Category Archives: Maryland Budget

Hogan’s ‘incredible’ maglev gaffe

By Barry Rascovar

June 8, 2015 –In the name of improved economic ties with Japan, Maryland Gov. Larry Hogan Jr. allowed himself to be used as a marketing tool for a pie-in-the-sky, ultra-expensive transportation project known as “maglev.”

Maglev train in Japan on test track.

Maglev train in Japan on test track.

It’s “an incredible experience” Hogan said of his 300-mile-an-hour ride on a test track in Japan during an economic development trip to Asia.

What’s really “incredible” is Hogan’s willingness to become a promoter of a still-emerging technology with eye-popping costs just as he nears a decision on building two crucial, but far cheaper, conventional mass-transit routes in Baltimore and the Washington suburbs that he previously called “too expensive.”

Supporters of maglev (magnetic levitation) say a Washington-to-Baltimore route would cost a mere $10 billion. Others says the price tag would be many times higher just for the first 40 miles of a route eventually stretching to New York.

Maglev, which glides on a cushion of air and is powered by super-conducting magnets, requires a straight track. It cannot use existing rail rights of way. Thus, the Baltimore-Washington route, through an intensely developed part of Maryland, will have to done by way of a 40-mile-long tunnel.

Now we’re talking REALLY big bucks.

Transformational?

Yet there was Maryland’s governor calling maglev “the future of transportation” that would be “incredibly transformative” for Maryland’s economy.

Huh?

It’s one thing to be polite and complimentary to your host on an overseas economic venture. It’s quite another to join hands with the promoter, the Japanese government, to support a Japanese company’s technology and request $27.8 million from the U.S. government to study a speculative maglev route between the nation’s capital and Charm City.

Just the notion that it won’t cost the state of Maryland one red cent if a Washington-to-Baltimore maglev becomes a reality — backers say it could be funded by Japan, a Japanese railroad and the U.S. government — is enough to wonder what was in the water Hogan drank while in Tokyo.

Hogan and wife Yumi on the test maglev train in Japan

Gov. Larry Hogan and his wife, Yumi, aboard the experimental maglev train in Japan

Sure, it’s a great technology on a test track. But the first maglev train, built in Shanghai, China, has been a flop. That line is only 18 miles long, linking Shanghai’s international airport with a suburb: You still have to transfer to a cab or a light-rail line to reach Shanghai’s downtown.

That route was built by German companies as a sales tool. It didn’t work. When it came time to select a technology for an 800-mile super-speed line between Shanghai and Beijing, the Chinese government chose a proven, wheels-on-track bullet-train.

Shouldn’t that tell Hogan something?

Facing Reality

Better to improve what you have with the limited transportation money on hand than jump into a questionable technology that isn’t ready for prime time and costs a fortune.

Does Hogan truly expect the budget-cutting Republican Congress to approve spending tens of billions of dollars on a maglev route through a heavily Democratic state?

Where’s the money going to come from now that Congress refuses to raise the federal gasoline tax — the main source of federal transportation funding?

Congress almost certainly would require Maryland to ante up a big chunk of the money, 50 percent or more.

Transportation Challenges

Hogan has limited state transportation funds and far too many priorities to address. Why divert state resources and waste the time of the state’s transit experts when you’re already faced with:

  • A decision on the Red Line for Baltimore, an absolutely pivotal project.
  • A decision on the Washington area’s Purple Line serving the state’s two most populous and congested counties.
  • A decision on a badly needed new rail tunnel through Baltimore. This directly affects the future of Maryland’s leading economic engine — the Port of Baltimore.
  • A decision on vastly improving Maryland’s commuter-rail line, MARC, so that its popularity continues to grow.
  • A decision on major repairs or replacement of railroad bridges over the Susquehanna, Bush and Gunpowder rivers.
  • A decision on how quickly to repair/replace dozens of deteriorating highway bridges throughout Maryland.
  • A decision on replacing the scary, congested, 75-year-old, two-lane, deteriorating Gov. Harry W. Nice Bridge over the Potomac River in Southern Maryland — a billion-dollar-plus project.
Gov. Harry Nice Bridge in Southern Maryland

Gov. Harry W. Nice Bridge crossing the Potomac River in Southern Maryland

With all this on his transportation plate, why in the world would Hogan champion a highly questionable maglev project with a stratospheric price tag and a completion date so far in the future it can’t be seen?

(Note: Japan is building a 175-mile maglev rail line between Tokyo and Nagoya. Construction started last year. The opening date? 2027.)

Unresolved Questions

Maglev is a great idea yet to be fully proven as a power source for long-distance travel. Oodles of engineering and technical issues remain unresolved. Huge political and geographic obstacles remain.

