Category Archives: Maryland Budget

Lockbox Lunacy

By Barry Rascovar

Feb. 21, 2018 — Here’s an example why the public doesn’t trust politicians: Right now, Gov. Larry Hogan and Democratic legislators in Annapolis are rushing to pull the wool over voters’ eyes in a scam that would leave taxpayers with billions of dollars worth of IOUs.

Cynics should beware of Hogan’s manipulative plan to divert all slot machine taxes into new K-12 public education programs. They also should take great offense at the Democrats’ parallel plan to do the same thing.

It’s an election-year ruse that would hurt taxpayers or other state programs in the years ahead.

Lockbox Lunacy

MD Gov. Larry Hogan and U.S. Education Secretary Betsy DeVos meet with children at a Bethesda elementary school.

And it is a prelude to another scam lurking in the background that could add three times as much additional education spending without a way to pay for it.

Everyone favors more money for K-12 education, right?

That’s why Hogan and Democratic legislators, in an election year, are now cheerleaders for the “slots for tots” movement in which every tax dollar the state receives from slots revenue would go into a so-called “lockbox” for new education initiatives.

Today, slots dollars support Maryland’s basic education aid formula. And there’s the rub. Hogan and legislative Democrats want to take that pot of money away and put it in another account just for new education programs.

Sounds great, except for one missing ingredient: How is the state going to replace the roughly $500 million in basic education support from slots that they want to strip out of the existing K-12 account?

Good question, but no politician in Annapolis is willing to provide a good answer.

Future Black Hole in Budget

So the next governor and the next legislature could be left with a huge revenue deficit — $500 million — in Maryland’s basic education account.

And if the legislature next year supports the expansive recommendations for new education spending coming from the Kirwan Commission, that revenue black hole could grow to $2 billion.

Hogan, of course, would love to be in a position where his slots lockbox plan “forces” him to slash existing programs by billions of dollars. He’s been whining about being unable to do just that since entering the governor’s office.

But he’s dead set against any new taxes, even for education.

Meanwhile, Democratic lawmakers badly want to pump another $2 billion into K-12  programs, especially in underperforming, poor school districts, as proposed by the Kirwan Commission.

That slot machine money sure looks enticing!

It’s a mirage.

Where Slots Dollars Go

Slots money already pays a big chunk of Maryland’s basic education aid package. How can you take that education aid away without finding replacement dollars?

You can’t. Yet each side is trying to persuade voters the impossible is possible.

Hogan and the Democrats are falling into the same trap as did an earlier governor and legislature. When the Thornton Commission education package was approved in 2002, lawmakers and Gov. Parris Glendening failed to create a funding source. Leaders at the time bragged that robust state revenue growth would support this extra $1.1 billion in new K-12 state spending.

Wrong!

Paying for the Thornton reforms out of current revenue was only possible by stripping money from other programs, like land-use preservation and the transportation trust fund.

When the Great Recession hit in 2008, Maryland’s fiscal situation plunged into crisis, thanks in large measure to the extra revenue burden placed on state government by the Thornton reforms.

That’s when a reluctant Gov. Martin O’Malley became a convert to casinos in Maryland, dedicating the state’s slots tax to basic education, i.e., the Thornton formula.

Without that step by O’Malley and Democratic legislators, the state would have been forced to boost taxes even more to pay the growing school-aid bill.

Revising History

Now, all of a sudden Hogan and legislators are condemning this common-sense move by O’Malley. They see something wrong with using slots revenue to prop up Maryland’s basic aid formula for public schools. They argue this money was supposed to go into new, expanded school programs.

Talk about re-writing history!

From the start, it was crystal clear O’Malley needed the slots revenue to balance his budget and pay for the growing expenses of the Thornton education-aid formula.

It was also clear from the start slots tax money would go into the basic education-aid pot. Those slots dollars kept Maryland’s foundational education program afloat during the worst economic times since the Great Depression.

One way or another, slots dollars have been supporting education aid flowing to county and city schools in Maryland. It helped pay for the increasingly expensive Thornton aid program.

But it did not add new school dollars on top of the existing education formula.

Democrats and Hogan now call that a sinister trick on taxpayers.

They both say they are trying to right that wrong in the current General Assembly session.

But where’s the revenue to pull that off?

Unanswered Questions

How do Hogan and lawmakers strip $500 million from the basic education-aid formula, give that money to the Kirwan Commission’s new, improved school programs and yet not replace the half-billion-dollar hole they’ve left behind?

Here’s another question: When the full recommendations of the Kirwan Commission are implemented, at an additional cost of roughly $1.5 billion per year, how are Hogan and legislative Democrats going to pay for all those enhancements?

So far, the Republican governor and Democratic legislative leaders have said not a word about paying for that new $2 billion a year in additional school spending.

Is Hogan really serious about slashing existing state programs by giant amounts after the November election so he can avoid raising taxes to balance the state’s education books?

Are Democratic legislators going to campaign this year as Education Champions while setting up taxpayers in future years for gigantic tax increases?

It’s time for some truth-telling from each side.

Don’t count on it.

The slots lockbox propaganda machine is in full swing. Fessing up to voters in an election year as to what’s really going on is the last thing on their minds.

