The state budget shell game

March 20, 2015 · Posted in Cathy Keim, Delmarva items, Maryland Politics, Politics, State of Conservatism · Comments Off on The state budget shell game 

By Cathy Keim

Governor Hogan was elected because voters had had enough of the O’Malley spending spree. Before Hogan was sworn in, the budget shortfall of $1.2 billion over the next eighteen months was already public knowledge. Everybody knew that cuts were coming; only the particulars were uncertain.

Because Maryland has a strong executive branch, the General Assembly can only cut the budget or move money around. It cannot increase spending. The House is squandering many hours debating how to find the money to undo cuts that Hogan made, particularly to schools and the state employees’ COLAs.

Last July, Martin O’Malley gave the state employees a cost of living increase of 2% despite knowing that the budget was not in good shape. I would like to point out that employees in the private sector are not seeing cost of living increases. Why the state employees deserve a taxpayer-funded pay increase when the taxpayers are not getting their salaries increased is hard to justify. Governor Hogan rescinded that increase in his budget because the state did not have the funds to support it.

He also declined to fund the schools to the level they desired. Yet his budget gave a 1.3% increase to education over last year’s budget, so it is hard to make the case that he cut the budget drastically. One might have expected a 0% increase when we are facing a $1.2 billion deficit in the upcoming months. That sort of deficit on a smaller scale is what causes taxpayers to choose ground beef over steak. But then we have to actually balance our checkbooks rather than use creative accounting to get the job done.

Let’s take a moment for some background information. Despite our budget shortfall, Moody’s just gave Maryland an AAA rating once again.

Why is this AAA Bond rating so important? “Retention of the AAA ratings affirms the strength and stability of Maryland bonds during difficult and volatile times,” said state Treasurer Nancy Kopp. “This achievement allows us to continue to invest in our communities’ schools, libraries, and hospitals while saving taxpayers millions of dollars thanks to the lower interest rates that follow from these ratings.” (Emphasis mine.)

Maryland is one of only 10 states that has the AAA bond rating from all three firms that assign ratings, Moody’s Investors, Standard and Poor’s, and Fitch Ratings. Moody’s included the following warning when assigning the AAA rating:

WHAT COULD MAKE THE RATING GO DOWN

  • Economic and financial deterioration that results in deficits and continued draw downs of reserves without a plan for near-term replenishment
  • Failure to adhere to the state’s tradition of conservative fiscal management, including failure to take actions to reverse its negative fund balance
  • A state economy that does not rebound in tandem with the rest of the country
  • Failure to adhere to plans to address low pension funded ratios (emphasis mine)
  • Downgrade of the US government

Why does Maryland have low pension funded ratios? Because all that pension money just waiting there for the retired employees is too tempting for the politicians. They have dipped into the fund before. In 2011 as a corrective measure, Martin O’Malley reached an agreement with state employees that if they would increase their contributions to the retirement fund from 2% to 7%, then the state would put in $300 million annually to fund the pensions at an 80% level by 2023. That would still leave the pension fund $20 billion short, but that would be an improvement. The state employees have been putting in their extra 5%, but the state has not been putting in the entire $300 million. They find other ways to spend that money.

Now we are finished with the history and back to the present. The House debated for hours yesterday whether to fund the pension plan with the full $300 million or to take a portion of the money to continue the 2% increase in state employee’s wages and increase school funding. As I write, it is uncertain how the issue will be determined and whatever the House decides will still have to be reconciled with what the Senate produces.

Politicians seem to prefer to pay their supporters now and to let the future take care of itself since they will probably not still be in office when that bill comes due. It is a pleasing shell game. The politicians appropriate raises and perks for their constituents who then pay union dues, and then the unions donate money to the politicians –  lather, rinse, repeat.

According to the Washington Post, those public servants/union members might want to take note that:

In an effort to block relatively modest budget cuts proposed by Mr. Hogan, mainly to schools and public employees’ wages, Democratic lawmakers in Annapolis are pushing a plan to revamp the formula for scheduled contributions. According to Comptroller Peter Franchot, one of the few prominent Democrats who opposes the scheme, it would shift $2 billion into the general budget over the next decade, then cost the state $4.5 billion in the following dozen years — meaning Maryland would face a net $2.5 billion in additional costs over time in order to keep its pension promises.

Additionally, even if the state did put all the funds into the pension plan that they promised, the pension fund would still be underfunded by $20 billion in 2023. Since over 382,000 current and former employees are covered in this plan, it would seem to be a rather important item for the state to fully fund the pension program.

So our esteemed politicians in Annapolis are willing to risk our credit rating which could lead to increased interest payments when borrowing funds, underfund the pension program that thousands depend on, and incur $2.5 billion in additional costs to finally keep its pension promises, just so that they can override Governor Hogan’s budget.