Isn’t it far more sensible to improve existing rail lines and projects nearing the construction stage?

Hogan didn’t help himself by making glowing maglev comments, signing a memorandum of cooperation with the Japanese government on maglev and announcing that he’s seeking federal funds to study a high-speed route in Maryland.

Instead, he needs to get serious about easing travel for Marylanders today, especially in the state’s most crowded regions.

Maglev should be taken off the table.

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Barry Rascovar’s blog is www.politicalmaryland.com. He can be reached at bracovar@hotmail.com.

Hogan’s Hypocrisy

By Barry Rascovar

May 18, 2015 — Gov. Larry Hogan Jr. makes it sound like he’s riding to the rescue of Maryland’s underfunded pension program that has been continually “raided” by evil Democratic legislators in Annapolis.

Gov. Larry Hogan & Lt. Gov. Boyd Rutherford

Gov. Larry Hogan (left) & Lt. Gov. Boyd Rutherford

What a bunch of hogwash. It’s pure Hogan hypocrisy.

Hogan’s stance — torpedoing a $68 million education appropriation to the state’s most populous jurisdictions and shifting some of that money into the state pension fund — is based on politics, not policy.

Indeed, Hogan is a late convert to the cause of pension-fund integrity.

Silent Secretary

When legislative analysts went before House and Senate budget panels and proposed a 50 percent reduction in Hogan’s $150 million supplemental appropriation to the pension fund, the governor’s budget secretary not only failed to object but congratulated lawmakers for their assiduous work in responsibly paring Hogan’s budget request.

Not until it became politically expedient later in the session to slam Democrats for cutting the supplemental appropriation in half did Hogan belatedly turn into a pension-funding hawk.

Since then, he’s continually referred to Democratic lawmakers’ “raid” of pension money.

Another bit of Hogan flummery.

The pension agency got so offended at this misguided gubernatorial propaganda pitch that it issued a press release regarding “the mistaken impression that the pension fund had been ‘raided’ by the General Assembly during the recently-completed session. This is not the case.”

No Dipping Allowed

The agency explained that the dispute centered on how much extra should be spent to help the state more quickly reach full funding to pay for future pension payouts. The state’s required $1.8 billion budget contribution to the retirement account this year remained untouched.

Indeed, it’s illegal for the legislature or the governor to “dip into” the $45.7 billion pension fund. That money can only be used to make pension payouts. No “raids” are permitted. But you’d never know that from listening to the governor’s spiel.

Hogan’s pension purity pursuit was his way of diverting attention from his other action — denying important state dollars to Baltimore City and other high-cost subdivisions to help them avoid layoffs or cuts in school programs.

He said it would be “absolutely irresponsible” to give that money to the schools instead of pouring it into the pension fund.

He’s got his priorities reversed.

The greatest immediate urgency is bolstering education achievement in distressed communities like West Baltimore. That takes money.

Further fortifying the state’s pension program can be done more gradually over the next decade or two.

Harsh Consequences

Especially in light of civil unrest in poor, racially blighted Baltimore neighborhoods, Hogan’s decision to yank $11.6 million away from the city school system seems short-sighted and counter-productive.

The consequences of his action could be quite harsh when the General Assembly meets next January.  This slap in the face to Baltimore schools won’t be forgotten. Nor will legislators from Prince George’s and Montgomery counties forget Hogan’s slight, either. They lost a combined $37 million in school money.

The governor’s next big decision could be the fate of the two mass-transit lines affecting those three major jurisdictions — the east-west Red Line in Baltimore and the Purple Line in the Washington suburbs.

His actions on the two lines could prove pivotal in his dealings with Democratic lawmakers. Deep-sixing either project will prompt an uproar. Yet Hogan is intent on appeasing his conservative base by finding ways to sharply reduce mass-transit costs.

He’s playing with political dynamite.

If he sets off a Democratic explosion over the fate of the Red and Purple lines, the resulting fallout could cripple Hogan’s efforts to constructively deal with the General Assembly over the next three years.

Judging from his rejection of supplemental education aid, this governor seems determined to restrict Maryland’s future spending habits at all costs. His goal is to lower taxes. Everything else is secondary.

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Hogan Keeps It Simple — and Low-key

By Barry Rascovar

May 11, 2015 — Larry Hogan Jr. is proving to be an unusual governor for Maryland, in many ways the polar opposite of his predecessors, Martin O’Malley and Bob Ehrlich.

Gov. Larry Hogan Jr.

Gov. Larry Hogan Jr.

