FY2014 budget – monoblogue

Time to get serious

While I mentioned the other day that not much fresh news would come from the political races until after the Independence Day holiday, that doesn’t mean that “Maryland’s top conservative blogger” (at least according to David Gerstman, contributor to Legal Insurrection) won’t have his say on things. I wanted to open up by taking a look at Larry Hogan’s “Hogan’s Plan” for the state’s finances.

Over the course of the primary campaign I was critical of Hogan for having such a vague “to-do list” of priorities he would have as governor, and this wasn’t a whole lot better. Be that as it may, I’m going to try and work with it in the real world anyway.

In Maryland, the governor perhaps has the most power of any such chief executive in the country – particularly if he wants to get serious about cutting the budget. The General Assembly can’t come back with a larger budget total, although they can tweak around the edges to some extent. So let’s go with the baseline established by Martin O’Malley when he set the FY2015 budget that takes effect tomorrow at $39.224 billion. Hogan promised that:

On day one, he will begin to run the government more cost-effectively and honestly. The Hogan-Rutherford administration will implement the recommendations of past audits, conduct additional independent audits of every state agency, and immediately get to work eliminating duplication, fraud, and waste to make sure that every cent of taxpayer money is spent efficiently.

By his reckoning, there is “$1.75 billion in waste and abuse” in state government. Figuring this with my public school math, that is 4.46% of the state budget – which seems like a nice little chunk of change until you realize the difference between the FY2015 and FY2014 budgets is $1.886 billion. In other words, the “waste and abuse” only accounts for about the same amount of money as an average annual increase. Something tells me there’s more low-hanging fruit than that. Yet Hogan says:

By cutting the waste and abuse from state government, he will be able to save the taxpayers of Maryland billions of dollars without having to cut our priority programs and agencies. It is a simple solution to a problem that has plagued our state for the last eight years, and it will enable him to cut and eliminate the regressive taxes that have crushed middle-class families and small businesses.

Nothing is ever that simple, but on the other hand his opponent is willing to blow up the budget with millions and millions of dollars in additional spending. If Anthony Brown simply maintains the Martin O’Malley glide path of 4% budget increases each year, this is what the next four budgets would look like:

FY2016: $40.793 billion
FY2017: $42.425 billion
FY2018: $44.122 billion
FY2019: $45.887 billion

Compared to level-funding the budget, that’s an additional $16.331 billion in tax dollars needed and you can bet your bottom dollar the Democrats will take all that and more from hard-working Maryland families.

And if you look at what Anthony Brown is promising, particularly in the area of education with universal pre-kindergarten, student loans for children of illegal aliens, creating a new Office of Educational Disparities, and providing extra money for HBCUs, assuming 4% annual increases may be on the low side.

The other part of Hogan’s Plan deals with business climate:

Maryland’s unemployment rate is 75% higher today than it when the recession began. In fact, the nonpartisan Tax Foundation ranked Maryland #41 in the nation for business climate. The main reason for this unfortunate reality is that it costs too much for job creators to stay in or come to Maryland. He will reduce the burden on job creators, open Maryland for business, and make our state more competitive with others in our region. The Hogan-Rutherford administration will overhaul the Department of Business and Economic Development to focus on aggressively attracting and retaining job creators in order to bring more and better-paying jobs to Maryland.

This is where the lack of specifics is really aggravating, particularly when Hogan’s vanquished opponents directly addressed the issue by proposing corporate tax cuts. In the FY2015 budget, corporate taxes bring in $1.011 billion so eliminating them entirely is affordable if you assume Hogan has the $1.75 billion of waste and fraud elimination in his pocket. Now THAT would turn some heads, but Hogan refuses to make the commitment.

Let’s look at Brown’s “Competitive Business Climate Tour” plan, though. There are nine “areas of focus” therein, but I’m going to focus on five of them:

Tax Liability: Reform our tax code to ensure that it reflects our current economy, enables state and local government to adequately fund our shared priorities, and encourages job generating investments in Maryland.

