Governor O’Malley is poised to call the General Assembly into special session with the express intent to raise taxes. The so-called “Doomsday Budget” that passed in the regular session a few weeks ago has been hailed as a “disaster” by some. In reality, the budget actually increases spending over last year by 2 percent or $700 million. This hardly constitutes drastic cuts and only in Maryland would such a budget increase, in the worst economy in 75 years, be considered a doomsday scenario.
This year’s budget fiasco is only the tip of the iceberg. Maryland did not just wake up to a spending crisis. In 1985, the state’s annual operating budget was $6.9 billion. In 2012 it stood at $34.7 billion, an average increase of 5% each year. After years of significant tax and fee increases, continuous raiding of dedicated funds, increasing the fiscal burdens of local governments, and excessive borrowing, we still can’t seem to pay the state’s bills.
How did such out-of -control spending become the norm? After all, there is a Spending Affordability Committee (SAC) to “limit the rate of growth of State spending to a level that does not exceed the rate of growth of the State’s economy”. In reality, the SAC is not at all effective in limiting spending in state government to that level. Over the last several years of a dramatically declining economy the state’s spending has continued to increase at a rate not reflective of the economic downturn. The SAC was first implemented in 1983.
The SAC process is nothing more than a feel-good measure, a gold star that Maryland’s leaders give themselves under the guise of fiscal prudence. The process is a scripted show that plays out the same way every December, when SAC offers its recommendations. A list of options are given, the proposal that appears the most moderate is selected (even though it generally expands spending to unsustainable rates), and any discussion of truly reigning in spending is met with a level of melodramatic zealous rhetoric usually utilized by those heralding the end of the world.
But you don’t have to take our word for it; leading non-partisan policy research organizations are also acknowledging the failure of Maryland’s SAC process. In “The Appearance of Fiscal Prudence,” Eileen Norcross, lead researcher for the State and Local Policy Project at the Mercatus Center at George Mason University, and Mercatus Masters Fellow Benjamin J. Vanmetre, examine the 2010 recommendation by the SAC. They go on to document the SAC’s ongoing inability to rein in spending, criticize the process and call for fundamental reform that limits spending to the objective measures of inflation and population growth. The full report can be viewed at www.marylandjournal.org/publications/detail/the-appearance-of-fiscal-prudence.
We agree that the SAC process should be reformed because it is doing absolutely nothing to control spending to affordable and sustainable levels in its current configuration. In many ways the SAC process is akin to allowing a repeat drunk driver to determine their own blood alcohol level. The result has been a disaster and the only thing we have to show for the SAC’s efforts are consistent tax and fee increases and spending that is not supportable by the state’s economic realities. The recommendation process of the SAC should be completed several months earlier than it currently is to be considered in early budget drafts. We also agree that it should be tied to the rate of inflation and population growth.
Unless we fix the root cause of the problem, namely spending beyond our means, we will continue to see an endless cycle of expenditure increases not sustained by the state’s economy. This is then followed by threatened budget cuts and inevitably tax increases clamored for by special interests. These tax increases further damage the state’s economy. This cycle will continue to repeat itself unless corrected by significant spending affordability reforms.
The Legislature should take a breather, live with the budget just passed in April, and begin the 2013 session with a new sense of purpose in January. The next session of the General Assembly should be dedicated to truly bringing spending under control. A priority should be to fix the SAC with a more effective process that truly protects Maryland’s priorities in the future. It is time for realism to regain its place of honor in Annapolis.
Delegate Anthony O’Donnell, House Minority Leader and Delegate Jeannie Haddaway-Riccio, House Minority Whip