted the Transportation Trust Fund. Between 2009 and 2011, O'Malley and the legislature removed $868 million in local highway user funds — money the counties use for road maintenance and repair — from the Transportation Trust Fund. None of it has been repaid. Keep in mind that during this same period Maryland received $771 million in federal stimulus funds for transportation and infrastructure projects. Even accounting for the stimulus money, state transportation spending decreased $97 million.

To replace the cash he swapped out of special funds, Mr. O'Malley has turned to general obligation (GO) bonds. According to the Department of Legislative Services, over the past five years, Mr. O'Malley has used $1.4 billion in GO bonds to replace the money transferred to the general fund, representing one-quarter of all GO bond authorizations. Last week, the legislature's Spending Affordability Committee (SAC) voted to approve Mr. O'Malley's request to increase in the state's debt limit by $75 million. Maryland funds its debt service payment through dedicated revenues from the state property tax.

Governor O'Malley likes to boast that his annual spending plans remaining within SAC recommendations are a sign of his administration's fiscal responsibility. SAC has recommended a 4 percent spending increase for fiscal year 2015. The committee is comprised of the House and Senate budget committee chairmen, the majority and minority leaders, members appointed by the Speaker and the Senate President, and two citizen advisors.

Restraining spending within SAC recommendations is by no means an indication of fiscal restraint. In a report for the Free State Foundation, Cecilia Januszkiewicz, budget director for former Governor Bob Ehrlich — a big spender himself — noted that if you think the idea of "spending affordability" suggests some kind of mathematical formula, you'd be wrong. Ms. Januszkiewicz writes, "no statutory or regulatory formula exists to determine what is affordable other than the statutory reference to growth in the state economy. Nor has the committee adopted a consistent approach to measuring affordability."

SAC recommendations offer Mr. O'Malley and the big spenders in the legislature a fig leaf of "affordability" while allowing them to spend beyond the state's means. Why, after all, has Mr. O'Malley needed to increase taxes and fees 40 times totaling $9.5 billion if his budgets stayed within "spending affordability" recommendations?

The problem with Maryland's budgeting is that everything is a priority, which means nothing gets prioritized, because the special interest groups that control the Maryland's one-party Democratic rulers demand ever increasing spending. Crafting Maryland's budget is an exercise in politics instead of prudent fiscal management of taxpayer dollars.

But, better choices, better results…or something.

Mark Newgent is a frequent contributor to Red Maryland, a conservative radio network and blog whose content appears regularly in The Baltimore Sun and on baltimoresun.com. His email is marknewgent@gmail.com.


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