If you want the tax code to reflect our current economy, rates should be decreased to match the zero growth Maryland is enjoying right now. Unfortunately, it will instead be certain to “enable…government to adequately fund” all the brilliant schemes these liberals come up with. And don’t be surprised if combined reporting isn’t among those items designed to “encourage” investment in the state by hiking taxes on national companies.

Cost and Reliability of Energy: Promote the cost-effective generation of energy and improve the reliable delivery of energy through the grid to businesses and residents while transitioning to more sustainable energy sources.

There’s either one of two ways to go here: we get a “grand bargain” where fracking is finally allowed on the western end of the state in return for “investment” in wind turbines off Ocean City (perhaps via a tax on natural gas producers), or we just get the necessary subsidies to make these unsightly and inefficient wind turbines and land-wasting solar panel farms a reality. Look for the “renewable energy portfolio” to increase the percentage of “sustainable energy sources” to levels unsustainable for utilities to address without huge increases in consumer bills.

Cost of Living: Expand access to affordable housing and healthcare, healthy food options and cost-effective transportation to create a reasonable cost of living for all Maryland families.

When you see the words “expand access to” they really mean “spend more on,” with two exceptions: expanding access to “healthy food options” will involve the elimination of those options deemed unhealthy, such as fast food outlets. You will eat your broccoli and like it. The same goes for “cost-effective transportation” because, for many, transportation will become cost-ineffective: gas taxes will increase in order to subsidize mass transit, which is only cost-effective to the inner-city user whose farebox donation isn’t nearly enough to cover its cost.

And just how is a “reasonable cost of living” determined by the government? To me, that is determined by the market and the desires of those families as to their priorities.

Reliable and Predictable Legal System: Provide a civil justice system that allows deserving individuals to get justice and hold wrongdoers accountable while ensuring that awards are fair and equitable.

That is called tort reform, and the chances of pigs flying in Maryland are probably far higher than passage and enforcement of anything of the sort – especially if Brian Frosh is elected as AG.

Small- and Medium-sized Business Access to Working Capital: Ensure all viable small- and medium-sized businesses have access to affordable capital by working with lenders and businesses to maintain a strong environment for growth.

When I read this, I immediately thought: nice little financial institution you got there, be a shame if something happened to it. It’s the market’s job to figure out if a business is capital-worthy, not government’s.

My gosh, Larry Hogan, you have to do better than this. There are so many holes and code words in Brown’s plans that it should be easy to come up with something actually viable for keeping businesses and people from leaving the state.

The tax-free year?

As an opponent is wont to do, yesterday David Craig released a criticism of the state’s tax-free week program:

Anything that gives Marylanders some tax relief is better than nothing, and it’s a recognition from a stubborn political monopoly about the need to spur the economy, but the need for a so-called ‘tax free week’ raises a broader issue. Why is it just for a week, and why do politicians decide what items qualify?

State government has collected nearly $4 billion since the enactment of a 20% sales tax increase in 2007. That is a lot of back to school clothes, and handing out some extra pocket change for shoes, shirts and pants is a sorry pittance considering this regressive, harmful tax hits working people the hardest.

Considering Craig comes from a county that’s a half-hour drive from a locality which has “tax-free forseeable perpetuity” – and isn’t afraid to trumpet that fact in every advertisement bargain-hungry Marylanders see – he raises the right question. But what is the answer?

According to the state’s latest budget summary, the sales tax raises $4.3 billion a year. So even if it were a “true” tax-free week, we would only lose about $83 million in total. Given the vast limitations on what can be purchased, I would figure the state is “sacrificing” no more than $10 million to tell the voters they care. (On a side note, the sales tax is only 12% of revenue but Uncle Sam is 27 percent, supplying $9.8 billion to prop up Maryland.)

So to me Craig’s question is valid, but I would go further and make the case that the state could do without the sales tax and be just fine. It’s 1/8 of the revenue, but consider the same budget document I refer to notes the difference between FY2012 and FY2014 spending is $3.47 billion. Just cutting the budget to FY2012 levels obviates the need for 3/4 of the sales tax revenue and I’d be pretty confident increased economic activity would cover the rest. Delaware may piss and moan about lost business, but that would be their problem. They still have an easier go of adjusting their casinos to market conditions thanks to our shortsightedness, so there’s always that.