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Slots for Tots–at a Steep Price

By Barry Rascovar
Feb. 6, 2018 — It sounds so appealing: Add $500 million to Maryland’s K-12 education funding stream by requiring every cent of the state’s take from casino slot machines be devoted to improving local schools.

But here’s the reality check. Such a feel-good move creates a $500 million hole in the state budget.

Where is that money going to come from? What social program will be cut to make room for this extra education aid?Slots for Tots--at a Steep PriceThat’s the rub in the “slots for tots” bill being pushed by Baltimore City lawmakers and House and Senate leaders. Instead of solving a problem, it creates a gigantic future headache.

And if a recession comes Maryland’s way — a likely event in the near future — such a move would create a catastrophic situation for social-net programs.

State colleges and universities are especially vulnerable during recessions and the “slots for tots” bill would further imperil their funding from the governor.

Some 83 percent of Maryland’s general fund budget already is locked in for specific programs. That leaves just 17 percent of the budget where the governor has flexibility. Take away the $500 million slots tax money and the governor’s options shrink even more.

Part of that flexibility comes from the governor’s ability to cut college aid. That aid isn’t locked in by law every year. Besides, the governor knows any budget trims he makes for colleges can be partly replaced by raising tuition and fees.

The Rationale

So if “slots for tots” becomes law this legislative session, the governor’s budget knife will be turned toward higher education next Janaury.

The rationale for “slots for tots” is the allegation that Maryland leaders have reneged on their promise to dedicate all state taxes from slot machine legalization to K-12 education.

That’s what the law says.

But Gov. Martin O’Malley needed every dollar he could find during the Great Recession to stave off massive cuts to social programs. Thus, the tax revenue from slots became fungible. It went into the education pot just as O’Malley withdrew an equal amount from the existing education revenue stream.

It became a zero-sum game. Education aid under the mandated Thornton formula continued to increase on schedule, but there was no extra boost in education dollars flowing to the counties and Baltimore City from casino slot machines.

Slots for Tots

Slot machines at Rocky Gap Casino Resort

Yet when Democratic leaders in the House and Senate say, “It’s time to keep faith with the people,” they’re being deceptive.

First, they were co-conspirators in denying local public schools that extra slots money. They did so for practical reasons — the slots money was needed elsewhere to plug budget holes in local health care and social welfare programs as state tax revenue shrank dramatically during the dark days of the Great Recession.

Second, they know full well “slots for tots” breaks the budget bank, sending the state into “deep doo-doo” in its next budget.

Third, they also know the Kirwan Commission later this year will be recommending another massive hike in education funding without any idea where that billion dollars or more will come from. “Slots for tots” compounds that budgeting dilemma.

Fourth, they also are aware that the Department of Legislative Services recently estimated Maryland’s long-term structural deficit at $3.8 billion over the next four years. “Slots for tots” would make that a $4.3 billion deficit hole and the Kirwan Commission proposal could push the state’s future red ink total over the $5 billion mark.

Suddenly, that feel-good education aid boost doesn’t look so hot.

In an election year, it’s no surprise that Democratic leaders would jump on board the teachers’ union “slots for tots” bandwagon. Slots for Tots -- at a Price

It’s an important and powerful union that can help elect more Democrats to the Annapolis State House.

But somewhere along the line, common sense ought to prevail.

Not only does “slots for tots” look like a political quid pro quo by the Democrats, it also seriously endangers Maryland’s ability to avoid a hefty tax increase after the November elections.

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Taxing Time for Maryland

By Barry Rascovar

Dec. 3, 2017 — Now that a massive trillion-dollar tax cut is a virtual certainty in Washington,  Maryland officials must quickly figure out if the appropriate reaction is panic or relief.

The impact on budget-makers in Annapolis and in the counties is enormous. Since Maryland’s tax laws are coupled to rules for the federal income-tax collections, what happens on Capital Hill tax-wise reverberates almost immediately in Maryland.

But will it mean more state and local tax revenue or less? At the moment, there is no easy answer.

State legislators have little time to react, since they go into session for just 90 days starting Jan. 10. At this point, they have no hard data on a) what will be in the final bill that hurts or helps Maryland and its subdivisions, and b) what changes must be made immediately in state tax laws.

We do know many Marylanders could have their lives turned upside down.

People who spend large sums supporting themselves or family members in assisted living or nursing home facilities, or those with giant family medical expenses, no longer get to claim these payments as a tax offset under the House-passed version.

That could lead to hefty rises in tax bills for them, putting themselves and their loved ones in financial difficulty.

No more write-offs for state and local taxes. This adds to every Marylander’s tax burden. How will this affect the state’s tax receipts?Taxing Time for MarylandEvery analysis of the dueling House and Senate tax bills confirms that well-to-do Marylanders will reap huge tax savings, middle-class folks could receive either a small reduction in federal taxes or a larger tax bill from the IRS, and the lower class will see its tax bracket rise.

The rich get vastly richer, the poor get little if any help and the middle class get a relatively middling savings.

The “trickle-down” theory of economics is alive and flourishing in the Grand Old Party.

But how will this play out in government budgets in the Free State?

There will be far more uncertainty among Marylanders who joined the Obamacare program. Health-care insurance bills are likely to rise 10 percent or more each year under the GOP’s tax-cut bill. Potentially 13 million Americans could lose health care coverage.