While that may be a winning hand for the politicians, their constituents that get the 2% cost of living increase, and the unions, it is not a winner for the taxpayers.

This will leave a mark

July 29, 2014 · Posted in Business and industry, Campaign 2014, Maryland Politics, National politics, Politics, Radical Green · Comments Off on This will leave a mark 

Although Jenna Johnson’s Washington Post piece described Governor Martin O’Malley as “brusque…terse and often lack(ing) patience” during a Board of Public Works meeting, that meeting still netted Dominion Resources another small step toward investing $3.8 billion into upgrading their Cove Point facility by allowing them a tidal wetlands license. O’Malley joined Comptroller Peter Franchot and Treasurer Nancy Kopp in approving the permit, leaving only federal authorities in the way. The permit was for a temporary pier to offload construction supplies for the project, which environmentalists fear will lead to further extraction of natural gas in the region for export.

To me, it wasn’t a vote O’Malley wanted to take, and he really didn’t have to – his vote against would have only made it a 2-1 decision. But to do otherwise would have left another black mark on his administration’s legacy of making Maryland one of the states most unfriendly to business in the nation, even though the permit would have gone through.

And it’s not like environmentalists aren’t winning the war despite losing that battle – the prospect of fracking in Western Maryland is growing dimmer by the day given some market saturation and the outlandish regulations proposed for drilling – never mind the possible benefits that would bring. But O’Malley had to disappoint the few hundred who are passionately opposing the remodeling of the LNG terminal in Calvert County.

Cove PointAt this point, though, it’s all about promoting the legacy and let’s face it: are the environmentalists going to vote for Larry Hogan? Well, there is that slight possibility but when the Washington AFL-CIO and other trade unions support Cove Point, O’Malley can’t afford to alienate that group. That’s hundreds or even thousands of motivated voters he has to keep in the Anthony Brown camp. So Martin O’Malley will hold his nose and vote for Cove Point, all the while hoping that his buddies at the EPA or somewhere else in the federal government will bail him out by turning thumbs-down on the project at a late stage. After all, if they can stall the Keystone XL pipeline for this long, pushing back a project just a few miles outside Washington, D.C. is almost a no-brainer to them.

So when Martin O’Malley acts like a petulant child in a meeting because he knows he has to take an unpopular vote, we shouldn’t feel any sympathy for him. He’s left a whole lot on the table insofar as benefiting from our American energy boom goes and he knows it.

 

More pay to play, the Martin O’Malley way

Damn, I can’t wait for this report to come out. Almost makes me wish Larry Hogan would drop this governor’s business and focus on getting more of this information out because too many will dismiss it as partisan opposition research:

Change Maryland has released new information that seems to reveal the appearance of a “pay-to-play” system within the O’Malley-Brown Administration where contractors received significant benefits from the state either before or after their donations to the Democratic Governors Association during Governor O’Malley’s tenure as its chairman.

“This additional data further suggests a disturbing pattern of behavior that, at the very least, is unethical and inappropriate,” said Larry Hogan, Chairman of Change Maryland. “I think the public has a right to know the truth about these practices. Did the governor and/or others in his administration solicit large contributions from contractors, then reciprocate by rewarding those donors with huge state contracts, contract extensions, or other special favors or decisions in return?” he added.

Obviously this has serious implications and gives the appearance of the potential for decisions being influenced by millions of dollars in “donations.” Recognizing the inappropriate and unethical nature of these relationships, state law currently prohibits state contractors from making contributions to an elected official’s campaign account. This evidence indicates the possibility of a deliberate, coordinated effort by this administration to circumvent the intent of the law by soliciting huge, unlimited contributions to a federal, rather than state, account.

The report released today by Change Maryland shows that healthcare services company Express Scripts received a $2.3 billion contract despite serious concerns about the company’s legal issues in Maryland and 28 other states. In 2008, the company paid over $9.3 billion in settlement costs to these states.

From March 2011 to February 2012, the Maryland Board of Public Works was deciding whether to approve the lucrative contract to Express Scripts to provide prescription drug services to state employees. In March 2011, two of the three members voted to postpone a decision out of concerns about the company’s legal issues and several flaws in the procurement process. Governor O’Malley was the lone vote to move forward with the contract.

During this same time, Medco – a company looking to merge with Express Scripts – donated a combined $225,000 to the DGA. In fact, their first contribution came just six days after Governor O’Malley cast the lone vote to move forward with the drug contract.

In late January 2012, the Board of Public Works again voted to delay the contract award, drawing significant criticism from Governor O’Malley at the time who complained about the endless delays. One month later, the BPW reversed course, awarding the contract to Express Scripts in a two to one vote. On March 27, 2012, Medco made their second and final donation to the DGA: $125,000. Medco and Express Scripts received final Federal Trade Commission (FTC) approval for their merger on April 2, 2012.