Looking at that Maryland state budget, it’s also worth mentioning that eliminating the corporate income tax entirely would “cost” the state $1.091 billion – an amount almost exactly equal to the difference between the FY2013 and FY 2014 budgets. So maybe the sales tax stays for the interim – and remember, that $4.3 billion will likely go up somewhat because gasoline is now subject to a 1% sales tax, or about 3.5 cents per gallon – but we eliminate the corporate income tax and level-fund the budget. There are all kinds of ways to make the numbers work, with the key idea being maximizing the number of dollars in Marylanders’ wallets, not Annapolis coffers.

Of course, we know the media and Democrats (but I repeat myself) would scream bloody murder; to them I say: we tried it your way, and it’s becoming clear we have an utter failure on our hands. It’s time for the adults to take over again.

How to deliver budget testimony: a primer

I have written testimony on bills before, but never have I done so for a budget hearing. But when Jackie Gregory, a friend and supporter of this website from Cecil County, wrote up her ideas on her county’s budget and posted this to Facebook, I asked her if I could share and she kindly gave permission. This is as she prepared it for delivery:

I do not believe that the current budget proposed is a responsible budget. I lay that at the feet of the council since one of your few powers is to appropriate funds. I do not advocate a slash and burn approach, but as a citizen and taxpayer, I expect the council to go through the budget line by line, find points of agreement on what can/should be cut, and make those decisions for the benefit of taxpayers. I haven’t seen that process play out with the council or any real collaborative effort to actually delve into the budget. This is very disappointing to say the least.

From the perspective of an average middle class citizen: There are many things in my house that need improvement, which I can’t afford to do all at once; they require me to break up the projects over the course of a couple of years. Yet I see the library asking for a $400k increase on a 4 million dollar budget in one year, because they have a lot of improvements they would like to do at once. They should decide what is necessary to do now, and what they want to defer until the next budget cycle. Also, I can’t afford to send my son to camp for a week overnight, yet this budget asks me to pay for other people’s kids to go on vacation for a week (North Bay). I don’t believe the current budget is responsible as written.

A rule for using the fund balance should be that only the amount gained in the fund balance over the course of the previous year should be used. Otherwise, it will be quickly depleted. You don’t want to adopt G.W. Bush’s economic policies: low taxes, increased spending, increased debt and deficits. Any new spending should be paid for by cuts elsewhere.

Also, new mandates beyond your control such as WIP compliance and the teacher pension shift need to be explained to the public with dollar figures attached to them so that the citizens understand what portion of new spending you control, and what portion you do not control. I believe that the teacher pension shift accounts for over 3 million dollars of the new spending in this budget.

In addition, I am aware that spending does not happen once a year, and that many taxpayer dollars have been wasted/lost due to poor decision making in the past. We lost millions and gained a continuing financial burden due to the sabotage of the sale of waste water plants to Artesian (by Councilwoman Broomell). That act alone adds 300k of unnecessary spending to this year’s budget, for upgrades to those facilities. The last board (Broomell, Mullin, Dunn) voted to waste half a million taxpayer dollars buying up development rights from a farmer to give them to the federal government. Citizens need to realize that the budget is not a one day event, and I encourage citizen involvement in government beyond just the final budget passage.

This board needs to vote down the current budget or delay it until you can come up with more significant cuts.

Suggested cuts:

For the new capital road improvements, have bike paths been added into the design features of the roads in compliance with the new bike plan? If so, that should be stripped. It’s not something we need right now.

Getting rid of the turf field and replacing it with something else should eliminate a couple hundred thousand.

The sick leave issue should be dealt with.

I would cut the library budget significantly; they should defer half or more of the projects until next year.

I would give Cecil College flat funding. We already subsidize the majority of a Cecil College student’s education. At the post secondary level, the amount asked of taxpayers for the purpose of funding a college education should be much less than it is. College students are not small schoolchildren, and they and their parents need to take more financial responsibility for their own education.

