February 1, 2015

Rascovar: Hogan’s ‘deflategate’

Print More
Hogan budget announcement

Photo above: Gov. Larry Hogan announces budget plan with, from left, Lt. Gov. Boyd  Rutherford, Hogan, Budget Secretary David Brinkley, budget adviser Bobby Neall

By Barry Rascovar

For MarylandReporter.com

Talk about an uneven fight! When it comes to shaping the Maryland state budget Gov. Larry Hogan Jr. is the pre-determined champion.

Think of the budget as a balloon. The governor decides how much air gets pumped into the balloon ($40 billion). Once this is done, the legislature can let out some of that air — but it can’t expand the size of the balloon at all.

This year the new Republican governor embarked on a truth-in-budgeting drive, eliminating much of Maryland’s underlying structural deficit with $1.3 billion in cuts.

In other words, Hogan gave the legislature a dramatically smaller balloon to play with. And there’s nothing lawmakers can do to create a bigger budget balloon short of raising taxes — pretty much of a non-starter this year.

Hogan’s budget ‘Deflategate’

By taking a considerable amount of air out of former Democratic Gov. Martin O’Malley’s overinflated budget balloon of last year, Hogan created his own “deflategate” controversy.

While Maryland’s gregarious governor can’t be compared to the frowning Bill Belichick of the NFL’s “deflategate” kerfuffle, Hogan isn’t making Democrats in the General Assembly happy.

The Black Caucus wants Hogan to reconsider his cuts to education in key aid categories that overwhelmingly impact two of the state’s worst-performing school districts — Baltimore City and Prince George’s County. A number of rural counties lost education funding, too, and their lawmakers are upset as well.

Even Senate President Mike Miller, who is attempting to remain on good terms with Hogan, said, “We’ve got to try to get more money in the classroom.”

Easier said than done, as the cagey Miller well knows.

New reality for Democrats

What Democrats are facing is a new playing field. Hogan brings to the table decades of experience as a real estate salesman. He’s got definite ideas on how to run the state in a business-like manner. That begins with keeping spending under control.

Thus, his first budget contains fewer transfers and gimmicks than during the O’Malley years, or even the Ehrlich years. Hogan spread his budget cuts around, though education and health care – the two biggest spending drivers — took the heaviest hits.

Hogan also is seeking legislative approval to weaken the state spending mandates on education, health care and the environment, among others. He wants those mandates changed so that required funding grows at a slower rate than the state’s overall spending plan.

This is straight out of Economics 101 — make sure you don’t pay out more than you take in, and build in a cushion.

No Free Ride

If Democrats follow Hogan’s request, Maryland’s underlying structural deficit could be on the road to elimination for a few years.

But Hogan isn’t going to be given a free ride.

Compromises on both sides are inevitable. The hit to education will be moderated and some other cuts will be, too.

With guidance from the Department of Legislative Services, lawmakers will make $100 million or more in budget reductions in other areas. They also could juggle fund accounts and transfers in a manner that creates more cash in the state’s general fund budget.

Give-and-take discussions with Hogan and Budget Secretary David Brinkley could be intense but will likely lead to common ground. In the end, the blow to education won’t be as severe.

Lower Spending Mandates?

As for Hogan’s request to lower annual spending mandates, the General Assembly may take a firmer stand.

Democrats cannot totally rebuff Hogan’s request to re-write the spending mandates because they then would have to find the money to pay for this new funding — an impossibility without raising taxes.

More likely, lawmakers will meet Hogan halfway — reduce the annual, mandated growth contained in these spending formulas, but not as much as the governor wants.

The sad reality for lawmakers is that Hogan doesn’t need a permanent change in the spending mandates to carry out his fiscal belt-tightening. If necessary, he can follow the same budget script in 2016 and beyond as this year, leaving lawmakers with little recourse but to go along with Hogan after hammering out some concessions.

Hogan wins either way.

Adjusting to this new playing field isn’t comfortable for Democrats, who are used to having the governor tack on a few more tax increases to support ever-growing, mandated payments to local governments and social programs.

Yet Hogan’s budget adjustments are far from Draconian. He’s practicing traditional, conservative economics without being vindictive or mean-spirited. Democrats in Annapolis have little choice but to adapt. Their only effective weapons: Political negotiation and compromise.

Barry Rascovar’s blog can be found at www.politicalmaryland.com. He can be reached at brascovar@hotmail.com.

 

  • Elmo

    It’s high time that Maryland lives within its budget. Very excited about where Hogan will take Maryland

  • Vidi

    Very thoughtful commentary. Yes, it will be quite a challenge for big spenders to become thoughtful spenders. However, the governor has the upper hand.

  • dwb1

    We need to stop using words like “cuts” that do not have ordinary plain-English meaning.

    $6.1 billion is about 0.7% more than last year, but because its $150 million less than “expected,” there is much wailing and gnashing of teeth. Cuts!!

    No, not a cut. More like, diminished expectations. Sure richer counties will get less, isn’t how this progressive taxation thing is supposed to work? Rich counties are always free to raise their own taxes. But they won’t, because they know the mood of the voters.

  • Foreign Observer Status

    It’s a good column, Barry, but I would disagree with on aspect:
    “And there’s nothing lawmakers can do to create a bigger budget balloon short of raising taxes”

    I mean, that’s not really true. They can mandate spending and have done it many times over. You had Thornton, Cade, Medicaid expansion, etc. (If I had to guess, there are probably over a dozen plus mandated spending programs).

    So the ways they can spend more money are to raise taxes, pass new mandated spending, or find sudden monies they can transfer around; they have a history of doing all three. With that said, none are easy to accomplish and given the sheer volume of freshmen in both chambers, highly unlikely to occur in Hogan’s first year.

  • Dale McNamee

    Why don’t the Black Caucus and other big spenders tap their wealthy friends for extra taxes instead of the rest of us who won’t benefit from the spending ?
    All of the special interests should pony up as well… They are quite wealthy…

  • Dale McNamee

    Dear Barry,
    Wasn’t 8 years of tax and spending enough for you and your fellow “Progressives/Liberals/Democrats ?
    It was more than enough for me…
    I voted for Governor Hogan & the Republicans to stop the madness…

    Why don’t you do some investigating of where all of the tax revenues have gone and are going ? It should make for some really interesting reading…

  • Amy

    We can throw as much money at education as the mint can print and it will not fix the shortcomings. Much like horses and water, you can offer a child a free, world class education but you can’t make them learn… only their parents can. So, fix the family problem and you’ll fix the education problem.