Both Democrat O’Malley and Republican Ehrlich love publicity and making a PR splash. They craved the spotlight, issued a tidal wave of propaganda pitches and tried to dominate the daily news coverage.

Republican Hogan wants none of the above. He’s such a modest, low-key governor that he brings to mind the gubernatorial years of an equally low-key Maryland chief executive, Harry Hughes.

But there’s a difference. Hughes came to Maryland’s top office steeped in state government and political expertise. Hogan, in contrast, was a novice who had never held an elective post.

During his campaign last year, Hogan followed a disciplined KISS strategy — “keep it simple, stupid.” His themes purposely avoided divisive social issues and stuck to a few key promises — cut the state budget and then cut taxes.

Narrow Legislative Focus

Hogan followed a similar KISS approach in his first legislative session. His one and only focus: developing a slimmed-down budget that came close to wiping out Maryland’s chronic structural deficit.

The rest of his so-called “agenda” consisted of leftovers from the campaign trail — unrealistic Republican proposals that stood no chance in a heavily Democratic General Assembly.

During those 90 days in Annapolis, Hogan held few press conferences, issued few press releases and remained pretty much in the background.

By session’s end, he had won much of the budget battles, setting the stage for a similar push next year to make room for tax cuts.

He gave us a preview of his intentions last week by announcing reduced tolls on Maryland’s roads and bridges.

Bay Bridge toll cut

While this puts a giant crimp in Maryland’s efforts to replace aging bridges and improve interstate roads, the symbolism of Hogan’s toll-cutting action is what counted for the governor.

Even when dealing with the volatile protests and unrest in Baltimore, the new governor kept his participation low-key — and simple.

His actions were few but decisive — calling in the National Guard when requested, moving his office to Baltimore and delivering daily updates in which he basically introduced law-enforcement leaders to brief the media.

Hogan in Baltimore unrest

When cornered by reporters, Hogan refused to blame the mayor for what had occurred and refused to discuss details of events. He sounded a one-note response: “We are here to keep the peace.”

Compared with the frenetic, 24/7 campaign styles O’Malley and Ehrlich brought to the governor’s mansion, Hogan’s modest and even shy approach is a refreshing change.

His eternal optimism, concern and ready smile serve him well with Marylanders.

Next Big Test

That widespread popularity soon could be tested when Hogan decides what to do about two costly but critical mass-transit projects — Baltimore’s Red Line and the suburban Washington Purple Line.

He called them unaffordable during the campaign, but rejecting either project will create deep antagonisms and hostility toward the Republican governor that could dog him in the legislature for the rest of his term.

So far, Hogan has avoided these kinds of flash points, knowing that a Republican governor can ill afford alienating a large chunk of the legislature’s majority party.

How he navigates between his campaign statements and strong public sentiment for the Red and Purple Lines in three of Maryland’s largest and most politically influential jurisdictions will tell us much about Hogan’s ability to navigate his way through perilous political situations.

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Barry Rascovar’s blog is www.politicalmaryland.com. Contact him at brascovar@hotmail.com.

Taming MD’s Structural Deficit

By Barry Rascovar

April 27, 2015 —  Can Republican Gov. Larry Hogan Jr. tame Maryland’s long-standing structural budget deficit? Judging from his first stab at it, he’s more than halfway there.

But high hurdles lie ahead if he is to reach the point where the state’s ongoing revenues far exceed annual spending.

Taming MD's Structural Deficit

Hogan may grumble to appease conservative groups about the remaining $206 million structural imbalance in the budget that’s been approved for the fiscal year starting July 1.

Yet that is a sharp reduction from the deficit anticipated back in November of a $525 million shortfall under Democratic Gov. Martin O’Malley.

Not Too Shabby

The General Assembly’s Department of Legislative Services (DLS) says Hogan is 68 percent of the way toward wiping out the structural imbalance — and if he continues to hold firm in denying state workers a 2 percent pay raise starting July 1, he will reach 82 percent of his goal.

Not too shabby for a Republican governor facing an overwhelmingly Democratic legislature.

Those deficit numbers will grow somewhat if Hogan decides to give Democratic lawmakers some of the $202 million they asked him to restore to various education, health and wage programs.

Still, Hogan begins preparation for his second budget in remarkably good shape.

It’s no secret that the Big Three growth items in Maryland’s budget are: 1) soaring debt service payments; 2) continually rising education aid, and 3) ever-rising health-care costs.

Too Many Bonds

Debt service alone will jump by $167 million next year. Payments on general-obligation bonds has tripled in the last three years. Hogan needs to take a hard look at ways to reduce or slow Maryland’s issuance of those bonds, including the always popular school construction allocations, which in July’s budget hits a record $380 million.