That could reverberate in Maryland with hospitals bearing the brunt of thousands of newly uninsured citizens flooding emergency rooms with little or no money to pay for medical treatment.

More to Come

Meanwhile, Republicans are making no secret of their real targets: safety-net programs, especially Medicare, Medicaid and Social Security. Republican Sen. Marco Rubio admitted as much last Wednesday, stating the “next step” is going after these big-ticket federal programs.

Why? Because the GOP’s tax-cut bill saddles the nation with gigantic new deficits — $1.5 trillion over 10 years. Another federal law requires Congress to make budget cuts as an offset.

Additionally, economists say the tax-cut bill will spawn rapid increases in inflation, which has been virtually nil in recent years. Rising inflation dampens economic growth, which was the raison d’etre for the GOP tax cuts.

How will all this impact Maryland?

Will companies with major Maryland employment centers reward stockholders when the corporate tax rate is chopped nearly in half or will they reward workers? Will firms hire additional employees or use the tax savings to automate production facilities and cut back on employment?

These are the kinds of questions fiscal analysts in Annapolis and county seats had better get a handle on sooner rather than later.

Placing a Big Bet

The Republican tax cut has not been wildly popular with Americans, according to polls. They seem to grasp that the vast majority of financial benefits flow to those who already live comfortably or to corporations.

Yet the GOP is placing a gigantic bet on the party’s ability to persuade voters that the tax-cut bill is a win-win for everyone. The fate of Republican dominance in Congress could depend on voters’ sentiment toward the tax-cut measure likely to gain final approval by Christmas.

Meanwhile, Gov, Larry Hogan, county executives and legislators have to cope with the impact of these fiscal changes on state and local budgets now being put together.

Hogan already is  planning to sell hundreds of millions of dollars of private-activity bonds before year’s end because the House bill eliminates these kinds of bonds — a move by Washington that could undercut all kinds of private-public partnerships like the Purple Line, affordable housing and student loans.

What other government funding programs are at risk?

When the Board of Revenue Estimates meets later this month, it could still be largely in the dark as to the ramifications of those taxing negotiations in Washington.

By the time the board meets again in March, far more will be known about the tax bill’s impact on states and localities. The board’s revenue revisions that month could prove pivotal in determining what immediate steps are necessary to adjust state tax policy.

Will the General Assembly have time in its 90-day session to make those adjustments? Will the governor fight or accept those changes?

Even in an election year, lawmakers might find themselves facing an extended session or a special session to grapple with the impact of the GOP tax bill on Maryland’s finances.

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Downsizing That Hurts

By Barry Rascovar

Nov. 27, 2017 — We live in a Trumpian world of propagandizing and denial of reality, with the accusers distorting the truth and calling it “fake news.”

Unfortunately, some of this manipulation is taking place in the Maryland State House. Far too often, spokesmen for Gov. Larry Hogan engage in blame-pointing rather than fess up to the cold, hard truth.

Case in point: The adamant denial that Maryland state government is suffering from huge personnel vacancies in some of its key agencies.

“Nonsense,” said the governor’s spokesman. There’s no shortage of state workers, he asserted, as he questioned the validity of the Department of Legislative Services report.

Denying the Obvious

Yet there is a glaring problem — according to data from Hogan’s own government agencies, a judge and state prison officials.

Instead of admitting the obvious and explaining what’s being done to find creative solutions,  Hogan’s office sought to denigrate a non-partisan research office with a sterling tradition of “calling it like it is.”

The “fake news” is coming from Hogan’s suite, not Legislative Services.

The argument is over the size of state government in Maryland.

Hogan, a believer in conservative budgeting, has consistently clamped a lid on state spending, including hiring. Part of this effort is grounded in the old Republican saw that government bureaucracies are always “bloated,” overflowing with people filling make-work jobs.

That has led to a drive to hold down new hiring, even in cases where there is a dire need for more personnel.

Contempt of Court

Take the Maryland Department of Health, where top brass nearly went to jail after they repeatedly they failed to hire enough psychiatric nurses and physicians to handle all of the patients being sent to state hospitals for court-ordered mental-health treatment.

This has been a longstanding problem that started well before Hogan. His aides could have pointed that out.

Instead, the governor’s minions circled the wagons and refused to cooperate with the judge — until the state health secretary was held in contempt of court.

Or take the Department of Public Safety and Correctional Services, which continues having a devil of a time finding qualified prison guards with clean records. Over 1,700 vacant positions exist in the department — a whopping vacancy rate of 9 percent.

Yes, there are extenuating circumstances but there’s a critical shortage of guards in state prisons. There was no effort by the governor’s office to explain how the administration is working to proactively meet this serious challenge.

Instead, the governor’s spokesman put the onus on the prior Democratic administration.

That line of attack ignores the fact that Hogan has been in office nearly three years — more than enough time to craft an effective plan to remedy this dangerous worker shortage.

Too Many Unfilled Jobs

DLS reported to a legislative committee that in a number of key agencies — corrections, health, human services, juvenile services and the State Police — the vacancy rate is more than twice the norm — over 7 percent.

That should be viewed as unacceptable by leaders of the executive branch. Instead, Hogan seems fixated on budgetary hold-downs — and denying there is a problem.

The English would describe his view as “penny wise and pound foolish.”

