On business issues, Hogan and Brown see two very different states

Hogan says his plan is needed to reverse course, though one of his claims doesn't stand up

October 04, 2014|By Michael Dresser and Erin Cox | The Baltimore Sun

When Republican Larry Hogan and Democrat Anthony G. Brown discuss the business climate in Maryland, it seems as if the gubernatorial rivals are talking about two different states.

Hogan's Maryland is a terrible place to do business, a state where companies and residents are streaming for the borders to escape oppressive taxation and capricious regulations. His remedy: tax and spending cuts coupled with business-friendly appointments to regulatory agencies.

Brown's Maryland is the state with the highest household median income and a blue-chip AAA bond rating, where top-quality educational resources and strategic investments fuel the nation's No. 1 entrepreneurial culture. The state has some problems with cumbersome licensing and regulation, Brown says, but he adds that he has a plan to ease that burden.

Driving their plans is a fundamental disagreement over the course Maryland has charted the last eight years under Gov. Martin O'Malley.

"The state of the business climate in Maryland is horrible over the past eight years. It's deteriorated in a frightening way," Hogan said.

Brown argues that the last eight years have been marked by steady progress in the face of the worst economic downturn since the Depression. He notes that Maryland has weathered the recession without the sharp spending cuts many other states made.

"We can't abandon the work that we've done, the investments we've made, the success we've had in such areas as education, college affordability, safe neighborhoods and the progress we're making on the environment," Brown said.

Neutral observers aren't buying into either Hogan's apocalyptic vision or Brown's relatively sunny assessment.

"It's something in the middle," said Dairius Irani, chief economist at the Regional Economic Studies Institute at Towson University.

Hogan's economy-centered campaign is built around a core narrative of a state in such decline that four more years of O'Malley-Brown policies will cause irreversible damage. On the campaign trail and in his ads, he delivers a rapid-fire critique of Maryland's economy: 8,000 small businesses gone or closed in the O'Malley years, unemployment almost doubled.

But at least one of Hogan's claims doesn't hold up under scrutiny. His central premise — that he could pare back spending without cutting essential services — rests on his assertion that the state's auditors uncovered $1.75 billion in waste, fraud and abuse under the O'Malley administration. Hogan's numbers do not add up.

A Baltimore Sun review of three cases in the audits Hogan cites found that his $1.75 billion figure is inflated by at least $843 million, or roughly half.

•In one case, the campaign put a decimal point in the wrong place. Questionable spending on business tax credits that a February 2012 audit put at $11.95 million was counted by Hogan as $119.5 million, a $107.5 million error.

•In another, the campaign noted tax assessors undervalued some land by $285 million, according to a 2013 audit. Were the land properly valued, the state would have received about $319,200 more in property tax revenue. The Hogan campaign erroneously said the state missed out on $285 million — money it would never have received unless the state set tax rates at 100 percent.

•The campaign cites an April 2013 audit that found the agency distributing school construction money did not have an adequate system to track 126 projects worth $450 million. The same audit said the agency resolved its tracking problems before the report was released. Though there was no suggestion that $450 million was misspent, the Hogan campaign counted the sum as waste, fraud and abuse.

Hogan's campaign did not dispute The Baltimore Sun's findings but argued that its review of 52 of 300 audits during the O'Malley administration still suggests lax monetary controls and government waste. "The fact remains that ... potentially billions of our tax dollars have been wasted by the O'Malley-Brown administration," campaign spokesman Adam Dubitsky said.

While some of his assertions may be in question, there's no doubt that Hogan's narrative of a stagnating economy and a "mass exodus" from high taxes resonates with voters such as Jerry Kirby of Cambridge, whom Hogan met while campaigning in that town recently.

"If this election goes the wrong way, I'm out of here," Kirby told Hogan. "I can't stand these taxes."

Hogan says that his long-term goal is to roll back what he calls O'Malley's "40 consecutive tax increases" — a list that includes not only tax hikes, but fees, tolls and increases in bus and other transit fares required by state law. By Hogan's calculation, the various increases have brought in about $9.5 billion in state revenue — much more than he has identified in potential budget cuts.

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