Needless Cuts Underscore Need for Budget Reform

September 8, 2017 by Christopher Meyer in Blog, Budget and Tax

The governor and the Board of Public Works cut already approved funding for state services by $61 million on Wednesday. Midyear cuts like this are ordinarily used to plug holes in the budget in response to lower-than-expected revenues, but the Board of Revenue Estimates last week reported that the state’s fiscal health is currently somewhat better than expected. Unnecessary cuts in the middle of the budget year mean lower-quality public services for Maryland residents and underscore the need to reform the state’s budget process.

The budget cuts took the biggest chunk out of the Department of Health, which lost $22 million in funding. Next up was higher education, with $11 million in combined cuts to public four-year institutions, the Maryland Higher Education Commission, and Baltimore City Community College. A wide range of other state agencies also lost funding, from the Department of Public Safety and Correctional Services to the Commission on Civil Rights and the Office of the Public Defender.

A large fraction of the cuts come from requiring agencies to leave job openings unfilled. Without sufficient staff, agencies will have a harder time providing high-quality services. Making matters worse, the package permanently eliminates 30 jobs at public universities, including teaching positions. Investing less in affordable college options is the wrong move for a healthy Maryland economy.

There is one piece of good news: When the governor originally announced the cuts last week, they included a $6 million reduction in state aid to counties where low property values and incomes make it hard to raise enough local revenue. Following objections from the Maryland Association of Counties and members of the General Assembly, this cut was absent from the package approved on Wednesday. Because the General Assembly required counties receiving this funding to spend it on schools, this cut would have weakened our state’s education system if it had survived. Thankfully, a 2016 law requires advance notice for any midyear cuts, which gave the affected parties an opportunity to weigh in.

While budget reductions may sometimes be necessary when the economy takes an unexpected downturn, there was no such motivation for this round of cuts. The Board of Revenue Estimates reported last week that the state ended the most recent budget year with $90 million more in the bank than anticipated. In light of this report, the cuts by the governor and Board of Public Works seem less like a necessary response to fiscal reality, and more like a decision to change the state’s fiscal policy. The appropriate time to make fiscal policy is during the ordinary budget process, when the General Assembly is also at the table.

The decision to unilaterally reduce investments in public services at a time when revenues are growing as expected and the legislature has no chance to respond underscores the need to reform Maryland’s budget process. Even during the legislative session, our budget process is heavily tilted in favor of the governor. This is because the General Assembly cannot add discretionary funding into the governor’s budget, only subtract—unlike legislatures in every other state. A more balanced process would ensure that the governor can’t unilaterally cut state investments. Wednesday’s cuts make clear why this reform is so necessary.