Category Archives: Maryland General Assembly

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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Madaleno Crosses the Line

By Barry Rascovar

April 2, 2015–If only it had been an April’s Fool joke — but it wasn’t. Instead, a highly regarded Maryland state senator, who happens to be gay, got carried away with his anger over a discriminatory Indiana law and dragged the governor’s wife unwillingly into the conversation.

Sen. Richard Madaleno went too far. He crossed the line. His letter to the governor was hurtful to an innocent bystander.

State Sen. Richard Madaleno

State Sen. Richard Madaleno

Madaleno lost his credibility, and his argument, as soon as he dragooned Gov. Larry Hogan’s wife, Yumi, into his pitch for the governor to ban travel by state officials to Indiana.

Yumi Hogan, Madaleno wrote, could be subjected in Indiana to “public humiliation” under the new law and refused service by a business because she is a divorcee.

Spouses as Fair Game

It’s ludicrous statement. Worse than that, it unfairly makes a spouse fair game in rough-and-tumble political controversies.

How would Madaleno like it if the governor made a disparaging remark about the senator’s gay partner during a heated political debate?

It is unacceptable. Period.

Senate President Mike Miller did the right thing by telling senators “we don’t mention other people’s spouses in any type of correspondence — their spouses or children.”

Senate President Mike Miller

Senate President Mike Miller

Madaleno knows better.

He harmed his cause and his effectiveness in the State House. While his intentions were pure, his recklessness proved counter-productive.

Hogan rejected the senator’s letter as a “stunt.” He didn’t even bother reading beyond the offensive statement about his wife, who was needlessly reminded of a painful chapter in her life.

Rich Madaleno is respected for his fiscal expertise. He plays a major role in the legislature’s all-important budget deliberations.

Hurting Constituents

Now, though, he’s persona non grata on the second floor of the State House. The governor isn’t going to accommodate his requests or give his statements much credence. He’s damaged his ability to help Montgomery County constituents.

The senator is right to protest loudly Indiana’s deeply disturbing and un-American law that sanctions discrimination (especially since more conservative states are following suit).

But in his haste and emotional distress, Madaleno made a mess of his message.

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Fracking Follies in Annapolis

By Barry Rascovar

March 30, 2015 — Shakespeare, as usual, had it right. “Full of sound and fury signifying nothing.” That describes the squabbling in Annapolis over hydraulic fracturing, commonly known as “fracking.”

It is Maryland’s phantom issue.

Environmentalists and do-gooder legislators are panicked that fracking will mean earthquakes, tainted drinking water, dirty air, despoliation of pristine farmland and other biblical plagues. They want to bar this drilling procedure forever in Maryland.

fracking-2

Hydraulic Fracturing

 

Never mind that wide-spread fracking has been going on since 1950. In those 65 years, more than one million wells have been fracked, in which a combination of water, sand and chemicals is pumped under high pressure deep into shale formations. This fractures the rock and sends deposits of oil and/or natural gas gushing to the surface.

Low Oil Prices = No Fracking

There’s only a tiny part of Maryland where hydraulic fracturing into the gas-rich Marcellus Shale formation is viable — in far Western Maryland, i.e., portions of Garrett County and a bit of Allegany County. The number of farmers who might benefit from oil and gas royalties is very small.

Moreover, no oil or gas driller is interested in Maryland any longer. The steep plunge in oil and gas prices makes fracking in the state far too costly now or any time in the foreseeable future.

So the arguments in Annapolis are largely speculative.

Environmentalists continue to spout off about the doom and gloom that will descend on Maryland if fracking is allowed — part of a larger argument by environmental zealots who seek to ban coal and even gas-fired power plants, nuclear power plants, the export of liquified natural gas, as well as wind farms in state parks (they won that fight) and wind farms on the lower Eastern Shore.

O’Malley Study

The O’Malley administration, never a friend of business-development if it bumped up against the fears of the environmental community, forbid fracking for three years while it conducted a lengthy, in-depth, scientific study.

The results pleased no one: The research showed fracking could be done safely in Maryland, but only under very strict state supervision — the strictest rules in the nation.

Even that hasn’t made environmentalists happy. Nothing short of a permanent ban will satisfy them.

A bill imposing another three-year moratorium — totally meaningless in today’s low-cost energy world — has made it out of the House of Delegates. Prospects in the Senate are less certain. The bill calls for a 36-month study that would largely duplicate the O’Malley administration’s extensive research.

Meanwhile, a Senate bill, sponsored by Sen. Bobby Zirkin of Baltimore County, offers an even more extreme step that kills any possibility of fracking coming to Maryland.

It creates extraordinary legal liability standards, calling fracking “ultrahazardous and abnormally dangerous” and requires a $10 million insurance policy that must be in place for six years after drilling ends.

