The State Debt Rises
Former governor Martin O’Malley was the governor Maryland deserved. We did, after all, vote him into office twice. But he was not the governor our state needed—at least not from the perspective of capital spending and debt financing.
Eileen Norcross, senior research fellow at the Mercatus Center at George Mason University and author of several reports for the Maryland Public Policy Institute, was gracious enough to share the research from her paper The Appearance of Fiscal Prudence. I have trimmed it down significantly to give readers a glimpse into just how much spending on capital projects increased under O’Malley.
O’Malley held the governorship from early 2007 to early 2015. To get an idea of how fiscally prudent he was during that time, take a look at the graph below, which shows both state debt as a percentage of personal income and debt service as a percentage of state revenues. Both rise significantly under his watch.
Supporters of the former governor will say that increasing debt financing was necessary because of the difficult economic times. Supporters of the current governor will say the borrowing could have been avoided if O’Malley and other state policymakers had made the “difficult decisions” that they often talked about.
Regardless, the increase in debt financing means one very important thing to Maryland residents:
Debt service as a higher percentage of state revenues means less money the state can use to fund programs that need to be paid for today and in the future. This can mean cuts to current and future services or the need for higher taxes to maintain service levels.
Governor Hogan is already having to get creative to close the budget gap without increasing taxes. If the cost of debt continues to rise every year, he will only be further constrained and less able to keep his promises. That could end up meaning four more years of chronic budget shortfalls, transfers from special funds to cover the difference, and nickel-and-dime taxes to make up the difference.