How much will it cost? (Part one of a multi-part series)

I know, I know, you want Tawes coverage. Look for it tomorrow or Friday.

Since Ben Jealous won the Democrat Party nomination for Maryland’s top job, the progressives who have already seen his campaign as a chance to put their dreams into action on the state level are beside themselves with giddiness about the prospect of a state that borders Washington, D.C. being set up as a contrast to the relative austerity of one President Donald J. Trump.

But skittish voters may have been turned off by a Department of Legislative Services report (as reported by the Baltimore Sun) that claimed Ben’s single-payer health scheme could cost the state as much as $24 billion a year – astounding when you consider Maryland’s annual state operating budget runs about $44 billion. It would become the single largest line-item on the budget overnight and (of course) necessitate significant tax increases.

The story, however, neatly coincides with the question I’m sure I’m not alone in asking: how much is the Jealous agenda going to cost?

Well, I can’t give you an exact answer. But what I can do is study his platform, point by point, and give as good of an estimate as possible. And when you say, “Michael, all politicians promise to spend taxpayer money when they pledge to ‘invest’ in whatever item they think will get them the most votes,” I would say yes, you are correct – but Ben Jealous pledges to do it in spades.

If you go to his issues page, you will find Jealous has laid out a wide-ranging agenda of several issues:

  • Education
  • Medicare-For-All
  • Criminal Justice
  • Ending The Student Debt Crisis
  • Police Reform
  • Great Cities: A Vision For Maryland’s Future
  • Opioid Crisis
  • Make It In Maryland: Building A More Inclusive, Thriving Economy
  • Civil Rights
  • Immigration
  • Environment
  • Seniors

On many of these, Ben goes beyond the standard one-paragraph blurb and lays out fairly detailed plans – although they are often lacking in financial estimates. So today I’m going to start laying out my thoughts on what this agenda may cost taxpayers, and I’m going to begin with Education and the related subject Ending the Student Debt Crisis.

As a baseline figure, bear in mind that the most recent budget adopted by the state (for FY2019, which began at the start of this month) has the state of Maryland spending $14.72 billion between education and higher education, for a total of 33% of the budget. K-12 gets $8.099 billion and $6.621 billion goes to higher education. (The total budget, by the way, is $44.416 billion, compared to $42.142 billion just two years ago.)

Here’s the first concrete proposal in the Jealous education plan, increasing teacher salaries:

In the Kirwan Commission’s preliminary report, there’s a recommendation to bring Maryland’s average teacher salary to the average of Massachusetts and New Jersey’s – two of the country’s top performing states – by the 2024-2025 school year. Ben Jealous is committed to raising teacher pay by 29% between now and the 2024-2025 school year – the exact same percent increase as was accomplished in the seven years following the Thornton Commission.

To determine the cost of this salary increase plan, we need to find the difference between the natural cost of increasing salaries under the current Thornton funding formula and a new salary plan.

In an attached chart, Jealous details the cost over the five year period from FY2020 – FY2024. Total cost to taxpayers: $1.8953 billion over five years, with FY2024 alone contributing a $658.5 million increase. This is above and beyond raises already baked into the budget totaling $2.1845 billion.

Jealous, however, says he has a way to pay for this – but it depends on Maryland voters.

Late in this year’s session, a Senate bill was passed that placed an amendment to the Maryland Constitution on this year’s ballot. The “Fix The Fund” Act mandates that gambling revenue become a supplement to educational spending rather than a component of it. The Fiscal Note for the bill notes that revenues for education are expected to increase by $1.2678 billion from FY2020 – FY 2023. Unfortunately, that money doesn’t replace what would have gone into the General Fund: as the Fiscal Note continues, “Designating the use of a portion of (Education Trust Fund) monies for supplemental funding requires general fund expenditures to increase by an equal amount.” However, this money is folded into the expenditure from above, yet Jealous admits to being short in year 5. His solution? Enacting a combined reporting tax on Maryland businesses.

On this particular point of combined reporting, Jealous references an unsuccessful bill from 2017 that would have enacted this, with the carrot to business of eliminating filing fees for a business or entity with 10 or fewer employees. That may not necessarily be in Ben’s plan, so I am going to make two assumptions here: one. that the revenue for a five year period of FY2020-24 is similar to that which would have occurred FY2018-22 as covered by that particular Fiscal Note and that the filing fee waiver would be eliminated. Given those two items (and the fact business taxes aren’t paid by businesses but by consumers) I will say this adds $150.8 million over five years – but that still leaves Jealous short, and WAY short if “Fix The Fund” doesn’t pass – however, you can bet your bottom dollar the teacher’s unions will be out in full force to pass that one come November. (The odds of the Fix The Fund Act passing are very good, though, as Maryland voters seldom turn down a referendum. But it won’t be a fix, just more tax on the poor.)

And the fun is just beginning…next up is this gem:

In the 2018 legislative session, two former educators in the General Assembly proposed legislation to guarantee all education support professionals a living wage: at least $31,500 a year in lower cost of living counties and at least $36,000 a year in higher cost of living counties. It would be phased in starting in FY2020 and fully funded from FY2024 onward.

