First Look: Governor’s Budget Doesn’t Meet All State Needs
While Gov. Larry Hogan’s proposed budget provides some of the much-needed public investments that will help Maryland families still struggling in the aftermath of the Great Recession it still doesn’t fully address the state’s needs. It is also important to keep in mind that many of those investments are due to the legislative mandates the governor wants to eliminate.
The budget proposal unnecessarily shrinks the public workforce and sets the stage for tax cuts and other policy changes that would, over time, take significant resources away from public investment in the common good.
An initial review of the budget also shows how the governor’s priorities differ from what other state leaders have pursued in past years. For example, the governor wants to spend less on buses and trains, and more on roads. And he places a higher priority on upgrading police and fire facilities than helping state colleges and universities expand or update their campuses.
Tax Cuts
Governor Hogan is asking the General Assembly to approve a package of reductions in taxes and fees this year. Because the tax cuts would be phased in, these actions would have a limited effect on this year’s budget but, within a few years, would have state leaders again weighing decisions that could boost class sizes, raise college tuition or take away assistance from Marylanders struggling to make ends meet.
If the state cuts taxes, within four years it would be $400 million short of what is needed to maintain good schools, roads and safe communities, according to estimates from the Department of Legislative Services.
Some of the tax cuts are good ideas. In the next budget year, the governor’s proposal to accelerate the increase in the state Earned Income Tax Credit would reduce revenues by about $16 million, but that money would go straight into the pockets of Marylanders who work for low pay. They would spend it on necessities in their local communities, which is good for the economy.
Other aspects of the governor’s tax plan are more troubling. He proposes lowering a variety of fees, which would cost the state more than $5 million in the fiscal year that begins July 1. Some fee reductions, such as lowering the cost to obtain birth certificates, make sense. But others pay for important services, such as fishing licenses that help support the state’s fisheries programs.
His proposal to increase the income tax exemption for people 65 and older has a much higher price tag, about $100 million per year once it is fully phased in. As proposed, this tax break would provide the same benefit to a comfortably retired millionaire as someone trying to get by on a few hundred dollars per month. If legislators create such an exemption, it should focus on seniors who are struggling to make ends meet.
Most troubling is the Governor’s proposal to allow manufacturers that set up shop in certain locations to pay zero taxes for 10 years. Such programs are easily gamed, and experience shows that they create few jobs. New York spent roughly $200 million just promoting the program Governor Hogan modeled his proposal after, yet has seen fewer than 100 new jobs created.
Failure to Invest in Baltimore
Despite holding press conferences about the importance of investing in Baltimore, Governor Hogan’s budget proposal doesn’t include promised funding for demolishing vacant properties in the city. His budget secretary has said it will come in a supplemental budget.
Even more troubling is the governor’s handling of education funding for the city. Baltimore City is one of a few jurisdictions that will receive less support for its schools under state funding formulas due to declining enrollment in city schools. However, he plans to give additional funding to three other districts in the same situation – Carroll, Garett and Cecil counties – to allow them more time to adjust to the changes in their school districts. Baltimore would be justified in asking why it can’t get the same treatment.
The unrest in Baltimore last April made it clear that Maryland needs to do more to address the challenges facing its largest city. Because the legislature has limited powers to amend the budget, it will likely be up to the governor to come forward with the money needed to support these essential initiatives.
State Workforce
The governor’s budget plan aims to shrink the state workforce by eliminating hundreds of positions, including laying off more than 100 people who provide food and housekeeping services at the Springfield State Hospital and the Regional Institute for Children and Adolescents. The state employees would be replaced by a private contractor, which most likely would not provide the same level of pay and benefits that the state employees get.
At Springfield State Hospital, affected workers make between $22,000 and $37,000, well below the cost of living for a family of four. Yet the governor wants to pay someone else even less.
In an interesting twist, the budget also proposes canceling the food service contract at a different institution, the Baltimore City jail, and using state employees to fill those roles, suggesting that prior experiments with privatizing these services haven’t been the best choice for the state.
The budget also calls for eliminating more than 650 positions in unspecified areas. While these could be positions that are already vacant (the governor hasn’t said), these staffing reductions could affect some state agencies’ ability to provide the high-quality services that Marylanders need and expect.
Medicaid
A remaining question mark for the budget is how much the state needs to invest in providing health coverage for Marylanders through Medicaid in the coming year. The number of people participating in Medicaid dropped by more than 9 percent from 2015 to 2016, as the state went through a process to review eligibility for all participants.
According to service providers, many people who dropped out did so because they had problems working through the administrative process, not because they are no longer eligible. Many of those people are expected to return to Medicaid.
The governor’s budget anticipates about 4 percent growth in Medicaid enrollment, which assumes some participants will return. If the need grows faster than expected, however, the state may need to shift money from reserves or other parts of the budget to cover the additional expense.