Complicating matters for the governor is Maryland’s too-slow economic recovery from the Great Recession. DLS estimates state revenues in fiscal year 2017 will grow a modest 4 percent. Yet it will take a 5.7 percent growth rate to balance spending with revenue.

More economic development is the key. That’s a long-term proposition, though.

Hogan’s aggressive “Maryland is open for business” theme won’t result in major tax gains for the state any time soon. So the governor will have to continue cutting back on state agency spending while finding areas where deeper cuts can be made without creating a harsh backlash in the legislature.

Ratcheting down the structural imbalance is Hogan’s best course. The problem is that he’s also determined to deliver on his main campaign promise — lower taxes.

Thus, balancing the state’s books isn’t enough. He’s got to go further so he can justify a tax cut that does not create a new structural deficit.

More Daunting Problems

That’s where Hogan’s problems multiply. Aid to local governments is a likely target, until you start to pull the plug on specific spending programs, like money for schools, police, fire-fighting, the poor, libraries and parks.

MD's Structural Deficit

Indeed, almost every area of state government spending affects huge numbers of Maryland citizens. Hogan must take care not to antagonize too many of them. If he does, it could jeopardize his re-election

Looking down the road, Hogan faces even more daunting budget difficulties, Indeed, DLS puts the state’s combined deficit for fiscal years 2019 and 2020 at $1.165 billion .

As bad as this sounds, it is a huge improvement over what O’Malley left behind: a combined estimated deficit for those two years of nearly $2 billion. Hogan reduced that future imbalance by 41 percent in his first budget.

Fundamental spending changes won’t be possible with Maryland’s Democratic legislature acting as a brake on Hogan’s budget-cutting tendencies. That’s why the slow-but-steady approach makes so much sense.

It won’t please Hogan’s absolutist supporters, but gradualism could prove the most practical and politically astute path to follow.

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Hogan: Strike One

By Barry Rascovar

April 14, 2015 — In his stubbornly conservative and highly politicized approach to governing Annapolis over the past week, Republican Larry Hogan Jr. took a step that may seal his fate as a one-term governor.

Hogan: Strike One

Maryland Gov. Larry Hogan Jr.

Let’s see: In just a few days Hogan managed to alienate and infuriate state workers, public school teachers and education advocates, disability workers, supporters of medical assistance for poor pregnant women and doctors who treat Medicaid patients.

He also left a trail of non-accomplishments.

Hogan’s refusal to follow-through on a final budget accord and instead turn the issue into a political football left Democratic legislators resentful and itching to show they can play hardball, too.

For someone who entered the governor’s mansion as Mr. Nice Guy cooing bipartisanship, Hogan ended his inaugural legislative session as Mr. Tough Guy defiantly declaring great success for what was clearly a disappointing 90-day performance.

Seeds for a Pushback

His flimsy legislative agenda got shredded. He turned victory on the state budget into an easily avoidable defeat.

He sowed the seeds for a strong Democratic pushback that could make Hogan’s legislative life miserable over the next three years.

The Republican governor’s inexperience showed.

He let hard-line ideologues on his staff get their way. Democrats reacted by tying his hands in future years on making budget cuts to education. They blocked him at nearly every turn.

Teacher layoffs that are sure to follow from Hogan’s budget-cutting actions will haunt him. He has awakened a key element of the Democratic Party’s base. Teachers and public school parents in core Democratic jurisdictions will neither forgive nor forget.

Pay Cut Coming

He also made enemies of 80,000 state workers by cutting their paychecks 2 percent, starting in July.

He still has a chance to spend the money set aside by the legislature for those two groups but that would require political accommodations Hogan doesn’t seem willing to make.

The irony is that Hogan had a golden opportunity to negotiate a budget giving him much of what he wanted without enraging large voting groups.

Indeed, Democratic negotiators thought it was a done deal — until Hogan made intentionally unacceptable demands at the last moment.

The new governor showed his naiveté and lack of insight into Maryland’s complex legislative process. His hard-nosed, conservative roots were showing.

His biggest mistake: Failing to accept the divided nature of governance in Maryland. Election as governor does not entitle Republican Hogan to rule the land in an imperial, “I’m the boss” manner.

Democrats firmly control the General Assembly. They are co-rulers. They make the laws, set policy and sit in judgment on the governor’s budget.

Hogan can’t demand obeisance to his legislative wishes. He can’t insist Democrats support a decidedly Republican agenda. Yet that’s what he tried to do in the final week before Monday’s sine die adjournment.

Budget Progress

Picking up the pieces won’t be easy for the governor.

