OCEAN CITY – While local legislators all agree the upcoming General Assembly session will be defined by the state’s ability to reconcile its burgeoning $1.5 billion structural deficit, not all agree on how best to close the gap.
The resort area’s representatives in Annapolis came before Ocean City’s Economic Development Committee (EDC) on Wednesday to brief business and community leaders on the issues most likely to affect them in the coming year. Depending on whose figures one believes, the gap between spending and revenue in Maryland has swelled to somewhere between $1.1 billion and $1.5 billion, a deficit lawmakers will have to reconcile with a combination of tax increases and/or cuts to state programs and aid to local jurisdictions.
Delegates Norm Conway and Jim Mathias, who both represent District 38B, Delegate Page Elmore (R-37B), Senator Lowell Stoltzfus (R-38) and lobbyist Dennis Rasmussen, who represents the Ocean City Chamber of Commerce, met with EDC members on Wednesday to lay out the nuts and bolts of the structural deficit issue and answer questions posed by business leaders and local elected officials about what they can expect in the upcoming session.
Most agreed the General Assembly should have started addressing the fiscal crisis in the last session, but latitude was given to the incoming Martin O’Malley administration to get a firm grasp on the state’s financial picture before any real solutions were offered. Stoltzfus said the delay has only exacerbated the problem.
“I had an amendment that would have balanced the budget last year,” he said. “The decision was made to put it off until this year, which ended up being a terrible mistake. Now, the problem is much greater.”
Conway, a democrat, agreed the deficit problem should have been tackled last year, despite the new administration’s request for more time.
“The decision was made to give the new administration time for its own analysis,” he said. “Maryland is the only state with an executive budget. The only thing the legislature can do is cut it. It can’t add anything to it.”
Stoltzfus said his proposed budget amendment last year would have curbed the amount of state funding for public education pouring into the schools since the adoption of the Thornton Commission findings several years ago. Thornton essentially became an unfunded mandate when a revenue source for the program was not dedicated.
“The solution would have slowed down spending, especially in K-12,” he said. “Thornton is largely responsible for the problem we’re facing. Education is slated to grow even more to the tune of around $300 million this year.”
Conway agreed the unfunded Thornton mandate was largely responsible for the state’s fiscal trouble. In the beginning, state lawmakers dedicated a portion of an increase on the cigarette tax to fund Thornton, but the revenue source did not keep up with the spending.
“One of the primary causes is, of course, Thornton,” he said. “The legislators never did put in place a mechanism to pay for it. They dedicated part of the cigarette tax to it, but that didn’t even pay for one year.”
While most agreed the Thornton school spending program was a large contributor to the state’s growing deficit, there does not appear to be the will to cut funding for public education to rectify the situation. The local legislators called Thornton a “political football” that nobody really wanted to touch.
However, Elmore questioned aloud if the state dollars poured into Thornton were achieving the desired results.
“The Thornton bill passed with no funding in place and yet our SAT scores went down,” he said. “As much as we put in, you would think we would be getting more out.”
It remains uncertain how state lawmakers will begin to address the deficit when they return to Annapolis early next year, and they could be heading back sooner if a special session is called to figure out a way to tackle the growing revenue gap. Several possible solutions, or combination of solutions, have been discussed including an increase in the personal income tax rate across Maryland, or an addition to the gasoline tax by as much as 12 cents on the gallon. Of course, slots is hanging out there as a potential instant money source for the state, but for the moment, the legislators are considering a combination of cuts in spending and increases in certain taxes.
Conway said the state’s financial picture is not as gloomy as it may appear, but did warn spending cuts are looming that could trickle down to the local jurisdictions.
“The fiscal picture is not as dire as it has been portrayed, but we’re at a critical juncture,” he said. “We can cut departments and staffing, but not to the point where we jeopardize the goals of the programs.”
Conway said programs often have their funding cut in times of fiscal crises. He said everything will be on the table when the General Assembly starts to tackle the deficit, but advised his colleagues to carefully scrutinize just where they were making their cuts.
“We cannot forget those who are most vulnerable,” he said. “As we move forward, it’s important to keep those programs viable, but they won’t grow as fast as they have been.”
Trimming unnecessary spending and cutting funding for some programs is just part of the state’s proposed plan to close the budget deficit. Also looming are increases in various taxes from the income tax to the gasoline tax as well as several other revenue-generating proposals. Elmore said state lawmakers have to make sure the proposed tax increases are not shouldered by the people who can afford them the least.
“That’s a great concern on the lower Eastern Shore,” he said. “You all saw the news reports last week where Maryland is the richest state in the country, but the figures don’t equate on the shore.”
Elmore pointed out in Howard County, the report said the median income is $90,000 and the state median income is $66,000, but on the shore, the county with the highest median income is Worcester at $53,000 and Somerset is around $35,000. He used the figures to illustrate just how much even modest tax increases would hurt Eastern Shore families.
“A large percentage of the population on the Eastern Shore is living pay check to pay check,” he said. “Where will the tax and spender legislators dial for their dollars? I hope it will not be on the backs of the hard working people on the Eastern Shore.”
Whether it comes in the form of cuts to funding for education or other state and local programs, or a tax hike package, slots, or a combination of all of the above, most agree the General Assembly and the O’Malley administration has its work cut out for it as it attempts to tackle the budget deficit. Rasmussen, who has served in many capacities in Annapolis over the last few decades said this upcoming session could be the most difficult in recent memory.
“This is going to be a very, very challenging session,” he said. “I’ve been through 35 sessions and I can’t think of one that was more challenging than this one is going to be.”
The lobbyist predicted a combination of spending cuts and tax increases would likely be used to resolve the budget deficit.
“At the end of the day, there will be some new revenue-generating mechanisms in place, and they will likely include some tax increases,” he said. “Another big part of fixing the deficit, or gap, will be cuts in funding to the local jurisdictions.”