Improvements on Oldfield Point Road are slated for 800k. I know that has been on the CIP for awhile, but I live near there and there really is no dire emergency to upgrade the road. It is fine. I would defer that till next year.

I don’t think there is any great emergency with the Rolling Mill Bridge either; if it isn’t vital, it should be deferred until next year too. (Those two road projects alone would save a million.)

The auditor can be cut/scaled down. An outside auditor to deal with particular issues that may arise may be legitimate, but we should not be paying a full salary and benefits to do the job members of the council are supposed to do. If a council member feels incapable of doing the job you were elected to do without the help of an in-house auditor, then it is time for you to find a new line of work.

The school budget has increased drastically. They should not be expanding preschool beyond the state mandate, and the North Bay trip is back in the budget. When I was a child, most kids, including me, did not attend preschool, and my parents never took the time to teach me anything. Yet my peers and I did just fine. I understand that there is a preschool mandate for at-risk kids, but the district should not be expanding preschool beyond that. Given the number of new mandates, I would offer the schools flat funding plus the cost of teacher pensions. That would probably save about 1.4 million. Remember, they also have a fund balance they can dip into if they believe their budget requests are crucial enough.

What I have listed above is probably close to 3 million in cuts. I’m sure there are others who can offer other suggestions. Please consider them.

If you choose to rubber stamp this budget without offering up significant cuts, then there will be a lot of citizens, including this one, who will feel like we were duped into supporting folks who were going to use their business experience to run the government in a more efficient, taxpayer conscious way. I sincerely hope you use your skills to cut the budget to a responsible, reasonable size.

Obviously I’m not a resident of Cecil County – although its politics are perhaps the most interesting in the state, particularly for a county of its relatively small size – so I don’t know the lay of the land that well. Yet I could well understand exactly what Jackie was talking about in a larger sense, and her points were well taken because she not only advocated for a more limited government, she spelled out a lot of specifics on what could be pruned from her county’s financial docket.

Oftentimes I’ve gone to Wicomico County’s dog and pony show, although I skipped this year’s rendition because I don’t have the confidence anymore that my County Council will go to the wall for fiscal conservatism since the Bennett Middle School debacle. Meanwhile, our County Executive whines about not having enough money but obviously doesn’t mind adding millions in debt while convincing the bonding agencies that our situation is better than it really is.

But I digress. One problem we’ve had is that everybody and their brother can say “we can’t afford this budget” but they’re quick to exclude their pet project from the chopping block. Instead, Jackie sacrificed a road repair near her house, telling her County Council that the road was in decent enough repair to last another year.

She also brought up a very, very important point – one rarely mentioned by those who create the budget. Just how much do state mandates cost us as a share of the budget? It would probably be an eye-opening experience to see this; for example, one state mandate cost Wicomico County taxpayers $1.3 million (see page 8 here) although it may have “saved” us from a $14 million hit. No one would call the bluff, though, and now the County Executive wants to go $1 million above and beyond maintenance of effort, meaning every year we will have to come up with an extra million dollars because the bar will be raised – by yet another state mandate, since maintenance of effort is a state law.

So if your county (or city, or state) is going through its annual budgetary battle and you have the opportunity to have your say, use this as a guide: know your facts and come prepared with alternatives. This was an outstanding effort.

Maryland makes big mistakes

With a vote in the House of Delegates, the state of Maryland removed the ultimate punishment and allowed criminals to live out the rest of their lives in prison, at taxpayer expense. Two House Republicans split from the pack in the 82-56 vote, joining one GOP Senator in listening to the siren song of those who would mistakenly believe our society becomes more civil with the punishment’s repeal, forgetting that knowingly committing a heinous, premeditated crime is supposed to come with the realization one would forfeit their right to life in doing so. Nothing like giving a hardened criminal animal free reign to kill a corrections officer – after all, what now does he have to lose?

Perhaps the one saving grace in all this was that the false flag amendment which would have made this an appropriations bill and not subject to referendum was stripped out, so it appears to me that this bill could be placed on the 2014 ballot with many of the same people who foolishly voted for it.

