Cuts-only approach outlined by governor will hurt Maryland’s economy

Author: Benjamin Orr, Executive Director 

In his State of the State speech, Governor Hogan outlined an approach to the state’s finances that threatens Maryland’s economic recovery and does too little to help families that struggle to make ends meet. In fact, he seemed to be talking about some other state entirely as he described his vision for change.

The evidence is clear—Maryland is a great place to do business. We have a growing population, our workforce is highly educated because of our great public schools, our median income is among the highest in the country, and we have the most millionaires per capita of any state. Heck, according to Ernst & Young, Maryland businesses get a better return on their tax dollar than those in any other state.

That’s not to say that Maryland families aren’t struggling—many are. Parents still skip meals so their kids can eat in every corner of this state, for example. And we need to invest in what will help them, not cut the things they need to get ahead. We need a balanced approach to meeting the state’s financial challenges that includes revenue, not a cuts-only approach that hurts hard-working families and fails to build on a foundation for the future. Unfortunately, Gov. Hogan’s speech took us in the opposite direction.

Taxpayers at the bottom of the income scale – those making less than $24,000—already pay more in state and local taxes as a share of their income than the wealthiest Marylanders – those making more than $481,000. People who work hard and aren’t paid enough, pregnant mothers, school teachers, nurses, and college students aren’t the ones who should pay the price.

Here are a few lowlights from the speech that caught our attention:

•  Governor Hogan claims that his budget doesn’t include any cuts to services or those who deliver them. But where else would his budget cuts come from? In fact his proposed budget includes elimination of health insurance for pregnant women making less than $30,000. Furthermore, the proposed 2 percent across-the-board cut for departments will  require reduced services and layoffs. The cuts to education alone  threaten the jobs of over 2,500 teachers and over 4,000 support staff. Because the departments are still releasing their budgets, it is difficult to say precisely what will be cut.

• The governor mentioned a recent Gallup poll, implying that half of Marylanders want to leave because of taxes. Tellingly, he left out some key facts. According to that same poll, more people said they wanted to move because of weather than taxes. More people also said they wanted to move to be near family. If people are leaving Maryland, blame the snow, or maybe the lack of snow. We’ve discredited these same tired claims before.

• The governor proposed exempting the first $10,000 of business personal property from taxes. This is a local tax, except in the five counties that do not charge it. Small business owners in Baltimore City (which has the highest rate) would see a maximum benefit of $562 at the end of the year. Such a small benefit would not help our state economy or create jobs. However, localities will feel the pain of the lost revenue. It will most likely force counties and Baltimore City to cut emergency services or other necessary services to recoup the losses. In recognition of this, Hogan has proposed allocating $6.8 million to pay back the counties for this lost revenue. Unfortunately, this means the state will have to cut another $6.8 million from elsewhere in the budget.

• Business groups supported raising the gasoline tax two years ago, recognizing the economic benefits of a well-maintained transportation network. Yet Governor Hogan called for repealing the automatic inflation adjustment that was a key component of the plan. Such a change would cost the Transportation Trust Fund $275 million over the next four years, according to the State Department of Transportation. The governor submitted a supplemental to his budget on Wednesday that would increase the fund by $25 million, a drop in the bucket compared to the lost revenue if Hogan gets his way. Oh, and there was one small detail missing in his supplemental budget: where the $25 million is coming from!

• The Partnership for Student Education and Community Investment Tax Credit, formerly known as BOAST (Building Opportunity for All Students and Teachers), is an old idea with a misleading name that has consistently failed to pass because of the harm it would inflict on public education. Allowing parents to deduct the tuition they pay to private or religious schools would fuel educational inequality and reduce funding statewide for public schools. If we are worried about people leaving Maryland, we should not seek to dismantle our high-quality education system that has brought and kept families here for generations.

• The governor was correct when he said the Chesapeake Bay’s health was in critical condition. Maryland’s main waterway needs major help and that help was to come in the form of projects funded by the stormwater management fee. Repeal of the fee would not protect the bay or reverse the damages done by pollution from runoff. As we’ve written previously, Maryland’s storm water management fee is critically important to designing, constructing, maintaining and administering an environmentally sound storm sewer system. Furthermore, the governor seems focused on alternatives that have already been shown to have minimal impact.

• Governor Hogan also proposed exempting from taxes the pensions of retired military, police, firefighters, and other first responders. Some of these retirees are already exempted from state income tax. Some are also better off than most retirees. This proposal must be looked at very carefully, not only for its implications to the state budget, but also to make sure that it does not result in another tax break for Maryland’s better-off residents.

Governor Hogan did make two proposals we would support:  the creation of a bipartisan commission to redraw the boundaries of legislative districts and the reinstatement of voluntary donations to support publicly financed political campaigns. The governor Hogan certainly benefited from public financing last year, as did Delegate Heather Mizeur. Public financing for political campaigns provides opportunity for non-established candidates. As ever, the devil will be in the details, but both proposals have the potential to improve the connection between Marylanders and their government. If only the rest of Governor Hogan’s State of the State address had been so promising.