Analyst: Federal shift intensifies state budget woes | WYPR

Analyst: Federal shift intensifies state budget woes

Jan 24, 2017

Maryland State House
Credit Flickr-Creative Commons

Gov. Larry Hogan’s proposed budget for the fiscal year that begins in July closes an estimated $544 million revenue shortfall and ends with a balanced budget. The Republican executive, a proud fiscal conservative, touted this achievement when he announced his budget last week.

But Warren Deschenaux, the state’s top policy analyst, warned a joint meeting of the House Appropriations and Senate Budget and Taxation committees that state spending is likely to outpace revenues by more than $300 million in the following fiscal year, not counting a few tax cuts Hogan has proposed. And the deficit is likely to grow to more than $1 billion four years later.

“For all its bells and whistles, this is just another kick the can down the road budget,” Deschenaux told the lawmakers.

One of Hogan’s priorities is eliminating so-called “mandates” — effectively legal requirements that Hogan’s budget pay for specific programs or services year after year. But Deschenaux said Hogan’s proposed legislation banning the practice wouldn’t have a measurable effect on the state’s bottom line.

“Frankly, the measure that was proposed is relatively weak tea,” he said. “It applies only to a handful of mandates, … and you add up their appropriations, it represents only about 4 percent of the total budget. We are not going to solve our structural budget problem by beating up on 4 percent of our spending.”

Hogan spokesman Doug Mayer blamed the General Assembly for impeding the governor’s efforts at cutbacks.

“The General Assembly’s never had tea before, so how would they know the difference?” he said. “This governor has attempted from the day he stepped into office to put forth common sense spending relief, mandate relief reform options.”

Deschenaux suggested that getting rid of mandates may be part of a bigger picture that also includes rethinking personnel policies and how programs are administered, as well as how much the state spends.

Baltimore City Del. Maggie McIntosh, chairman of the Appropriations Committee, said cutting spending is certainly part of the answer, but revenues are another part.

“Now I know that’s off the table with this governor, but I think at some point you’re going to find that the structural deficit will not go away even by cutting what he calls mandated programs,” McIntosh said.

What was made clear at Monday’s briefing was that in the face of changes in Washington, the state’s budget problems are increasingly urgent.

For starters, a shrinking federal government would hit Maryland’s economy hard.

Federal contracts have accounted for roughly a 10th of the state’s economy since the early 2000s, federal workers make up at least 8 percent of the state’s workforce and federal government jobs account for about 12 percent of wages.

McIntosh expressed concerns about the effects of actions like Trump’s executive order on Monday.

“It sends a message to federal workers that puts them in a posture to be very cautious about their spending so sales tax doesn’t come in,” she said. “It has a ripple effect.”

Maryland lawmakers were also warned about the impacts of federal policy changes, such as the repeal of the Affordable Care Act.

The state is due to receive $13 billion in federal funds in the coming fiscal year, including about $1.4 billion tied to the healthcare law.

Extend the budget forecast by four years, and that number grows to $7.7 billion tied to the ACA