Meanwhile, in this age of austerity when hard-working families have to watch their pennies and learn to do with less, the House also passed Governor O’Malley’s bloated budget by a 101-36 vote. By those tallies, it’s obvious that at least three Republicans have turned their back on fiscal conservatism and must believe the state will continually be a spigot for goodies, courtesy of the taxpayer. I wouldn’t expect the O’Malley budget to fail as the bulk of Maryland continues to vote against its best interests and sends more big-spending liberal Democrats to Annapolis, but I would hope for at least a united front of Republicans – there should have been at most 98 votes for the bill, and I’ll be interested to hear the excuses when those Republicans are called out on the carpet. A vote for an O’Malley budget pretty much exhausts my 20 percent of slack I’m willing to grant.

Certainly I will update this post as more becomes available, but what a lousy way to start a weekend. Beware the ides of March, indeed.

Update: Joe Steffen writes that the four (!) Republican Delegates who voted for the budget were Wendell Beitzel, Kathy Afzali, Robert Costa, and our own Addie Eckardt. The lady in pink has some ‘splainin to do.

Odds and ends number 69

It’s not meant to be a weekly Saturday fixture, but thus far in 2013 it was worked out that I’ve done an O&E post each Saturday. (I have to look the prior one up to see what number I am on – can’t duplicate the series, you know.) So once again I have a boatload of items which deserve anything from a sentence to a few paragraphs, but not enough for a full post by themselves.

First of all, the news is full of angst over the Sandy Hook massacre, mainly because the knee-jerk reaction has been: we need more gun laws. But MDYR president Brian Griffiths called Governor Martin O’ Malley’s new gun provisions just simple posturing:

Instead of introducing supporting meaningful proposals that would actively reduce gun crime, O’Malley has decided to sign on to proposals that will have only one meaningful impact: to inhibit the ability of law-abiding Marylanders to purchase and possess firearms.

Yet I suspect one proposed Maryland gun law will go nowhere. Delegate Pat McDonough is slated to introduce “The Criminal Gun Control Act,” which, as he terms, will:

…prohibit any offender convicted of a criminal act involving a gun from receiving any form of early release. This proposal would include parole, probation, or good time early release credits. The bill would also disallow a plea bargain.

After claiming 40% of all Baltimore City gun murders were perpetrated by felons with previous gun law violations, Pat added:

The solution to gun violence is not to destroy the Constitution and law abiding citizens’ rights to bear arms. Politicians are hypocrits (sic) when they attack good citizens and pass laws that benefit criminals like early release.

I thought, though, there was already an extra five years tacked on to a sentence for committing a crime with a gun. Perhaps someone in the judicial system can clue me in on why that’s not effective.

Meanwhile, Maryland Shall Issue is more succinct and to the point:

Respectfully tell those you speak with that you are against Gun Control in all its forms. You do not need to pick the magazine limits, or discuss the definition of so-called “Assault Weapons.” You must make your representatives understand that all Gun Control must be off the table.

Compromise is not possible when it comes to fundamental rights. Our lawmakers must be told that we will not willingly give up any of our rights. They will need to take them from us.

Maryland faces elections in 2014. Make sure they know we will remember who stood for our rights, and who wanted to deny your fundamental right.

Of course, when the chips are down and government has overstepped their bounds, there is the option of non-compliance, a route that Patriot Post editor (and one of my few bosses) Mark Alexander is vowing to take.

I hereby make this public declaration: In keeping with the oath I have taken in the service of my country, I will “support and defend” Liberty as “endowed by our Creator” and enshrined in our Constitution, “against all enemies, foreign and domestic.” Accordingly, I will NOT comply with any defensive weapons ban instituted by executive order, legislative action or judicial diktat, which violates the innate human right to defend self and Liberty, as empowered by “the right of the People to keep and bear arms.”

After all, wasn’t it Hillary Clinton who said “we have the right to debate and disagree with any administration?” Last time I checked, inalienable rights endowed by our Creator trumped laws which violate same.

