O’Malley administration seeks to float $750 million more in bond debt

By Len Lazarick

The O’Malley administration is seeking authorization to float $750 million more in state debt over the next five years, a move Comptroller Peter Franchot objects to as potentially triggering a property tax hike.

The administration presented the plan at a meeting of the Capital Debt Affordability Committee last Monday. Franchot called it “an out-of-left field request” with no document to show how the money was to be spent and little to justify it. According to Franchot, Sen. James Ed DeGrange, chairman of the Senate Capital Budget Subcommittee and a non-voting member of the Debt Affordability Committee, also raised objections.

There were apparently no reporters or other observers at the meeting because there had been no public notice of the meeting as is required under the Open Meetings Act for public bodies created by statute, such as the debt committee.

Debt to personal income chartNo action was taken last Monday, and a follow-up meeting was scheduled for 3 p.m. today in order to meet a deadline for consideration by the legislature’s Spending Affordability Committee. When MarylandReporter.com complained on Friday morning that there had been no public notice of either meeting posted anywhere, in apparent violation of the Open Meetings law, a notice was posted within the hour on the website of State Treasurer Nancy Kopp, who chairs the debt committee.

“We missed the boat on that,” said Deputy Treasurer Susanne Brogan. “We should provide notice. We overlooked that.”

No explanation for the spending

Brogan said that Budget Secretary Eloise Foster, a member of the committee, was asked last week to provide a memo for today’s meeting explaining how the money would be used.

Franchot said the request last Monday was not in writing, and the only paperwork was a briefing document showing how it would impact the state’s current debt standards.  Currently Maryland does not permit debt obligations to exceed 4% of personal income in the state, and the debt service on the bonds – principal and interest – may not exceed 8% of state revenues.

Page 8 of the briefing document, which had been adjusted for the increase in debt and the increase in state revenues, shows the total new debt is well within those limits.

“I saw it as a back door tax increase,” Franchot said. “Adding that much debt is going to cause an increase in the state property tax,” which is dedicated to paying off the debt.

“It just added to this culture of debt,” he said. “We also have a culture of secrecy in this state.”

Among its budget-balancing techniques in recent years, Gov. Martin O’Malley has beefed up the general fund by taking money out of special funds supported by dedicated taxes, such as the Open Space Program and the Bay Restoration Fund. He has replaced the money with bonds to support those programs.

“Long after Martin O’Malley is finished as governor we’re going to be paying off this debt,” Franchot said.

About The Author

Len Lazarick


Len Lazarick was the founding editor and publisher of MarylandReporter.com and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.


  1. Patriot

    He has GOT to be a relative of Obama’s!!! What a jerk!!!

  2. William H. Campbell

    If this debt increase becomes a reality, it will result in Maryland reaching its debt limit in 2017. It probably, in combination with our pension and retiree health insurance, will result in Maryland’s credit rating being downgraded. Debt is powerful tool which can fund necessary projects that are truly worthwhile. It can also be a terrible curse when misused for ill-advised hobbies. Governor O’Malley has not demonstrated good judgment in the stewardship of Maryland’s finances and debt. What would it hurt to have a two year freeze on new debt? This would allow us to pay down a significant part of our existing debt, and free up debt ceiling for future needs.

  3. abby_adams

    I’m shocked that Martin would be laying the ground work for yet another tax increase. How much more will the sheeple in MD take before they fire the culture of corruption that thrives in Annapolis? Somedays I’m not so sure they will ever wake up.

  4. hungrypirana

    Good article, Len. And thanks for informing Ms. Kopp about her failure to follow the open-meetings law. That failure is one piece within a larger body of evidence showing that the debt committee takes a cavalier and perfunctory view towards complying with the law. It’s as if the committee’s decisions have been made previously by higher-ups before the committee discharges its responsibility.

    A larger piece of evidence is the Committee’s meeting agendas for September 24 and October 1. Franchot says they lack any documentation of where the general obligation bond proceeds will be spent. True, but Franchot’s complaint is incomplete. The agenda also lacks any information about whether there are any bond amounts authorized but not yet issued. Further, they provide no justification for the state to take on $750 million more debt in the context of Moody’s “negative outlook” issued on July 18, 2012. If Ms. Kopp’s committee were discharging its legal responsibilities, then the meeting agenda would justify the debt increase in spite of the state’s above-average debt burden, budget pressures due to failures to cut spending, vastly underfunded retirement, and reliance on federal jobs in era of retrenchment. Moody’s explicitly cited these in its rationale for that negative outlook.

    Perhaps Ms. Kopp must be told of other applicable law before the meeting later today.

    Md. State Finance and Procurement Code Ann. 8-112(c)(1)(ii) stipulates that the committee must consider the amount of bonds authorized but unissued; and 8-112(c)(5) requires the committee to consider the criteria that recognized bond rating agencies use to judge the quality of issues of State bonds.”

    How can these matters be given the requisite due process when they are given no weight on the meeting agenda?

  5. JGwen

    “Long after Martin O’Malley is finished as governor we’re going to be paying off this debt,”

    Which is why O’Malley proposes it now! It can’t wait for the next session of the General Assembly. It’s purpose can’t be described or justified.

    Another slam dunk for the Governor steeped in the “Chicago-Way!” Congratulations to his voters, but with heartfelt sympathies to Maryland citizens who didn’t vote for him, being dragged along to the Maryland “Cool-Aid” parties!

  6. David A. Robier

    And here he (O’Malley) goes again… I guess he thinks we are too preoccupied with the national election.

    Note to Marty: We’re still watching!