It makes sense to trim the size of government if it is done carefully. Problems begin when the needs of individual agencies are ignored for the sake of downsizing and budget cuts..

The Hogan administration may succeed in papering over most staffing shortages until after next year’s elections. But eventually lack of skilled job-holders could diminish state government’s ability to perform basic obligations. There’s a limit to downsizing in the public sector, a point Hogan’s team may have started to reach.

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Hogan, King of the Road(s)

By Barry Rascovar

Sept. 25, 2017–Gov. Larry Hogan never met a highway project he didn’t like. He’s a 1950s type of politician – solve all the state’s transportation gridlock and congestion by paving the countryside with lanes of new concrete.

He’s got a $9 billion plan that is a lollapalooza: Let construction giants build and pay for toll lanes on the Capital Beltway and the busy I-270 corridor from the beltway to Frederick – 70 miles of exclusive Lexus lanes – and let those companies reap the toll rewards so they can recoup a staggering $7.6 billion investment (the actual cost is likely to be substantially higher).

Then Hogan says he’ll take the state’s part of the profits and turn the Baltimore-Washington Parkway, now owned by the U.S. Park Service, into curb-to-curb concrete with nary a tree or woodlands in between.

Hogan: King of the Road(s)

He could re-name it the B-W Speedway.

It’s an all-highway solution straight out of the mid-20th century.

While conversation over this stunning proposal has barely started – Hogan consulted very few people it seems – there are a slew of points that deserve consideration before his back-to-the-future initiative gets too far off the ground:

The environmental damage, especially along the B-W Parkway, could be substantial.

How can the Park Service, even under a run-amuck Trump administration, turn the parkway’s 30 miles of mature woodlands over to a state eager to destroy those trees and vast stretches of scenic greenery? Is such a move even legally permissible?

Eight lanes of concrete – four new toll lanes (plus wide shoulders) and four toll-free lanes – would convert the parkway into a high-speed, tension-filled raceway.

For homeowners and neighborhoods abutting or close to the three roadways, Hogan’s plan is a calamity.

When a two-lane expansion of the B-W Parkway was proposed in 2011, Greenbelt leaders loudly objected, fearing the intrusion of the busy highway directly into the town. Imagine what a four-lane toll expansion will do to Greenbelt and other communities along the route.

The situation is far worse along high-density sections of I-270 and the Capital Beltway. Gigantic lawsuits and protests await Hogan when he tries to seize all that private property from businesses and homeowners – and then turn the land over to a consortium that would profit from those government land-grabs.

At the end of this project, Hogan may have done little to relieve highway congestion.

Every expansion of I-495 and I-695 (the Baltimore Beltway) has meant more cars on those roads and a quick return to the same level of congestion and added pollution. Los Angles has experienced the same thing with the famed I-405, where a $1.4 billion expansion didn’t help ease congestion at all.

The notion that Maryland taxpayers won’t be on the hook for a lot of the expense of these mega-projects isn’t realistic.

Hogan’s no-cost-to-taxpayers assertion may sound good to voters, but there’s virtually no way he can make it happen. These are ultra-expensive projects. For starters, seizing private properties through eminent domain can’t be privatized and will be extraordinarily expensive in the high-priced Washington suburbs.

Hogan also says the state’s share of profits from the I-495 and I-270 toll lanes will pay for the four toll lanes on the B-W Parkway. That doesn’t compute given the woeful record of the state’s last two toll projects – the Intercounty Connector and the I-95 Express Toll Lanes from Baltimore to White Marsh. Neither has come near the revenue numbers anticipated prior to construction.

Maryland’s toll authority already is in a heap of long-term financial trouble that would be compounded by these mega-projects.

The Department of Legislative Services says that between now and 2022, Maryland’s tolling facilities will take in $267 million less than projected but operating expenses will be $588 million higher than anticipated. This will force $1.7 billion worth of cuts to future projects and reduce the toll authority’s ability to float bonds by $3.7 billion.

Adding Hogan’s toll-road projects, even with a public-private contract, will scare the heck out of bond-rating agencies, which know full-well the state isn’t getting a free ride on construction projects of this size.

Transportation trends are not on Hogan’s side.

In good times, more cars and trucks use highways and toll roads. But in bad times, the reverse is true. Experts almost universally note the nation is ripe for an economic downturn. That means a big drop in gas tax and toll receipts for Maryland’s transportation agencies.

Rising fuel-mileage standards are hurting Maryland’s gas-tax receipts, too. So is the growth of electric vehicles on the road.

Meanwhile, the Maryland Transportation Authority’s debt service is soaring – a nearly six-fold increase between 2007 and today with no decline in sight over the next 25 years.

The authority “will need to make long-term changes in order to remain financially stable,” DLS reported early this year. Hogan’s mega-projects ignore that suggestion and add to the state’s highway obligations.

Say goodbye to any future mass transit projects.

Hogan’s plan gives zero attention to a balanced transit solution in Central Maryland, instead putting all the state’s transportation eggs in a highway basket. That’s not the direction Virginia or other Eastern states with similar congestion woes are heading.

Such a vast expansion of I-295, I-495 and I-270 will create massive new gridlock at exit and access points.

