Hogan’s Placeholder Budget

By Barry Rascovar

Jan. 26, 2015 — Gov. Larry Hogan Jr. must be doing something right in his first few days in office because he’s got nearly everyone upset about his $40 billion budget.

Gov. Harry Hogan Jr.

Gov. Harry Hogan Jr.

Republicans and Democrats, liberals and conservatives, lobbying groups of all shapes and sizes are griping about parts of the new governor’s spending plan.

That’s a good thing: Hogan needed to dispassionately cut $1.25 billion to present a balanced budget, which meant making everyone uncomfortable.

In reality, this is a placeholder budget for Hogan. The more substantive and important task of analyzing Maryland spending and eliminating or paring down non-essential expenditures will be reflected in Hogan’s  budget a year from now.

‘Just a Start’

The new governor laid this out clearly on Friday:

“The presentation of this budget is just a start. We will have much more to do in the days ahead to redirect our state’s fiscal course. Programs must be examined. New debt must be managed prudently. Agencies must be consolidated. Mandates must become affordable. In short, the government must become efficient and practice fiscal integrity.”

Think about the sweeping nature of what Hogan is saying.

  • A top-down deconstruction and reconstruction of every nook and cranny of the state budget.
  • A major downsizing of Maryland’s overly ambitious — and ruinously expensive — bond and construction program.
  • Elimination of some agencies or departments as separate entities.
  • A major debate on changing existing spending mandates so they are affordable.

Plenty of dust-ups and angry disagreements are inevitable. It will start in the current General Assembly session with Hogan’s “mandate relief legislation.”

There are dozens of requests in this budget for legislative changes to reduce mandatory state spending. That will test the limits of Democratic cooperation with the new Republican governor. Budget balancing Hogan’s immediate challenge was to whip up a patch-work budget that repaired the fiscal damage outgoing Gov. Martin O’Malley left behind — a budgetary river of red ink.

Thanks to the wizardry of gubernatorial adviser Bobby Neall — an acknowledged master of the state’s budgeting process — Hogan was able to balance to state’s books without causing extreme harm to any needy group.

Instead, Neall and Hogan found ways to nip and tuck throughout state government and rein in aid to localities. Neall and Hogan ratcheted down state spending from 5 percent growth to 1.5 percent growth — a full two percentage points below slowing revenue forecasts.

Keeping growth well under the tax money flowing in will be a hallmark of the Hogan years.

Former Sen. Bobby Neall

Former State Sen. Bobby Neall

To balance the books, state employees will lose their 2 percent pay increase that started in January but which now will end in July. The workers’ unions aren’t happy.

Neither are environmentalists with Hogan’s bid to take $50 million from Program Open Space and not pay it back later. The Big Three jurisdictions — Baltimore City, Montgomery County and Prince George’s County — got hit hard with cuts to education aid. Yet so did smaller jurisdictions.

The counties also were upset with Hogan’s failure to increase local highway aid, which ended up getting cut. Hogan was an equal-opportunity, bipartisan budget-cutter.

Tough Road Ahead

The governor’s spending blueprint is, as he indicated, a starting point. Tough negotiations lie ahead with legislative budget leaders on ways to re-arrange some of the pieces to this fiscal puzzle.

With luck, there will be an upward revenue revision in March to ease some of the pain that Hogan imposed to get Maryland’s budget back in structural balance.

As Hogan noted, Maryland has been following “an unsustainable fiscal path” for a long time.

Even under Republican Gov. Bob Ehrlich, no lasting attempt was made to keep the general fund budget structurally balanced. In recent years under O’Malley, no attempt was made to reform out-of-control borrowing that is now leading to out-of-sight debt costs.

Fixing messy budget situations is never pleasant or easy.

It took an outsider with no elective government experience to bite the bullet.

Hogan has his work cut out to find middle-ground agreement on his budget fixes — but he is off to a solid start.

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