He did, though, take a major step toward truly balancing the state’s budget. Simply by trimming government spending in the next few years, identifying areas where money can be saved without significantly impacting services and keeping expenditures lower than Maryland’s growth rate, Hogan can tame the state’s structural deficit demon.

But don’t expect savings large enough to support major tax cuts. Even if that were to happen, Democrats in Annapolis would write laws that re-direct this surplus in ways more appealing to their constituents in Maryland’s big, Democratic subdivisions.

Hogan gets the next nine months to operate without legislative interference. He’ll have time to assess his next moves and prepare more carefully for the 2016 General Assembly session.

Will he seek to re-build bridges to Democratic lawmakers on issues of mutual concern?

Or will he continue to take the path of political opportunism that makes governing impossibly difficult in the Maryland State House?

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Hogan’s Choice

By Barry Rascovar

April 13, 2015 — Has Gov. Larry Hogan Jr. overplayed his hand? We’ll find out today as the Maryland General Assembly tries to wrap up its 2015 session.

Hogan's Choice on budget compromises

Gov. Larry Hogan Jr.

Hogan has two choices: Continue to play hardball with the Democratic legislature and risk losing all of his legislative priorities, or negotiate a settlement that gives everyone partial victory.

The first choice is really the nuclear option.

Hogan already has dug in his heels a couple of times in budget negotiations by demanding full passage of his partisan agenda that Democrats find unacceptable. Meanwhile, he says he won’t give Democrats what they want on education, Medicare and salary adjustments.

Another Ehrlich?

This “my way or the highway” approach is what punctured former Republican Gov. Bob Ehrlich’s balloon and led to four years of bitterness and open warfare between the political parties in Annapolis.

Does Republican Hogan, who was part of the Ehrlich administration, wish to go down that dead-end road again?

He shouldn’t misread the election results. This state remains heavily Democratic, as reflected by the make-up of the General Assembly. For a Republican governor, power-sharing is the only rational road to travel — if you want to make headway on your goals and win reelection.

Today, Hogan must decide if he wants to fight or smoke a peace pipe. It shouldn’t be a difficult call.

Shrinking Budgets

Even if he gives Democrats what they want in the budget, Hogan still has achieved his immediate objective — sharply lowering Maryland’s structural deficit and sending a clear signal that more slimmed-down budgets are coming.

Hogan is in control. But he could lose that advantage if he touches the third rail of Democratic politics in Maryland — aid to education.

A sharp cutback in state education funding for large Democratic subdivisions would be met by howls of protests by parents. It might well lead to teacher layoffs, larger class sizes and bitter anger in those subdivisions.

Why risk hostility that could sabotage cooperation with the Democratic legislature over the next three years and foreclose chances of Hogan gaining Assembly approval of his promised tax cuts?

Negotiating Tactics

So far, the governor has played the budget negotiating game well. He’s kept Democratic leaders off-balance. He’s already moved Democrats in his direction.

Indeed, he made them look foolish on their efforts to strip money from state worker and teacher pension accounts. He’s also won concessions on a handful of bills he wants passed.

If he cuts a deal at this stage and declares victory, Hogan will emerge from the session with incremental successes and few hard feelings on the Democratic side.

That’s not a bad outcome given the fact that most legislative triumphs take more than one session to achieve — and that legislative victories for a Republican governor in Maryland are always difficult.

Of course, compromise won’t please hard-edged  conservative Republicans who will accept nothing less than Democratic capitulation. Hogan would be wise to ignore them and focus on the bigger picture.

He’s got four years to construct a positive list of accomplishments. He’s made a sound start over the past 90 days. He’d be foolish to blow it at this late stage.

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Barry Rascovar’s blog is www.politicalmaryland.com. He can be reached at brascovar@hotmail.com.

Hogan Wins Round 1

By Barry Rascovar

April 6, 2015 — Even before the final votes are taken the verdict is in: The winner of Maryland’s 2015 budget fight, by a wide margin, is Republican Gov. Larry Hogan Jr.

Actually, Hogan was playing with a stacked-deck.

Maryland governors almost always win these budget fights because they’re the only ones who can add money to programs and priorities; the legislature has the power to subtract, period.

Gov. Larry Hogan Jr.

Gov. Larry Hogan Jr.

But remember where Hogan started: He was handed a wildly out of balance budget by outgoing Democratic Gov. Martin O’Malley, who had neglected to take strong steps to stem the growing deluge of red ink on the state’s books.

Even worse, projections called for far wider deficits in future years. O’Malley wasn’t up to the task of pulling back hard on the spending reins because he was preparing to leave office and run for president as a darling of the Democratic liberal left.

So O’Malley passed the baton and dropped the budget mess he had created in Republican Hogan’s lap.