How in the world could Russell Street in Baltimore handle an additional two lanes of rush-hour traffic? Ditto as the BW Parkway flows into New York Avenue in D.C. It would be a nightmare. Arterial roads and cut-through streets in adjacent neighborhoods along these three interstate highways would be clogged. The law of unintended consequences could kick in.

Passing environmental tests posed by federal and state laws and regulations could delay construction for many years, especially on the B-W Parkway.

Rest assured, legal challenges to every aspect of Hogan’s plan will be posed by environmental groups, well-to-do neighborhood associations along these routes and local governments.

Indeed, Hogan may be out of office by the time the first ground-breaking ceremony takes place – which may be part of his strategy.

What happened to helping Joe Six-Pack and the “forgotten Americans” who can’t afford E-ZPass transponders or Lexus lanes?

There’s nothing in Hogan’s transportation vision that helps people at the lower end of the economy. No expansion of commuter buses, no shuttles connecting workers to spread-out job sites, no future mass transit such as a desperately needed east-west line through Baltimore.

Hogan’s highway proposal creates a windfall for the well-to-do and transportation businesses.

The plan is a winner for candidate Hogan.

Expect hefty campaign contributions from the construction and highway industries, from trucking concerns and from companies along these routes that figure to benefit from additional high-speed, interstate concrete lanes.

For voters, Hogan’s plan sounds great and makes an ideal campaign pitch. The devil is in the details, though, which Hogan won’t mention to voters.

How Democrats react to Hogan’s mega-plan will be fascinating to watch. Commuters want highway relief. But will they like what comes with the relief Hogan is offering?

Putting specifics before voters won’t be easy because the topic is complex. Voters like simple solutions and Hogan is very good at giving simple answers to exceedingly complicated problems.

How will the two other members of the Board of Public Works vote on Hogan’s plan?

They hold the key. Without BPW approval, Hogan’s super-highway plans are dead.

Comptroller Peter Franchot and Treasurer Nancy Kopp will have to dissect the extensive financial ramifications of Hogan’s proposal, the environmental impact, the legal liability such a huge seizure of private property might entail and the impact this would have on the lives of thousands of residents and businesses along those interstate routes.

About the only thing that seems assured is this: Hogan’s sweepingly ambitious highway-building plan is a long way from getting built.

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Repeal Obamacare? Hogan’s Conundrum

By Barry Rascovar

July 10, 2017 – Though he’s a Republican, Maryland Gov. Larry Hogan must pray each night that his fellow Republicans in Congress fall flat on their faces in their concerted efforts to wipe out Obamacare and replace it with a vastly inferior health care safety net.

Hogan quietly voiced opposition to House and Senate “repeal and replace” bills in a statement he had issued in Annapolis while on an overseas trip.

He’s trying hard to avoid offending Maryland Republicans who support an immediate repeal of the Affordable Care Act. Yet he’s acutely aware of the harm, and human pain, such a move would have on hundreds of thousands of Marylanders.

Maryland is in a unique situation when it comes to the “repeal and replace” movement. Ending Obamacare could place this state’s entire hospital system in jeopardy. Hospitals in the Free State stand to lose a staggering $2.3 billion in Medicare and Medicaid payments if Obamacare abruptly ends.

Obamacare and Hogan

Maryland Gov. Larry Hogan

Some hospitals, especially in rural parts of the state and in poor urban neighborhoods may not survive. One national study indicated up to 50% of all rural hospitals in the United States could close under an Obamacare repeal. In Louisiana, Mississippi and Texas, up to 75% of rural hospitals could be driven out of business.

Nursing homes are under the gun, too, since two-thirds of its patients are on Medicaid, which is the primary budget-cutting target of congressional Republicans.

‘Tremendous Impact’

Passage of either the House or Senate repeal bills “could have a tremendous impact on Maryland,” according to the non-partisan Department of Legislative Services. This would “require the General Assembly [and the governor] to consider significant financial and policy decisions.”

That’s something Hogan cannot afford in 2018 as he runs for re-election. Yet the governor could find himself between the proverbial rock and a hard place next year, thanks to conservative Republicans in control of the House, Senate and White House.

The price to Maryland state government of an Obamacare repeal is in the billions. Maryland government would lose $1.3 billion in federal Medicare and Medicaid funds next year, growing to a loss of $1.5 billion in federal dollars in 2022.

If the law is repealed, Hogan and Democratic legislators in Annapolis would face a monstrous and agonizing choice.

Do they jettison Obamacare’s expansion of Medicaid that now gives health insurance to 421,000 state citizens, many of them children? Do they leave 1 million Marylanders now covered through subsidized private insurance plans or the Medicaid expansion to the tender mercies of insurance companies?

Or are Hogan and lawmakers going to jump in, swallow hard and raise taxes – in an election year – by a huge amount to cover the lost $1.35 billion next year?

That’s why deep down inside, Hogan really but really wants Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan to give up their insistent request to wipe out Obamacare and instead work with Democrats on a compromise plan that preserves the best parts of the ACA and fixes what’s not working.

Seeking a Magic Bullet

The odds of McConnell and Ryan finding a magical “repeal and replace” formula that satisfies the majority of Republicans are not good. It may yet happen but time isn’t on their side.

The more voters learn about specifics of the Republicans’ replacement proposals, the stronger the opposition. Over the July 4 holiday, GOP lawmakers who dared to venture out received heated criticism from constituents.