Now it’s time to turn to another issue where our state government is failing us: economic growth and opportunity. I talked about one aspect of this the other day, but Change Maryland and Chairman Larry Hogan also had some suggestions for Martin O’Malley on rebuilding Maryland manufacturing:

Since 2007, Maryland lost 20% of its manufacturing employment base, the 10th worst decline in the country. Over 26,000 manufacturing jobs vanished during that time.

“It is unacceptable that the state’s most powerful elected officials do nothing with numbers as clear and convincing as these,” said Hogan.”These are the results you get when economic development is nothing more than cherry-picked pie charts and bar graphs in the Governor’s power point demonstrations.”

Just over a year ago, (New York’s) Governor Cuomo forged a three-way agreement with the senate majority leader and assembly speaker on executive proposals to cut taxes and create jobs in advance of the 2012 legislative session. The corporate income tax rate for Empire State manufacturers was cut to 6.25%. Maryland’s rate is 8.25%. New York’s decline of year-over-year manufacturing jobs is 1.4%, less than half of Maryland’s decline during the same period.

Hogan urged that, like so many other areas where O’Malley has followed Cuomo’s lead, a tax cut for businesses should be considered. Yet the advocacy group stayed on O’Malley this week like white on rice, also condemning his bloated budget:

This budget increases spending 4% over last year, to a record $37.3 billion, and does nothing more than continue the spend-and-tax governing that Martin O’Malley feels will further his political objectives.

Nowhere in this budget document is any mention made to helping Maryland’s blue collar workers and other regular working people. However, we’re all told to wait for some undefined sales and gas tax increase later on that will hit poor people the hardest.

Missing is any understanding whatsoever on how to bring jobs and businesses back to Maryland.

Hogan had more criticism for the Governor:

Martin O’Malley also showed again today in the budget briefing slide show for reporters why he is the most partisan governor in America, lauding the President for wanting to raise the debt ceiling and blaming in advance the U.S. House of Representatives for any largess that may not come Maryland’s way.

Martin O’Malley only wishes he had a debt ceiling, but unfortunately for hard-working Maryland families he has to raise taxes and fees on an almost annual basis to maintain the wish list he calls a budget. The $37.3 billion docket proposed for FY2014 is the largest in Maryland’s history and is a far cry from Bob Ehrlich’s last budget in FY2007 that totaled $29.6 billion. (Ehrlich’s last budget, by the way, was 12% higher than the $26.4 billion tab the previous year, in FY2006.) Up 4 percent from last year, O’Malley speaks of “cuts” but those cuts are only in his fantasies because the budget is 26% higher than it was seven years ago and up 41% from FY2006 levels. For most of the rest of us, we’ve not seen a 41% increase in our salaries since 2006.

It’s worth pointing out on the whole job creation issue that small businesses across the country fret about the impact of government, with the results of a new survey by the advocacy group Job Creators Alliance pointing this out. Taxes were the number one issue, with fully one-quarter of the 600 small businesses survey placing it atop the list. Add in the effects of Obamacare and government regulations, and the response swells to nearly half of those surveyed.

The group was pessimistic in its assessment, stating:

As America’s small business owners look forward at 2013 they do so with a great deal of concern about the obstacles Washington is placing in their path. As the engine of job creation, pessimism among small business owners does not bode well for job growth this year.

Lest we forget, 7 to 8 percent unemployment seems to be the “new norm.” Of course, if they untied the hands of the energy industry we could do a lot better. (That includes Marcellus Shale, Governor O”Malley, but not your pipe dream of offshore wind.)

But to get jobs, we need a better educational system and that means giving parents a choice in where to send their child for their education. National School Choice Week begins next Sunday, but no local organization on Delmarva has yet stepped up to participate in an event. (There are 22 in Maryland, but all of them are on the Western Shore. No events are planned in Delaware or on the eastern shore of Virginia.)

As it turns out, my fiance made the choice to send her child to a private, faith-based school. It’s good for her, but it would be even better if money from the state was made available to cover her tuition and fees. Years ago I volunteered for a political candidate whose key platform plank was “money follows the child” and I think it makes just as much sense today.

So that’s yet another wrapup and cleaning out of the e-mail box. We’ll see if I go four Saturdays in a row next week.