“Maryland’s working families deserve better from their elected leaders,” Hogan said. “This is what happens when you have an arrogant monopoly that feels they can get away with anything. What Maryland desperately needs is a healthy and competitive two party system, open and honest debate, and some real checks and balances to keep some of these outrageous abuses from taking place.”

In addition to this most recent research, Change Maryland released other questionable contributions from state contractors to the DGA.

Update: I was informed by a representative of Express Scripts that the correct settlement figure is $9.8 million (not billion.) This is incorrect in the original Change Maryland release, so I left the release as is and opted to clarify here.

Hogan’s group seems to be taking the Chinese water torture approach, leaking information on this report a drop at a time to both make the opposition wonder what else he’s got and keep up interest in the runup to the release.

This series seems to leave me torn as well. I’m an advocate for unfettered political contributions, even at the risk of these apparent pay-to-play contributions. But I also want full and relatively instant disclosure, and even though these are federal releases with a more aggressive reporting schedule than state accounts – at least in non-election years – there’s still a significant lag time involved.

The allegations also raise another embarrassing question: where was the state’s major media in reporting this? Didn’t anyone wonder why the vote changed? Certainly Comptroller Peter Franchot had his reasons for maintaining his vote against the issue; the vote which changed was treasurer Nancy Kopp – interesting, because hers is not an elected post. (The transcript of that meeting is painful to read because the state really seemed to drop the ball on a $2.3 billion contract, dropping a Maryland-based provider for the aforementioned Express Scripts.)

What I’m afraid of is that this Change Maryland report will be both the tip of the iceberg and dismissed as “old news” because Martin O’Malley isn’t running for anything in Maryland and Anthony Brown will escape culpability because Larry Hogan is now a political opponent instead of an honest broker.

We need to clean out the swamp, it’s true, but in order to clean it we have to secure the tools to do so first. I think it would also be a good idea for Change Maryland to reveal where it gets its funding, just to show leadership. That’s my two cents.

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  • 2018 Election

    Election Day is November 6 for all of us. With the Maryland primary by us and a shorter widget, I’ll add the Delaware statewide federal offices (Congress and U.S. Senate) to the mix once their July 10 filing deadline is passed. Their primary is September 6.

    Maryland

    Governor

    Larry Hogan (R – incumbent) – Facebook Twitter

    Shawn Quinn (Libertarian) – Facebook

    Ben Jealous (D) – Facebook Twitter

    Ian Schlakman (Green) Facebook Twitter

     

    U.S. Senate

    Tony Campbell (R) – Facebook Twitter

    Ben Cardin (D – incumbent) – Facebook Twitter

    Arvin Vohra (Libertarian) – Facebook Twitter

    There are three independent candidates currently listed as seeking nomination via petition: Steve Gladstone, Michael Puskar, and Neal Simon. All have to have the requisite number of signatures in to the state BoE by August 6.

     

    U.S. Congress -1st District

    Andy Harris (R – incumbent) – Facebook Twitter

    Jenica Martin (Libertarian) – Facebook Twitter

    Jesse Colvin (D) – Facebook Twitter

     

    State Senate – District 37

    Addie Eckardt (R – incumbent) – Facebook

    Holly Wright (D) – Facebook

     

    Delegate – District 37A

    Frank Cooke (R) – Facebook

    Sheree Sample-Hughes (D – incumbent) – Twitter

     

    Delegate – District 37B (elect 2)

    Chris Adams (R – incumbent) – Facebook Twitter

    Johnny Mautz (R – incumbent) – Facebook Twitter

    Dan O’Hare (D) – Facebook

     

    State Senate – District 38

    Mary Beth Carozza (R) – Facebook Twitter

    Jim Mathias (D – incumbent) Facebook Twitter

     

    Delegate – District 38A

    Charles Otto (R – incumbent)

    Kirkland Hall, Sr. (D) – Facebook Twitter

     

    Delegate – District 38B

    Carl Anderton, Jr. (R – incumbent) Facebook Twitter

     

    Delegate – District 38C

    Wayne Hartman (R) – Facebook

     

    Delaware

     

    U.S. Senate

     

    Republican:

    Rob ArlettFacebook Twitter

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    Libertarian (no primary, advances to General):

    Nadine Frost – Facebook

     

    Democrat:

    Tom Carper (incumbent) – Facebook Twitter

    Kerri Evelyn HarrisFacebook Twitter

     

    Green (no primary, advances to General):

    Demitri Theodoropoulos

     

     

    Congress (at-large):

     

    Republican:

    Lee MurphyFacebook Twitter

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    Democrat (no primary, advances to General):

    Lisa Blunt Rochester (D – incumbent) – Facebook Twitter

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