Penny-Wise, Pound-Foolish Policies Could Threaten Projects that Help Economy Grow

Against a backdrop of growing revenues and an improving economy, Maryland might still face eliminating or delaying important transportation projects, school building and other public investments that help create jobs and build a strong economy.

It won’t be due to lack of money. Instead the problem could turn out to be reluctance to use available dollars – a policy that fails to take into account the state’s needs.

With regard to schools, the issue is $68 million that Gov. Larry Hogan has refused to release. The money would mean giving high-cost school districts the support they need. The Governor says that the state shouldn’t be spending more in the classroom until it meets all its pension needs. The General Assembly voted to appropriate the money but agencies can’t spend it without the Governor’s approval; the ongoing stalemate means serious needs are going unmet.

Meanwhile, state analysts estimate that the state’s capital budget, which pays for building schools, police and fire stations and other important public facilities, will be short by tens of millions of dollars in the upcoming years because of Governor Hogan’s plan to limit yearly funding from the state’s Capital Improvement Fund to $995 million a year – a level that doesn’t even take into account inflation-driven cost increases.

If the Governor holds to his decision, the state’s construction budget for next year will be $50 million less than what the General Assembly authorized. Unless the governor signs off on additional funding, the state will have to cut $210 million in projects that are already on the construction schedule over the next four years.

Warren G. Deschenaux, executive director of the Maryland General Assembly’s Department of Legislative Services, said Governor Hogan’s transportation plan “relies on unrealistic assumptions” that will result in a $1 billion shortfall. Lower revenue estimates and higher operating expenses will reduce the ability of the Transportation Trust Fund to support both the road construction program that Hogan laid out earlier this year and the amount of funding for local transportation maintenance assumed in the Maryland Department of Transportation forecast.

Maintaining adequate levels of spending on capital projects has far-reaching implications for public safety, the environment, innovation, and Marylanders’ overall quality of life. If the state doesn’t make these investments, many community needs will likely remain unaddressed.

It’s one thing to have to reduce support for education or cut back on necessary construction projects because the money isn’t there. To make such decisions when the money is available is harder to explain.

This is happening at a time when the state’s finances are much better than in the recession and over the past few years. Maryland likely won’t have to make painful cuts in services in the budget year that starts July 1, 2016, analysts from the Department of Legislative Services told legislators this week.

According to state analysts, the next budget will be the first time since 2006 that the state can meet its needs without relying on reserve funds or other one-time sources of money, although there may be additional challenges down the line.

It would be good for Marylanders if the administration would heed legislators’ calls to use available funds to restore deep cuts made to education and other essential areas during the recession and its aftermath. There is no reason not to invest these funds in things like education that are vital to a strong economy, particularly now that the state is running a surplus.

Based on current forecasts and priorities, the costs to maintain current service levels and cover growing needs in the next budget year will increase by about 6.7 percent as things now stand, the state legislative analysts said.

On the plus side, Maryland has made good on commitments to continue improving the state’s financial contributions to the pension system, providing even more money to than the minimum pension experts recommended as they work to close the pension shortfall, which is one of Hogan’s priorities.

Over the next month, the General Assembly’s Spending Affordability Committee will review the information it received at the hearing last week. The committee will produce a report for the Governor and the Legislative Policy Committee that provides recommendations on the best way for the state to achieve its goals, based on the current financial picture.

As they formulate their recommendations, legislators should keep in mind the implications that the failure to support education and the capital budget at levels that meet today’s needs and tomorrow’s could have on the wellbeing of our state. The administration should do the same as it drafts the next budget.