Based on the Fiscal Note for this bill, over three years (FY2022-24) the total cost to taxpayers will be $527 million.

Another biggie comes up a page or so later:

As governor, Ben Jealous will provide the funding necessary for full-day, universal pre-kindergarten and he will pay for it through the tax revenue generated by legalizing and taxing marijuana for adult use.

In a report entitled A Comprehensive Analysis of Prekindergarten in Maryland, the authors noted that at the time (early 2016) the state spent $132.9 million to educate the 35.58% of 4-year-olds who are already enrolled. Doing the math for 100% of 4-year-olds means an annual expenditure for pre-K on a state level would be a total annual cost to taxpayers of $375.3 million, and over a five-year period the cost would edge close to $2 billion.

Yet again, it’s likely that revenues will not keep pace. Obviously laws vary from state to state, but a good fit for projecting Maryland’s success might be Colorado because of its similar population. In 2017 Colorado generated $223 million in revenue from the sale of marijuana, while Washington state (which is somewhat larger) added $314 million. It’s not likely that Maryland would be able to sustain its revenue stream to the extent needed, meaning money would need to come from the general fund.

Next up is an unknown amount of money to address this seeming disparity:

We need to reimagine what schools provide in our low-income neighborhoods by making the school building the central hub for community services – counseling, job training, meals, mentoring programs, and health clinics. As part of the new funding formula, the state should add a concentrated wealth factor that drives more funding to schools with 40% or more of their student population coming from low-income families.

To me, this is akin to the current Geographic Cost of Education Index that cost taxpayers $141.6 million this fiscal year (page 47 here). But that money is a starting point because, in order for schools to take on all these functions, there is an unknown capital improvement cost involved. I suspect when all is said and done this could easily exceed $2 billion in additional spending after five years.

Lastly on the K-12 education front, there is this idea:

Providing children with a critical mass of mental health services requires an investment in personnel like inschool social workers and psychologists, but it also requires fully incorporating these service providers into the broader academic ecosystem, and providing other key members of that ecosystem with the training they need to help our mental health service providers.

So let’s begin with this:

By providing the child with case-management, the social worker can ensure a student is connected with an in-school counselor (and) has up-to-date treatment from an inschool psychologist.

(…)

… it is important that enough counselors be hired to maintain a low student-to-counselor ratio…

(…)

Every school should have at least one on-site psychologist, who is focused fully on addressing the mental health needs of the student body.

(…)

As governor, Ben Jealous will work with key stakeholders like the MSEA to increase staffing levels for service providers like social workers and school psychologists…

Yes, because we know the MSEA teacher’s union is oh-so-careful with taxpayer dollars.

The information is a little out-of-date, so I’m extrapolating the 1.449 schools that Maryland was claimed to have a half-decade ago to 1,500 for ease of math. So let’s make some more assumptions: three new social workers, one new psychologist, and three counselors (to maintain the low ratio) are added per school – that is a total of 10,500 staff statewide. And they’re not going to come cheap: on average a school psychologist makes almost $60,000 per year, a school counselor checks in at almost $49,000 a year, and school social workers earn just over $48,000 a year. Therefore, the additional per-school staffing expenditure (just for salary, mind you, and not including benefits) would be $351,000 a year. Multiply that by 1,500 public schools in the state and the total annual cost to taxpayers is $216.2 million.

Once you’ve paid for K-12, you still have the aspect of “free” college.

As governor, Jealous will make community college free for every Marylander… The guarantee of free tuition will be extended to every Maryland high school graduate. This program will be paid for by increasing the state income tax for the top 1% of earners ($500,000+ annually) by 1%, and savings from significantly reducing Maryland’s levels of incarceration.

Now this is a little bit confusing because I thought we already had that, based on a bill passed last year. And the question is whether Ben means every dollar of the average $4,324 (see here) for tuition and fees or whether it’s an expansion of the “last-dollar” program where prospective students have to exhaust other avenues of aid first (although, in all honesty, the taxpayer pays most of it anyway.) Now multiply that by a projected 46,592 full-time students and just a high-end estimate of Ben’s scheme comes out to be $201.5 million every year. And since it’s “free” we should probably assume a total annual cost to taxpayers of $300 million because more will take advantage and (naturally) colleges will increase their tuition and fees to get in on this largess.

Yet as they say on the home shopping networks…but wait, there’s more.

As governor, Jealous will create a MD Careers program that partners with industry experts to determine growing job sectors, and incentivize education and training in these sectors by covering any education costs associated with entering the fields. Special priority will be given to service professionals like first responders, organized labor sectors like educators, and healthcare workers who can help drive down the cost of quality treatment for our population in the years ahead. The guarantee of free tuition will be extended to every Maryland high school graduate who commits to staying in Maryland for five years after they receive their degree.

This program will be paid for with a percentage of the savings generated by significant reductions to Maryland’s incarceration levels. This funding stream will stretch even further when one considers that training for in-demand sectors like construction rely on apprenticeships and technical training that are less cost intensive than traditional 4-year degrees.