Judicious Budget-Cutting

Thanks to the work of career budget analysts and former state Sen. Bobby Neall, Hogan whipped up a budget-balancing plan in about six weeks. It was a tough but judiciously pared-down financial blueprint that went nearly all the way toward eliminating Maryland’s chronic and widening structural gap between revenues and spending.

Hogan also called for long-term steps to ratchet down future spending growth in costly education and health programs.

Democratic legislators didn’t bite on that last Hogan proposal. Yet there is nothing they can do to stop the governor from shrinking budget increases for state and local aid programs in each year of his administration.

The result is a half-loaf victory for Hogan, which is impressive for a Republican in a heavily Democratic state. If he persists over the next three years, he’ll almost certainly pick up the other half of the loaf — and more.Government Spending

Hogan came into office promising to squeeze excesses from the state budget so he can lower taxes.

He’s started down the first path with considerable success. The tax-cut pledge will be infinitely harder to fulfill, as Democrats have shown in this legislative session.

In office, Hogan has proved to be a realist. He recognized that without a truly balanced budget that slowed spending, there is no hope of gaining meaningful tax reductions.

He’ll have to keep shaving Maryland’s expenditures — and especially the state’s overly ambitious and costly capital spending program. Ever-rising health and education costs remain enormous challenges, too.

Power-Sharing

Still, the direction of future Hogan budgets is now transparent to both conservative Republicans and liberal Democrats.

To the relief of Democratic legislators, the new governor isn’t a scorched-earth program cutter. He understands the importance of the social safety net, of education advancements and offering improved health care options.

He also understands the dynamics of Annapolis.

Hogan knows he must share power with the heavily Democratic legislature. He must find common ground and avoid the mistake of the last Republican governor, Bob Ehrlich, who proved too partisan and confrontational.

So far, Hogan is succeeding.

Fiscal Turnaround

He’s won this year’s budget battle, regardless of the final negotiations over legislative demands for restoration of funds for public schools and health care.

The new governor has turned around Maryland’s bleak fiscal forecasts in a matter of months, not years.

Once legislative adjournment comes on April 13, Hogan will have the rest of  the year to implement spending hold-down ideas, analyze where downsizing makes sense, educate lawmakers on sensible ways to shrink the cost of state government and start eliminating excessive and harmful business regulations.

Not bad for a guy given almost no chance of winning the governorship a year ago — or of working constructively and peacefully with legislative leaders of the opposite party.

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Betraying State Workers

By Barry Rascovar

March 23, 2015 — Once again, the House of Delegate took the easy way out of its budget bind — and in the process stuck it to future state workers, teachers and taxpayers.

The Senate is on a glide path that follows that same flawed approach.

Instead of facing up to its fiduciary pension obligations, Annapolis delegates opted to play games, placing at risk the safety of state retirement programs.

Budget balancing

In the process, the delegates are leaving the next generation of taxpayers a monster-sized unpaid pension bill totaling in the billions.

If Maryland loses its prestigious triple-A bond rating, you’ll know who to blame.

Thanks to the intellectually dishonest proposal by the Department of Legislative Services, the delegates found a way to save $75 million this year to pay for K-12 education and a salary increase for state employees — if the governor goes along with those suggestions.

How It Started

Back in 2011, the state agreed to supplement its annual pension contribution by $300 million a year. This was the quid pro quo for forcing state employees and teachers to contribute more out of their own paychecks to the pension program.

But lawmakers reneged on the bargain, eventually cutting their supplemental payments to $150 million a year — or to zero when times got tough.

Now the House wants to reduce the state’s supplemental payment to just $75 million each year — a far cry from the original $300 million commitment. Meanwhile, state employees and teachers get no relief in their enlarged pension payments.

A major part of the rationale for this irresponsible move by lawmakers is the fast-rising value of the retirement agency’s stock portfolio. Last June 30, the state pension program topped $45.4 billion — a rise of $5.2 billion in just one year.

Its investment return for the fiscal year was a strong 14.4 percent. Fund managers have exceeded their target of 7.7% growth in four of the past five years.

Roller Coaster Ride

Sounds wonderful, doesn’t it?

It certainly entranced the legislature’s budget analysts, who cited the stock market rise as a key factor in recommending that the state slash its supplement payments by 75 percent.

But a funny thing is happening on Wall Street.

In the first 75 days of 2015, stocks ran out of gas. The long rally stalled. Prices are about where they were on Jan. 1.

If Wall Street’s prices fail to rise, or even fall, for the rest of this year, Maryland’s pension managers won’t come anywhere near their 7.7 percent growth target.