Part of the problem is that McConnell and Ryan are attempting to peddle a plan that calls for an unprecedented version of “income re-distribution.”

Obamacare re-distributed taxes collected from the rich, insurance companies, durable medical equipment companies and tanning salons. The ACA spent that money to help provide health insurance to the poor and lower-income families.

Now Republicans are calling for a reversal of this process – giving back all that tax money to wealthy Americans and profitable corporations while stripping from the poor and lower-class much of their health care benefits.

It’s “Robin Hood in Reverse,” in this case congressional Republicans want to take from the poor and give to the rich.

Had the GOP plans created an alternative health care safety net that protected the rights of the elderly, poor and near-poor, the furor today might have been averted. But in their haste to wipe out Obamacare, Republicans in Congress failed to develop a legitimate replacement program that would make things better, not worse.

Obamacare in Maryland

In Maryland, there have been good results from Obamacare. The state’s uninsured rate has dropped more than half, to an all-time low of 6.6%. This is a godsend for hospitals, which saved $311 million in just two years due to the shrinkage of uncompensated care cases.

Big problems remain in the current system. Large premium increases are pending before Al Redmer, the state insurance commissioner (and a likely Republican candidate for Baltimore County Executive next year).

If Redmer approves large rate hikes, many of those currently insured may be priced out of the market. The state’s uninsured rate could soar and hospitals could run deficits.

But if Redmer rejects those big rate hikes, private insurers may have no choice but to drop out of the Maryland marketplace, as Cigna recently did.

Regardless of what happens in Washington and what Redmer decides, Maryland’s health-care safety net is in danger of tearing apart – unless Hogan and state legislators are willing to intervene.

That’s a tough call in an election year, especially for a governor who made a no-new-taxes pledge.

But the Republican governor and Democratic leaders in the General Assembly may have no choice.

Fixing the existing system is far easier than wiping out Obamacare and starting from scratch. Either way, though, State House politicians likely will have some heavy lifting to do early next year. ##

Sen. Kasemeyer Responds

This missive arrived the other day from Sen. Ed Kasemeyer of Howard County, chair of the Budget and Taxation Committee — a defense of his entire committee and his own role in the budget process.

Kasemeyer’s low-key approach to legislating — first in the Maryland House of Delegates and now in the Maryland Senate — rarely grabs the headlines. It is a refreshing reminder of how lawmakers can work effectively but quietly, with fewer partisan and parochial conflicts.

He chairs one of the hardest-working committees, given the unenviable task of cutting budget allocations rather than adding to them.

Sen. Kasemeyer Responds

Howard County Sen. Ed Kasemeyer

Here is Kasemeyer’s email:

“I was reading one of your articles in [MarylandReporter.com] dated 4/16/17 regarding the Maryland budget and the out-year predictions.

“I realize that most of the people who follow the legislature are constantly praising Sen. [Rich] Madaleno — and I totally agree that he is incredibly competent and intelligent.

“However, your comment about [Gov. Larry] Hogan, [Del.] Maggie McIntosh, and Sen. Madaleno working together to put the budget together is an insult to my committee and me.

“I met with Del. McIntosh from early in the session to deal with Baltimore City’s issues so that she knew we (the Senate) would be totally supportive. I think if you asked any of my members they would tell you I am firmly in control.

“As a progressive leader I am supportive of my members and try to put them in situations where they will shine (including Rich). Sometimes I wonder if you all know what is really going on.”

Ed Kasemeyer

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Maryland’s Balanced Budget – For Now

By Barry Rascovar

April 17, 2017 – Another Maryland General Assembly session has come and gone with Gov. Larry Hogan proclaiming victory and legislative leaders breathing a positive sigh of relief.

There were no big wins for Hogan but no shocking defeats, either. His ideologically driven, conservative agenda may sell well with die-hard Hogan backers but it was a non-starter with Democratic lawmakers.

His most solid step forward?

A compromise bill giving manufacturers tax breaks, especially if they provide workers with new job skills (that’s the part Democrats insisted on). It’s not a huge benefit for those companies but it is another incentive that could help persuade manufacturers to move to the Free State.

His biggest defeat?

A set of restrictions imposed on the Hogan-selected state school board, which had its hands tied by Democratic lawmakers to prevent state intrusions into local school board autonomy on figuring out how to turn around failing schools.

Constitutional Mandate

Still, the most important issue of every General Assembly session revolves around dollars and cents.

Passing a balanced budget is the only constitutional requirement both the governor and legislature must achieve every year.Maryland's Balanced Budget--For Now

This time, they cobbled together a fiscal blueprint that avoids deep spending cuts while expanding state aid and services in targeted areas.

The outcome is a budget for the fiscal year starting July 1 that grows only 1.2%, to $43.6 billion.

The general fund budget essentially remains level. The state workforce holds at 80,000 (no pay raises or longevity increases).

That is a tribute to Hogan’s ability to hold down spending without taking a Trumpian axe to state government and local aid.

That’s the good news.

Dark Days Ahead?

The bad news: Those ominous storm clouds coming from the nation’s capital – potentially massive federal job losses, large cuts in healthcare, medical research and local aid.

This could give Hogan an Excedrin-sized headache he doesn’t need as he approaches an election year.