As governor, Jealous will extend this guarantee to students pursuing graduate degrees at Maryland’s public institutions. This will be paid for by increasing Maryland’s cigarette tax, which is currently less than the cigarette tax charged by regional competitors such as D.C., Pennsylvania, and New York.

I love how he pointed out “organized labor sectors.” Like we need more of that.

So we come to the “savings” part. Jealous proposes to save our dollars by emptying out the jails.

Ben Jealous will reduce Maryland’s prison population by 30%. He will do so by ending returns to prison for technical violations, downgrading drug possession, expanding opportunities to earn parole, and investing in reentry programs. Doing so will create savings of up to $660 million.

Obviously the amount spent on free tuition is going to depend on the shape of the program, but more predictable is the increase in the cigarette tax. Maryland currently has a $2 per pack cigarette tax, which indeed is less than D.C. ($2.50), Pennsylvania ($2.60) and New York (tops in the nation at $4.35.) It’s even a dime less than Delaware’s and New Jersey comes in at $2.70 as well. (And then you have Virginia, second lowest in the country at 30 cents a pack.) Nor should we forget about the millionaire’s tax I cited above.

So let’s speculate that the cigarette tax of $2 a pack increases to $3, which would peg us just above the surrounding jurisdictions aside from Virginia and West Virginia. For FY2017 (the latest figures available) the cigarette tax raised $348.8 million. So a 50% increase in the tax brings a 50% increase in revenue, right?

Well, not quite. For taxes, there is almost always a lag between the rate of increase and the revenue increase. I’m thinking the difference in this case will be about 30%, although your mileage may vary. Total cost to taxpayers (particularly the poor and working class): $244.2 million a year.

On the other side of the scale is the tax on the “top 1%.” It’s harder to judge the impact based on a lack of parameters, but the “millionaire’s tax” of a decade ago reportedly brought in $120 million. I think with inflation, and the fact income taxes bring in $9 billion a year, that a 2% increase in revenue is a realistic estimate because there aren’t that many who would qualify. Total cost to taxpayers: roughly $180 million a year.

After that, there is another highly variable promise:

The guarantee of debt-free tuition will be extended to every Maryland high school graduate.

Jealous will offer this debt free path to graduation in the form of a state-financed work study program that pays students the cost of their tuition each year, including for public graduate schools. A significant part of this restructuring will also come from driving down the overhead costs associated with higher education: expensive book purchases, inflated rents, and non-essentials like luxurious gyms.

The obvious question is how many students would be eligible and how much of the tuition they will pay. Pennsylvania has a similar program where students are allowed to make $10,000 a year toward their college funding. If this is the case, for every 100 students that are accepted there’s a million dollars that has to come from somewhere, oftentimes from the college itself.

Jealous also desires the state get into the student loan refinancing business:

10 states currently offer refinancing programs for student loans. It is long past time that Maryland embrace its role as a national leader, and join these states in easing the often onerous financial burden that student loans pose for Marylanders.

Assuming the state can find the cash reserves, this is actually very inexpensive in comparison. A state study found other states run these programs for less than one million dollars a year, Total cost to taxpayers over five years: $5 million.

Lastly, Jealous wants to correct the supposed shortchanging of HBCUs in the state:

As governor, Jealous will reallocate future state-based funding streams for higher education to provide restorative funding that equals the historic underfunding of HBCUs in Maryland. Moreover, ongoing funding will be fixed to prevent this disparity in the years ahead. Jealous will also end the practice of allowing other public institutions to offer duplicative programs to those traditionally offered by HBCUs.

(…)

Under Jealous’ leadership, the state will begin to fund immediate infrastructure improvements at HBCUs using a percentage of the over $1 billion in general obligation bonds that it issues each year. Beyond improving the physical infrastructure of HBCU facilities, it will allow HBCUs to reallocate existing infrastructure spending to other programmatic investments.

It’s been claimed (by a minority member of the Maryland Senate) that HBCUs have been shortchanged by $2 billion over the years. I don’t think Jealous would try to eradicate that in four years, but over eight it would be a doable thing, simply increasing the $1 billion the state annually puts on its capital funding credit card by 25%. Over four years, this would be $1 billion in additional debt which needs to be paid eventually.

So, to total all this up: just for education at all levels, Ben is looking to ladle on at least $6.743 billion to the budget. In order to fill this gap, we will have to endure the adoption of an ill-considered amendment to the Maryland Constitution, the legalization and taxation of marijuana, increases in business taxes, cigarette taxes and income taxes for certain brackets, the emptying of our jails (with no telling how that will affect the crime rate), and squeezing people out of a legitimate business, refinancing student loans.

And that, my friends, is just for starters.

Now allow me to say that Ben seems like a nice, personable guy. I spoke to him a little bit at Tawes about a concern I had unrelated to this series, and he seemed receptive to help out. But in order to be informed, it should be known that his “free stuff” is going to come at a cost people may not be willing to pay.

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