Maryland's Board of Public Works approved a suite of spending cuts and other fiscal maneuvers Wednesday in an effort to eliminate the state’s $410 million dollar deficit for this fiscal year, which ends in June.
It was O’Malley’s last meeting as part of the Board of Public Works – a three-member panel made up of the governor. Treasurer Nancy Kopp and Comptroller Peter Franchot. O’Malley was joking and smiling, Kopp and Franchot praised O’Malley’s fiscal stewardship. At Franchot’s recommendation, the crowded room gave the out-going governor a standing ovation.
But the business of the day was not so sunny. The board greenlit a two percent across-the-board cut that effects most state agencies. It’s the second time in six months that the governor has needed to cut spending. More money was found by funds transfers, eliminating vacant positions and other financial maneuvers. About $161 million of the plan requires the legislature's approval.
O’Malley pointed out that k-12 education didn’t get cut, and there are no lay-offs to state workers, but acknowledged the cuts would be hard on agencies already stretched thin.
“This is a time when we have to do some rebalancing, when we have to make some tough choices, painful choices, but this too is fiscal responsibility and this is what it takes in order to make progress,” he said.
But before the group voted on the measure, O’Malley used gave a presentation. It could’ve been titled “How We Kept Maryland Solvent While The Economy Was Melting Down” or, even, “Don’t Believe It When People Tell You Democrats Are Financially Reckless”
Suit coat off, sleeves rolled up, he clicked through slides of his fiscal responsibility highlights:
“So Maryland today: Number One public schools in America five years in a row, record investments every single year over the last eight years…Number One median household income in America. Number One in innovation and entrepreneurship – not says us, says the U-S Chamber of Commerce,” O’Malley rattled off.
O’Malley touted the smallest executive branch (per capita) in decades, a bolstered rainy day fund, and nearly ten billion dollars in spending cuts over the last eight years. He walked the audience through the recent fiscal history of the state’s budget ups and downs – tax cuts that also cut revenues followed, a growing structural deficit, an economic downturn, a corrective tax on the state’s top earners that raised revenues accompanied by spending cuts, a federal government shut down and sequestration – which he helped the state to weather, all the while keeping a AAA bond rating.
But for Gov.-elect Larry Hogan, who will have to figure out how to cover an estimated 750-million dollar shortfall for the next fiscal year,the picture might not look so great.
Hogan’s office did not return requests for comment, but at a briefing about the state’s fiscal outlook two weeks ago, Hogan’s chief economic advisor, Bobby Neall, said things are all out of wack.
“Unfortunately we have several major components of state government that are big pieces that are growing faster than all of our revenues combined,” Neall said.
Hogan has yet to detail his budget plans. He has said he won’t go into specifics until after he is inaugurated on Jan. 21.
When Hogan joins the Board of Public Works in two weeks, he may find an ally in Comptroller Peter Franchot, who has been critical of the state’s spending plans.
“We have many needs in Maryland. The problem is we haven’t been able to distinguish between what we need and what we want,” Franchot said.
Franchot praised O’Malley’s plan to save the state $410 million and eliminate the current-year deficit. But he said the generally assembly has gotten into the bad habit of budgeting out nearly every available cent of projected revenue.
“When the economy is volatile like it is, then we see these dips,” Franchot said.
That volatility in the state’s economy has one big culprit, according to Daraius Irani. He heads the Regional Economic Studies Institute at Towson University: “For so long, our biggest customer has been the federal government,” Irani said.
Between the hundreds of thousands of federal employees who live in the state and the numerous federal contractors based here, Maryland relies bigtime on federal spending. But the federal government is no longer the dependable golden goose it used to be.
“The challenge remains with federal spending slowing its spending down, the challenge remains in front of us how can we come in and leverage what we have now into the next gig and this is a perfect time to do is,” Irani said.
Irani says Hogan’s in a good position to help nurture some of the seeds the state has planted during the O’Malley administration – investments in tech and medical research and cybersecurity, for example – so that the state can have a more diverse and reliable economy. Irani says he thinks a government helmed by a moderate Republican like Hogan will also help signal to companies that the state is committed to helping businesses thrive.