The retirement agency’s unfunded liabilities could jump substantially — and the heat will be on state legislators and the governor next year to make up the difference.

Inevitable Downturn 

That’s why the legislature’s quest for immediate gratification is so misguided. This is not the time to monkey around with reduced pension contributions.

When the bulls rule Wall Street, Maryland politicians start thinking they can cut back on the state’s pension appropriations. But that ignores the inevitability of the economic roller coaster. Prosperity only lasts so long.

If lawmakers don’t prepare for the lean years they will put Maryland’s pension program — already nearly $20 billion in the hole — in an even worse bind.

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Reneging on a Promise – Again

By Barry Rascovar

March 2, 2015 — The legislature’s fiscal leaders, in a truly bizarre move, are considering reneging — once again — on a commitment to state workers and the public by pulling the plug on supplemental state contributions to Maryland’s severely underfunded pension program.

It would save $71 million this year, $179 million next year and $233 million the third year. But, over a 25-year span this action would cost taxpayers a staggering $2.5 billion.

This suggestion from the legislature’s own analysts didn’t come out of the blue. The Department of Legislative Services was told by Democratic leaders in the legislature to find mounds of money that could be cut from the budget for later redistribution to their priorities — education and health care.

‘Deja Vu’

The result is an incredible prostitution of DLS’ fiscal stewardship. It is as though these analysts and legislative leaders learned nothing from the pension debacle of the past decade.

If approved, this proposal would be, as Yogi Berra once said, “Deja vu all over again.”

Solving a short-term budget problem would seriously threaten the state’s long-term fiscal viability — and its triple-AA bond rating.

Legislators would be gambling that a booming stock market continues over the next decade without let-up. This would easily erase the need for supplemental pension payments by the state to help close a whopping $19 billion unfunded liability.

But what if economic good times fade? What if — as is almost inevitable — the stock market suffers setbacks during that time?

Irresponsible Plan

Unfunded liabilities in the state worker and teacher pension accounts would soar, just as they did during the recent Great Recession.

It is a foolish and fiscally irresponsible proposal that never should have been presented to the legislature. It could make a bad situation worse and set off alarm bells at bond-rating agencies.

Interestingly, the Hogan administration considered this proposal and rejected it — even though it would have helped close a $1 billion budget gap.

Budget Secretary David Brinkley

Budget Secretary David Brinkley

David Brinkley, Hogan’s budget chief, said the decision was made to honor the state’s commitment to its employees.

In 2011, lawmakers approved reforms that raised employee payments to the pension system, reduced benefits for new workers and committed the state to increasing its annual payments.

Reneging on that agreement would be a terribly crass and unwise step, a slap in the face to state workers and public school teachers. They still must ante up additional paycheck dollars to fortify the pension system.

Moral Obligation

Why should state legislators walk away from their end of the bargain?

“What duty do we have to employees,” said Del. Tony McConkey of Anne Arundel County. “What moral obligation do we have”?

Del. Tony McConkey

Del. Tony McConkey

“A promise made is a promise kept,” noted Del. Mike McKay of Allegheny County.

Indeed.

Short-sighted illogic got Maryland into deep trouble the first time. Will lawmakers be foolish enough to go down that road again?

Glendening Started It

Back in the early 2000s, Gov. Parris Glendening intentionally underfunded state payments to the pension program so he could increase education aid. The legislature not only went along but came up with a flawed accounting gimmick to justify lower payments.

Known as the “corridor funding method,” this scam lets the state cut its pension allocations when times are good and stock market returns are strong.

But when the recession hit in the late-2000s that corridor became a dead end. The state’s pension liabilities skyrocketed. Tough, painful reforms had to be instituted.

Eventually, the state pension board agreed to phase out the corridor funding method that had caused all the trouble.

Walking Away

Now, DLS is proposing that Maryland repeat its actions of the early 2000s, but without calling it “corridor funding.” The state would walk away from its pledge to state workers and teachers and stop its supplemental payments.

Sure, there would be short-term benefits, enabling legislators to allocate more money for other priorities. Over the next 11 years, the state would save $2 billion that could be spread around to worthy programs.

But here’s the catch: In the subsequent 14 years, the state would have to shell out a staggering $4.5 billion in extra payments to make the pension fund whole.

Even worse, that calculation doesn’t consider what happens to the pension fund in the next two or three recessions. After all, economic downturns are inevitable and an integral part of the economic cycle.

Nightmare on State Circle

What a nightmare this could turn into.

As Brinkley told the House Appropriations Committee on Friday, if the pension fund’s earnings performance turns south over the next 10 years, “this will be a disastrous decision.”

