The Governor Should Be Uncomfortable

JULY 30, 2010 E-MAIL THIS PRINTER FRIENDLY

As the Sun says, it was open mic day at the Board of Public Works hearing. When some concerned citizens got up to question Governor O’Malley over his fiscal shenanigans, the Sun reports, “the governor appeared uncomfortable with the line of questioning.” As well he should.

The issue that was making the governor uncomfortable was the fact that the budget he proposed (and that was passed by the General Assembly – any legislator who voted for the bill is to blame, too) counted on $389 million in federal Medicaid money that now is unlikely to materialize. To pay for $200 million of that shortfall, the governor plans on raiding the local income tax reserve fund, which is where the county income taxes you pay are kept until they are disbursed to the county governments.

The governor and his defenders in the room point out that Maryland has a great bond rating and that people are still willing to buy Maryland’s debt. The Sun points out that when he was governor, Bob Ehrlich also relied on budget tricks. All true, but all miss the larger point about the problems the governor’s fiscal shenanigans impose on counties and municipalities across the state (by taking away money these entities relied upon, O’Malley simply shifted the cost of his fiscal recklessness onto county officials) and the problems that will face future legislators.

This raid on the local income tax reserve fund is only the latest hit that fund has taken to pay for O’Malley’s spending. The money is supposed to be paid back within the next few years. That, of course, obligates future legislators to pay for the current spending, leaving less money to pay for spending in those years. If the recession drags on and revenue continues its slow rebound, this borrowing will significantly complicate future efforts to balance the state’s budget. There is also the possibility that if things continue to go poorly in terms of revenue, the money won’t get paid back at all.

All indications are that in 2011 there will be a huge push to increase Marylanders’ taxes. The reliance on temporary (or even nonexistent) federal funds and massive borrowing from other state funds leaves policymakers only two options next year: cut spending or increase taxes. Which do you think they will choose? But when the tax increase does come, at least it will be after the election. And that’s what’s really important to Governor O’Malley and those in Annapolis.

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