There’s an additional problem, too.

The respected Department of Legislative Services (DLS) predicts that over the next five years, Maryland’s revenue will grow 3.5% annually – versus a 5.4% rise in state spending.

That yawning gap was partially closed in the just-passed budget, eliminating 88 percent of the state’s structural budget gap.

The trouble is that this budget magic was achieved by stripping out money from the state’s Rainy Day reserve fund and moving other money around –$202 million worth of “fund transfers.” Another $185 million was saved through budget cuts by the legislature.

Thus, Hogan, Del. Maggie McIntosh and Sen. Rich Madaleno, among others, worked together in the budget process and balanced the state’s books with $91 million to spare.

Tepid Economy

Yet DLS predicts the budget gap will reach $716 million next year, $1 billion in two years and a staggering $1.5 billion by FY 2022.

Why?

“. . .a combination of tepid revenue growth, fueled by a lackluster economy, and growth in mandated spending and entitlements.”

DLS concludes “the Administration will need to take action to address a shortfall in excess of $700 million in Fiscal Year 2019.”

It adds, “The magnitude of the projected shortfalls suggests that discussion will need to focus not only on what services are provided by the State but also the fundamental revenue structure currently in place.”

That’s a polite way of announcing tax INCREASES could be back on the table, whether Hogan likes it or not.

This is especially true if the dire forecasts of historic Trump budget cuts become reality.

Closing a $700 million fiscal gap next year in Annapolis exclusively through spending reductions would be extraordinary – and painful. If Trump multiplies that deficit through massive federal budget cuts and layoffs of Maryland residents, the state could face a financial crisis.

For now, though, the state’s revenue and spending plan for the next fiscal year is in good shape.

But things could change in a hurry between now and year’s end as Trump and the Republican Congress get serious about slashing federal programs, positions and aid to local counties and states.

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Hogan dodges Trump bullet, fracking, ‘road-kill’ & more

By Barry Rascovar

March 27, 2017Maryland Gov. Larry Hogan can thank his lucky stars the bitter and intractable Republican disputes in Washington sabotaged plans to do away with the nation’s current healthcare plan, the Affordable Care Act.

Passage of the Trumpcare alternative – imposing horrific added costs on older Americans, endangering Medicare funding and removing healthcare coverage for 14 million citizens next year – would have had cataclysmic effects in Maryland and placed Hogan on an untenable political hot seat.

Hogan dodges Trump bullet

President Trump

Instead, Hogan gets a slight reprieve, which helps his chances of getting reelected next year.

Then again, if the president and GOP hardliners insist on pressing a second time to wipe out the ACA and succeed, Hogan will be in the bull’s eye when furious Maryland Democrats seek revenge at the polls.

Equally ominous for the first-term Republican governor is Trump’s obsession with making exceedingly deep cuts in the federal budget. Even if Congress ignores the president’s budget submission from last week, the administration has its marching orders – cut personnel wherever possible, cut back severely on spending wherever possible and hold back on doling out money for programs run by the states.

Take, for instance, Trump’s budget that eliminates all federal funds for Chesapeake Bay restoration. Any sizable elimination of funds will infuriate many moderates and independents who voted for Hogan in 2014. Anger toward Trump could be taken out on Hogan on Election Day next year.

Hogan Dodges Trump Bullet

Maryland Gov. Larry Hogan, Jr.

The Maryland governor’s silence about Trump’s assault on federal spending isn’t helping him, either. Of course he’s in an unwinnable bind – criticize Trump and Hogan’s conservative followers will feel betrayed; support the president and Democrats will unload on Hogan.

It’s a tough time to be a Republican governor in a heavily Democratic state. Hogan has his work cut out trying to separate himself from a wildly unpopular president without alienating died-in-the-wool Republican voters.

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From the “sound and fury signifying nothing” department, here are two items of wasted energy by elected leaders in Annapolis who should know better:

Pointless fracking debate

Environmental activists are in a tizzy over their insistence that hydraulic fracturing of Marcellus shale rock formations deep beneath Garrett County and a portion of Allegany County be forever banned in Maryland.

They’ve made such a stink that Hogan has flip-flopped on the issue – abandoning his efforts to help Republican Western Maryland landowners who might some day benefit from extraction of oil and gas using this “fracking” technique that has been in use for over 60 years.

Yet here’s the reality:

·         There is no fracking taking place anywhere in Maryland.

·         There is no likelihood of fracking taking place in Maryland any time in the years to come.

·         Fracking in Maryland is uneconomical today and will be for a long time to come.

·         Regulations proposed by Hogan are so tough that no exploration companies in their right mind will venture into Maryland unless oil prices soar far beyond $100 a barrel – an unlikely scenario thanks to the glut of fracked oil wells in more hospitable, resource-rich regions of the country.

So environmentalists will win this empty victory and Hogan will win over some environmentalists come Election Day – but he might also lose votes from the Western Maryland landowners he betrayed.

Ludicrous “Road Kill Bill” dispute

Both Hogan and lawmakers are in the wrong here.

The governor has completely politicized a law that is so insipid and toothless it’s not worth arguing about.

The law in question has no enforcement provisions and leaves the governor in full control of road-building decisions. All it does is provide a bit of transparency on the relative value of each project being funded.

