Center Maryland: Budget consensus surfaces in Annapolis

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Editor’s note: The following commentary appeared on CenterMaryland.org on March 27, 2015.

By Donald C. Fry

What a difference seven weeks have made to the legislative atmosphere in Annapolis.

The less-than-positive reactions by Democrats who control the General Assembly to Governor Larry Hogan’s Feb. 4 State of the State speech prompted many to conclude that the post-inauguration honeymoon – punctuated by mutual pledges of bipartisanship and collaboration – was quickly evaporating.

Nevertheless, it appears to have been somewhat revived. A good deal of compromise and consensus has been reached between lawmakers and the governor on a $40.4 billion state operating budget, which passed the House of Delegates last week and passed the Senate of Maryland with amendments this week.

Though lawmakers made significant revisions to Hogan’s proposed budget, the end result is a state spending plan for FY 2016 that is apparently palatable to both the executive and legislative branches.

“The governor has worked with us remarkably well,” said Senate President Mike Miller, who was highly critical in February of Hogan’s State of the State speech.

Lawmakers went through the governor’s original budget during weeks of subcommittee hearings where they analyzed budget proposals, heard non-partisan independent fiscal analysis from the Department of Legislative Services, and listened to department heads justify the appropriations in the originally submitted budget.

The House passed the budget with only 10 dissenting Republican votes and the Senate passed it unanimously. The budget will go to conference committee for the House and Senate to reconcile their differences. It is also likely that a Supplemental Budget will be forthcoming from Governor Hogan that will be addressed during the final stages of the legislature’s budget process.

Not surprisingly, two areas of Hogan’s budget that received heavy revisions from lawmakers were the same ones that gained the most attention when the governor released his budget in January – the pace of structural deficit reduction and education funding.

While details remain to be worked out between the two chambers, the FY 2016 budget will reduce the structural deficit between revenue and spending by more than 70 percent, an amount well above the 50 percent target recommended by the Spending Affordability Committee but less than the 100 percent deficit reduction proposed by the governor.

It reduces general fund spending by more than $460 million. The Rainy Day Fund would continue at 5 percent of general fund revenues and the state would have a $50 million fund balance at the end of FY 2016.

Both House and Senate plans call for restoration of public school funding by fully funding foundation aid, the largest local school aid category. Also, with the cooperation of the governor, both plans would restore full Geographic Cost of Education Index funding for jurisdictions where education operating costs are greater.

While the budget does not include funds for state employee merit increases, the revised House and Senate versions do include a restoration of the 2 percent cost-of-living raise appropriated in the FY 2015 budget but that Governor Hogan proposed rescinding as part of his budget submission to the legislature. The Senate budget committee found an additional $24 million in cuts over what was recommended by the House, some of which was a result of shifting $15 million in school construction funds to the bond program.

Though primarily meant to be a tool by which the legislature and the governor appropriate funds for state operations, the budget has also become a place where a good deal of governing takes place as funds are restricted until legislative mandates have been achieved.

The use of restrictive budget language helps to hold state agencies accountable. Many agencies find themselves facing restricted funds due to programmatic shortcomings in the previous year, poor audit findings or a variety of other reasons. Here are just a few examples of how the House and the Senate have proposed to restrict agency funds:

  • Department of Business and Economic Development – $100,000 of the appropriation made to fund the Office of Finance Programs may not be expended until the Department of Business and Economic Development submits a report on its activities under the State Small Business Credit Initiative.
  • State Lottery and Gaming Control Agency– No portion of the agency’s appropriation may be expended for planning or implementing the sales of traditional lottery games over the Internet until the agency reports to the budget committees on a proposed platform and regulatory structure for online sales.
  • Maryland State Department of Education – $500,000 of the appropriation made for the purpose of accountability and assessments may not be expended until the department submits a report to the budget committees on the progress made toward administering the Partnership for Assessment of Readiness for College and Careers (PARCC) assessments online.

Additionally, the Maryland Insurance Administration, Comptroller, Department of General Services, Department of Human Resources, and numerous other agencies would have use of some funds restricted due to unsatisfactory audit findings. The funds will be released once a report is submitted detailing how the deficient audit findings have been addressed.

Lawmakers inserted budget language on some hot button issues in an attempt to influence or protect policy positions through budgeting. Most notably, for the Maryland Department of Transportation’s budget, lawmakers stipulate that funding appropriated for the Red Line and Purple Line may not be expended on other projects unless provided for in a supplemental budget that is submitted and approved by the General Assembly.

Considering that Governor Hogan’s new transportation secretary has yet to decide on the status of these two projects as the legislative session begins to wind down, this language serves as a protection that the funds in the state’s Consolidated Transportation Plan will not be used for other purposes without first informing the legislature on these critical transit projects.

It’s safe to say that the Senate of Maryland, House of Delegates and Governor Hogan can all claim success at the level of consensus achieved thus far this session on the budget. Though the legislature restored K-12 education funding, the Governor’s goal to significantly reduce the state’s structural deficit is still achieved after revisions by the legislature.

Furthermore, Governor Hogan’s proposed 2 percent across-the-board cut to all state agency budgets remains intact and state spending is significantly reduced over previous years.

Budgets are the product of compromise and a balancing of the spending priorities of the legislative players – the Governor, the Senate of Maryland, and the House of Delegates. On its face, it appears that this year’s budget will be reflective of shared priorities among the three.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.  

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