Two prominent Maryland lawmakers and two policy experts on January 28 offered Greater Baltimore Committee members perspectives on key fiscal issues that ranged from an administration pledge to do whatever it takes to address the state’s transportation funding crisis this year to warnings that the federal fiscal cliff crisis is far from over.
Governor Martin O’Malley’s proposed $37.2 billion budget for FY 2014 reflects a state financial outlook that’s “the strongest it’s been since the Governor took office,” the governor’s Chief of Staff Matt Gallagher told more than 300 members who attended the GBC’s 2013 Legislative Forum at the Renaissance Baltimore Harborplace Hotel.
Maryland is on the rebound, said Gallagher, noting that the state has recovered 80 percent of jobs lost to the recession and will have a Rainy Day Fund approaching $1 billion in place to guard against future downturns.
He acknowledged that the state’s stagnant funding for transportation infrastructure remains one of Maryland’s most pressing fiscal challenges.
“We will do whatever we need to do” to bolster funding for the state’s Transportation Trust Fund and to restore trust in it, Gallagher pledged. “If that means a lock box, if that means constitutional amendments, the administration is very willing and able to engage on those issues.”
The administration’s top legislative goals also include passage of public-private partnership legislation that promotes private-sector interest in participating in such partnerships and closing what remains of the state’s once-massive structural deficit.
A major impediment to crafting a solution to the state’s transportation funding crisis is disenchantment in rural counties over an increasing imbalance in the proportion of transportation revenues, raised predominantly from highway users, that go toward transit rather than roads and bridges, said House Minority Leader Delegate Anthony O’Donnell.
Prior to 2007, use of transportation revenues was split relatively evenly between highway and transit purposes. But during the last six years, the percentage share of spending from the state’s transportation fund used for highways has declined to 24 percent, from 37 percent in 2007.
Meanwhile, the share of spending on transit has increased to 48 percent from 37 percent in 2007, O’Donnell contends.
“Mass transit is eating our Transportation Trust Fund dollar,” he said, noting that the “vast majority” of state revenue to the fund comes from highway users in the form of gas taxes, vehicle titling fees, car registration fees and other MVA fees.
To address the transportation funding impasse, O’Donnell proposes enacting a trust fund lock box, “rebalancing” the use of funding between roads and transit, increasing farebox recovery from transit users, and delaying construction of the proposed Red Line in Baltimore and the Purple Line in the D.C. suburbs.
Maryland has transportation funding challenges, but “we’re not on the verge of having the system collapse,” said Senator Richard S. Madaleno Jr. “We’re on the verge of being in a place where our revenues can only maintain the system we have.”
He acknowledged, but did not endorse, a proposal by Senate President Mike Miller to enact a 3 percent sales tax on gasoline and set up regional transportation authorities with revenue-raising capabilities in conjunction with local governments.
“That might not be the best idea, but we’re going to have a conversation about how to move forward,” said Madaleno, adding that the state at least needs to begin indexing the gas tax to inflation.
He suggested considering increasing the state sales tax, dedicating the increased portion to transit and leaving the rest of the transportation trust fund for roads, other transportation modes and Maryland Department of Transportation capital needs.
As for growth of the overall state spending during the recession, “you’re seeing the safety net working as it should be,” said Madaleno, who is a member of the Senate Budget and Taxation Committee. It’s a system that is “actually working,” he said.
Meanwhile in Washington, D.C. across-the-board spending cuts, or so-called “sequestration,” that could result from Congress’ current struggle to address a national debt of more than $16 trillion would have “disproportionately adverse” impacts on Maryland’s economy, said Capitol Hill consultant and lobbyist Kevin F. Kelly, vice president of D.C.-based Van Scoyoc & Associates.
The possibility of sequestration should be of major concern for Maryland, a state with a heavy reliance on government-related employment, said Kelly. He noted one in four jobs in Maryland is directly related to the federal government and three quarters of those jobs are in the private sector.
“The impact of sequestration on the private sector in Maryland is far greater than the public sector,” said Kelly, who also chairs Maryland’s Federal Facilities Advisory Board. “Because of that, there is a big, big risk to our state from the sequestration.”
What’s more, in the worst case scenario, sequestration “could hit at the end of next month” if Congress doesn’t make some adjustment to push it aside pending a unified resolution on debt reduction.
Kelly cited the elimination of one in four NIH grants as just one possible example of cuts that could severely impact growth in Maryland. The Pentagon has already reported 46,000 jobs will be lost and even more furloughed should sequestration occur.
“The ripple effect on employment, on innovation, on progress, on the institutions that are important to ‘eds and meds’ in this metropolitan area is huge,” Kelly said.