By Donald C. Fry
State lawmakers will convene in Annapolis at noon next Wednesday, January 9 for the 2013 General Assembly session, facing somewhat improving fiscal circumstances than they have experienced during the last five years.
After having to deal with major annual structural deficits well in excess of $1 billion in three of those five years, state lawmakers will face relatively benign structural operating deficits between now and 2018, according to the General Assembly’s December 2012 Spending Affordability Report.
The latest expert projections call for our state’s annual structural operating deficits to ease back from $417 million in FY 2014 to only $154 million in FY 2018.
The projected declining structural deficit is, unfortunately, not because Maryland’s economy is suddenly growing robustly. It is not. But it’s not bad, either. Our state’s economy is meandering at growth rates slightly above the national average.
Rather, the deficit reduction is largely attributable to legislative action during the last two years to reduce the structural deficit by more than 60 percent that included increasing tax and gaming revenues.
Maryland, unlike the federal government, does not actually accumulate massive deficits over the years, because by law our state is mandated to have a balanced budget every year. State lawmakers close projected operating deficits through a process of fiscal scrambling that can involve budget cutting, reallocating other state revenue sources to the operating budget, and/or increasing taxes or fees.
During the last few years, the state’s fiscal scrambling has included all of the above.
So now that the structural deficit pressure is easing, what will lawmakers focus on during their 90 days in Annapolis?
No substantive signals about major legislative issues – particularly relating to business competitiveness – have emerged from legislative leaders.
The top issue for most business advocates would be transportation funding, specifically increasing annual revenue to the state’s transportation trust fund by at least $800 million. But aside from vocal advocacy from local delegations in the Baltimore-Washington corridor, and an occasional hint from someone in legislative leadership that they might consider nibbling around the edges of the state’s massive crisis in funding roads and transit, there is little encouragement that a consensus on transportation funding has emerged.
The languishing resolution by Congress of challenges related to the “fiscal cliff” and lingering uncertainty over its potential impact on Maryland’s economy only serves to foster what appears to be a general reluctance in Annapolis to commit to a transportation funding solution or any other major initiative this year. Speaker Michael Busch specifically referenced the need to see how the federal government deals with the “fiscal cliff” when recently asked about the prospects for a transportation funding increase.
The more than 120 bills that have been pre-filed by lawmakers range from capital budget requests for local projects, to legislation requiring applicants for handgun permits to have demonstrated competence with a handgun, to a bill that prohibits aiming a laser pointer at an aircraft.
There is also cross-filed legislation to designate the soft-shell crab sandwich as the state sandwich, and a bill to designate the second Thursday in May as “Maryland Centenarians Day.”
Business-related pre-filed legislation include a number of bills relating to state government procurement from minority businesses and legislation to increase the state’s flexibility related to the use of the Department of Business and Economic Development’s Enterprise Fund.
There is much more legislation to be filed after the General Assembly’s opening day. Members of the Senate have until February 1 for routine bill introduction. House members have until February 8.
March 25 is this year’s crossover date – the deadline for each chamber to send the other chamber bills that it intends to pass favorably.
Key dates in this year’s session also include the January 16 deadline for the governor to introduce his proposed budget and January 28, the deadline for the governor to submit a capital budget. This year’s deadline for passing the state’s budget for FY 2014 is April 1, a week before the session adjourns.
As for the big picture in Annapolis, the General Assembly’s Spending Affordability Committee recommends taking action to reduce the structural deficit by at least $200 million. Aside from that, the committee’s latest report vows to “shift focus from the structural deficit to its more customary focus” of limiting growth of ongoing state spending to keep it in line with the state’s pace of economic growth.
To that I would add, whatever spending and policy decision lawmakers make between now and April, they should be focused on one fundamental outcome: making Maryland more competitive as a place to locate and to grow a business.
Lawmakers must ensure that the state’s budget that is enacted strategically uses taxpayer dollars to provide maximum leverage for job creation. In the long run, that’s the essential prerequisite that ultimately drives economic growth.