Hogan’s empty threat of not funding projects because of this law is strictly for next year’s campaign sloganeering. He’s made a mountain out of a teeny molehill just to win political points with rural and suburban voters.

Democratic lawmakers said they were going to amend the law this year to make it even clearer the law is strictly advisory. They also said they would simplify the evaluation process.

Instead, Democrats in the Senate are pushing for a two-year delay in implementing a toothless law while wasting time studying how to make the law even more meaningless.

The whole thing is pointless and a turnoff to voters of all stripes.

Surely the governor and lawmakers can spend the remaining days of this General Assembly session on something that really is constructive and helps Maryland citizens.

Moxie from the mayor

Here’s a shout-out to new Baltimore Mayor Catherin Pugh, who took an unpopular stand because it was the right thing to do.

She vetoed a bill mandating a $15 an hour minimum wage for most workers in the city – a move that would have been an economic calamity for Baltimore.

Hogan dodges Trump bullet

Baltimore Mayor Catherine Pugh at her inauguration in December.

We all want every worker to take home a decent paycheck. But not if it means businesses will fire personnel, reduce hours for their remaining staff and consider moving across the city-county line.

Those weren’t idle threats when this well-meaning but idealistic bill passed the naively liberal City Council.

Such an ordinance would leave the city deep in debt, according to its own financial analysts, with businesses fleeing to Baltimore and Anne Arundel counties to take advantage of a lower minimum wage, far lower property taxes and lower insurance rates.

Baltimore City must be competitive. The state’s minimum wage already is scheduled to rise this July and in succeeding years, too.

Besides, minimum-wage jobs are not intended to be permanent positions but rather a starting point for people eager to work their way up the economic ladder to more responsible and good-paying jobs with long-term career potential.

Pugh’s veto protects Baltimore’s economic well-being, even if liberal critics unfairly condemn her.

She’s been quiet and withdrawn during her initial months in office. Yet when it truly mattered, Pugh didn’t hesitate to analyze the facts and make a tough, courageous decision.   ###

Avoiding MD’s Pension Reality

By Barry Rascovar

Feb. 14, 2017 – Let’s be honest: No one wants to face up to Maryland’s giant $19 billion long-term shortfall in its retirement program for state workers and teachers. Not the Republican governor nor the Democratic legislature.

True to his Lone Ranger approach, Gov. Larry Hogan is calling for a dramatic change – an optional 401(k)-style retirement program for new state employees.

It sounds good but falls apart when examined close up.Avoiding MD's Pension Reality

The best that can be said about this plan is that it saves both the state and new workers upfront money. Unfortunately, it could leave tens of thousands of state workers far worse off in their retirement years.

Hogan didn’t bother consulting with legislative leaders, pension agency officials or the employee unions to get their input and cooperation. Thus, the governor’s plan has zero chance of passing.

But it goes over well on TV and radio. It allows Hogan to brag that he tried to fix Maryland’s pension problem – though he really didn’t.

Flawed Retirement Approach

Hogan’s plan would weaken the current retirement program by encouraging new workers to leave the system and instead sign up for his 401(k) savings plan. This could mean the loss of a huge sum of regular contributions to the existing pension system. The retirement system’s shortfall would grow, not shrink.

As for workers opting for this “defined contribution” program, 5 percent of their paychecks would go into their IRA account, matched equally by the state. (State workers today contribute 7 percent of their salaries into the pension fund.)

Workers then could invest all that retirement money into the stock market or other financial instruments.

That’s where the risk soars.

In bad economic times, state workers could lose much of their retirement nest egg if they’re not careful. Worse, they’d no longer be eligible to receive a regular state pension. They could find themselves leading a hard-scrabble life in retirement.

The notion of providing state workers with optional ways of saving for their “golden years” makes sense. But not if it means entirely eliminating that pension check.

Existing 401(k) Option

There’s no reason to embrace Hogan’s plan because the state already offers supplemental retirement programs that do much the same thing: a 401(k) investment option and tax-deferred annuity and investment plans. Workers can defer up to $18,000 in salary annually.

The only catch is that the state does not offer a matching payment, as nearly all private-sector businesses with 401(k) plans do. A healthy state match could go a long way toward encouraging workers to save a lot more for retirement.

Perhaps the best way to go is a hybrid system combining a smaller, defined pension benefit with a 401(k) savings component that includes a generous state match. That would put most state retirees in a much stronger position after they leave work. It also could ease the state’s retirement-fund shortfall over the long run.

The catch: It would cost Hogan & Co. a lot more money each year to get such a program started, money the governor doesn’t have in these uncertain economic times.

Besides, Hogan isn’t about to pour more money into worker pensions if he can avoid it.  In fact in his new budget he eliminated a mandated $50 million supplemental contribution to the retirement program created to help bring down the shortfall.

That move deepens Maryland’s pension predicament.

There’s no incentive for Democratic lawmakers to support Hogan’s poorly thought-through bill, either. They’d just as soon let the pension problems slide, hoping against hope for a return of strong economic growth, which could mean high investment returns for the retirement agency.

Thus, the governor’s bill will get a polite hearing – followed by a dignified burial.

Then Hogan can denounce Democrats for failing to “save” the state retirement program. He’ll score political points while kicking the true pension-funding dilemma into the future.

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