Deficit seen key issue in upcoming session

Originally published in the Washington Times

Economic & Fiscal Policy

by Jon Ward


NOVEMBER 23, 2006 Bookmark and Share

The Maryland legislature is asking for trouble if it does not address a looming structural deficit -- a projected $7.65 billion over the next five years -- in the upcoming session, elected officials and budget analysts said.

    The deficit "is not like a bottle of wine," said Delegate Murray D. Levy, Charles County Democrat. "It doesn't get better with age."

    Sen. Patrick J. Hogan, Montgomery County Democrat, vice chairman of the chamber's budget and tax committee, said "the sooner we start to address it, the better."

    "You could get away with this session not doing a whole lot," he said. "But that just makes the problem more severe in 2008."

    Christopher B. Summers, president of the Maryland Public Policy Institute, doesn't think delaying action on the issue is an option.

    "Putting it off for another session doesn't solve the problem," he said. "Eventually you're going to have to face reality. There are some very tough decisions to be made."

    Despite such concerns, House Speaker Michael E. Busch, Anne Arundel Democrat, and other state lawmakers say the Democrat-controlled legislature can complete the 90-day session, beginning in January, without increasing taxes or making large spending cuts.

    Senate President Thomas V. Mike Miller Jr., Southern Maryland Democrat, supports slots legislation as a way to generate as much as $500 million a year in new revenue. However, Mr. Busch and most other state lawmakers oppose the plan.

    Gov.-elect Martin O'Malley, Baltimore's Democrat mayor, favors limited slots at racetracks to help the struggling horse-racing industry but does not view them as a revenue source.

    Mr. Levy, who sits on the House appropriations committee and was Charles County's finance director in the 1970s, said there is not enough political will to make the tough decisions necessary to start closing the budget gap.

    "My belief is you eat the whole elephant now," he said. "But I can assure you, I will be in the minority. Nobody wants to come in the first year and be the grinch who stole Christmas."

    Mr. Hogan agreed, saying Maryland having a new governor and a crop of new legislators will make it difficult to reach a consensus on such politically unpopular legislation.

    "The first year of a term is always kind of like a courting period," he said. "We're recognizing that fiscal 2009 is right around the corner, but we need to kind of wait and see where everybody is and see what's doable."

    A structural deficit means the state has committed to spend more money over the next five years than it is projected to receive in revenues from taxes and lottery-ticket sales.

    The $489 million deficit this year can be covered by the cash surplus left by outgoing Gov. Robert L. Ehrlich Jr., a Republican. But in fiscal 2008, which begins July 1, the state is facing a $1.3 billion deficit.

    Deficits for the following four years average about $1.5 billion, totaling about $7.6 billion over five years.

    One of the largest contributors to the deficit is the Thornton education plan, which the legislature passed in 2002. The plan mandates a $1.3 billion increase in education spending by fiscal 2008, but does not include a funding mechanism.

    Sen.-elect Richard S. Madaleno Jr., Montgomery County Democrat, who is expected to sit on the budget and tax committee, said the state can use its rainy-day fund to cover most of the $1.3 billion deficit in fiscal 2008.

    A state briefing document released last week showed the fund at $1.4 billion, with about $860 million slated to go toward the fiscal 2008 deficit.

    "Really it's fiscal year '09, which is the 2008 session, that is the year of reckoning," Mr. Madaleno said.

    One of Mr. Madaleno's ideas is to update Maryland's sales tax to capture more types of purchases.

    Several lawmakers and special-interest groups also are urging Mr. O'Malley to increase the cigarette tax by one dollar this year.