The legislature’s fiscal leaders, especially Del. Maggie McIntosh of Baltimore and Sen. Ed Kasemeyer of Howard County, need to think hard about the dire consequences that could ensue by taking such a dangerous step.

They should remember what writer-philosopher George Santayana said:

“Those who cannot remember the past are condemned to repeat it.”

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Hogan’s ‘Deflategate’

By Barry Rascovar

Feb. 2, 2015 — Talk about an uneven fight! When it comes to shaping the Maryland state budget Gov. Larry Hogan Jr. is the pre-determined winner.

Gov. Larry Hogan Jr.

Maryland Gov. Larry Hogan Jr.

Think of the budget as a balloon. The governor decides how much air gets pumped into the balloon ($40 billion). Once this is done, the legislature can let out some air — but it can’t expand the size of the balloon at all.

This year the new Republican governor embarked on a truth-in-budgeting drive, eliminating much of Maryland’s underlying structural deficit with $1.3 billion in cuts.

In other words, Hogan presented the legislature with a dramatically smaller balloon to play with. And there’s nothing lawmakers can do to create a bigger budget balloon short of raising taxes — pretty much of a non-starter this year.

Hogan’s ‘Deflategate’

By taking a considerable amount of air out of former Democratic Gov. Martin O’Malley’s overinflated budget balloon of last year, Hogan created his own “deflategate” controversy.

While Maryland’s gregarious governor can’t be compared to the frowning Bill Belichick of the NFL’s “deflategate” kerfuffle, Hogan isn’t making Democrats in the General Assembly happy.

'Deflategate' Novelty

‘Deflategate’ Novelty

The Black Caucus wants Hogan to reconsider his cuts to education in key aid categories that overwhelmingly impact two of the state’s worst-performing school districts — Baltimore City and Prince George’s County. A number of smaller, rural counties received education cuts as well, angering local educators.

Even Senate President Mike Miller, who is attempting to remain on good terms with Hogan, said, “We’ve got to try to get more money in the classroom.”

Easier said than done, as the cagey Miller well knows.

New Reality for Democrats

Democrats are facing a new playing field. Hogan brings to the table decades of experience as a real estate salesman. He’s got definite ideas on how to run the state in a business-like manner. That begins with keeping spending under control.

Thus, his first budget contains fewer transfers and gimmicks than during the O’Malley years, or even the Ehrlich years. Hogan spread his budget cuts around, though education and health care — the top spending drivers — took the biggest hits.

Hogan also is seeking legislative approval to weaken the state spending mandates on education, health care and the environment, among others. He wants those mandates changed so that required funding grows at a slower rate than the state’s annual spending plan.

This is straight out of Economics 101 — make sure you don’t pay out more than you take in, and build in a cushion.

If Democrats follow Hogan’s request, Maryland’s underlying structural deficit could be on the road to elimination for a few years.

No Free Ride

But Hogan isn’t going to be given a free ride. Compromises on both sides are inevitable. The hit to education will be moderated and some other cuts will be, too.

With guidance from the Department of Legislative Services, lawmakers will make $100 million or more in budget cuts in other areas. They also could juggle fund accounts and transfers in a manner that creates more cash in the state’s general fund budget.

Budget Secretary David Brinkley

Maryland Budget Secretary David Brinkley

Give-and-take discussions with Hogan and Budget Secretary David Brinkley will likely lead to common ground. In the end, the hit to education won’t be as severe.

Lower Spending Mandates?

As to Hogan’s request to lower on-going spending mandates, the General Assembly may decide to take a firmer stand.

Democrats cannot totally rebuff Hogan’s request to re-write the spending mandates because they then would have to find the money to pay for this new funding — an impossibility without raising taxes.

More likely, lawmakers will meet Hogan halfway — reduce the annual, mandated growth contained in these spending formulas, but not as much as the governor wants.

The sad reality for lawmakers is that Hogan doesn’t need a permanent change in the spending mandates to carry out his fiscal belt-tightening.

Same Script, Same Results 

If necessary, he can follow the same budget script in 2016 and beyond as this year, leaving lawmakers with little recourse but to go along with Hogan after hammering out concessions.

Hogan wins either way.

Adjusting to this new playing field isn’t comfortable for Democrats, who are used to having the Democratic governor tack on a few more tax increases to pay for ever-growing, mandated payments to local governments and social programs.

Yet Hogan’s budget adjustments are far from Draconian. He’s practicing traditional, conservative economics without being vindictive or mean-spirited.

Democrats in Annapolis have little choice but to adapt. Their only weapons: Political negotiation and compromise.

Barry Rascovar’s blog can be found at www.politicalmaryland.com. He can be reached at brascovar@hotmail.com.