Few Side Effects

Funny thing: Over the past 65 years, fracking has been conducted without much in the way of negative side effects.

The industry has used fracking over 1 million times and the number of “ultrahazardous” outcomes has been tiny.

“Abnormally dangerous”? It would be hard to make that assertion stand up statistically.

It would be as if the Maryland legislature declared airplane travel “ultrahazardous and abnormally dangerous” due to a few highly publicized crashes — even though the odds of being killed this way are 1 in 30 million.

The fracking follies in Annapolis are a case of populist rhetoric run amuck. It’s a do-gooder attempt to outlaw something that is no longer on the radar screen in Maryland — and won’t be for years or decades to come.

Waste of Energy

Making it impossible for oil and natural gas companies to drill in Maryland — even under exceptionally close state supervision — is the sort of anti-business hostility Gov. Larry Hogan Jr. may not be able to tolerate.

A veto could await either the House bill or the Senate bill.

Still, all of this is academic — an exercise in wasted energy.

As long as oil and gas prices remain depressed, fracking has zero future in Maryland. The legislature has better things to do in its remaining days before its April 13 adjournment.

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Phony ‘Rain Tax’ War

By Barry Rascovar

March 24, 2015 — Opponents, especially Gov. Larry Hogan Jr., deceptively call it the “rain tax.” But the name and the issue are about as phony as a three-dollar bill.

Hogan used his mischaracterization of the stormwater remediation fee to great effect in winning the governorship. “Why they’re even taxing the rain!” he exclaimed in a highly effective TV ad.

Gov. Larry Hogan Jr.

Governor Larry Hogan Jr.

It’s actually a broad user fee based on how much stormwater pollution flows from roofs and parking surfaces — runoff that can cause great harm if it ends up in the Chesapeake Bay.

Hogan turned this into a political anti-tax, anti-government crusade. For him, this unconscionable levy showed the overreach of the O’Malley administration, which taxed anything that moved to fund an ever-growing list of do-gooder social programs.

Hidden Facts

His propaganda pitch worked; now Hogan is governor.

He pledged to eliminate the “rain tax.” but It isn’t working out that way.

Here’s a fact Hogan never told voters: Even if he could eliminate the “rain tax,” that step wouldn’t lower state or county spending by a penny.

Indeed, wiping out the “rain tax” would have zero impact on Hogan’s state budget. Repeat: zero impact.

It would affect some county taxpayers who now are assessed a stormwater remediation fee on their annual property tax bill. They could see their county taxes lowered minimally.

Another Catch

Here’s another catch: In each of the 10 jurisdictions affected by the “rain tax,” eliminating the levy could force county officials to make cuts in other programs like schools and public works.

It would be a lose-lose scenario.

That’s because these counties and Baltimore City are under a federal mandate to reduce polluted stormwater pouring into the bay. With or without the “rain tax,” they are required to continue paying for costly stream restoration and other cleanup efforts.

For example, Baltimore County spends $22 million a year on its remediation work. That money comes from the “rain tax.”

Eliminate the levy and the county still must come up with $22 million for those environmental-protection projects. That’s about the cost of a new elementary school.

In other words, it’s a zero-sum game.

If Hogan were to get his way, county governments would be squeezed to find money for those mandated environmental activities. Other programs financed by the counties would take the hit, be it schools, government-worker pay raises, road repairs or social programs.

Symbolic Reduction

Baltimore County Executive Kevin Kamenetz already has made a symbolic reduction in his county’s stormwater remediation fee, lowering the levy by one-third. He found roughly $8 million of savings in his budget that now will be used for these anti-pollution projects.

Stream restoration

Stream restoration project in Baltimore County

The county’s stormwater remediation work continues unimpeded. In future years, though, it could become increasingly difficult to find that extra money without cutting back in other areas.

 

Miller’s Plan

On the state level, symbolism is the name of the game, too.

Senate President Mike Miller, the most astute political mind in Annapolis, came up with the ideal Democratic response to Republican Hogan’s “no rain tax” demand.

Miller won unanimous Senate approval for his bill that makes the county remediation fee optional.

If Frederick County, Harford County or Carroll County wants to get rid of the fee totally, they are free to do so. But they still have to ante up millions to finance a long list of remediation projects.

That burden remains.

Indeed, Miller’s bill requires those counties to specify their remediation efforts and identify how they will be funded. Failure to do so could lead to a loss of state dollars.

Smarter county officials, who understand the value of spreading the tax burden for these anti-pollution efforts, could continue their fees under Miller’s bill. They won’t have to limit other county programs to make room for mandated remediation projects.

Curious Debate

Whether Miller’s “rain tax” option makes it through the House of Delegates is in doubt. Some Democrats there want to keep the current fee in place, despite the political advantage it gives Hogan and his conservative allies.

It’s one of the more curious debates to grip Annapolis in years.

No state taxes are involved.

No county saves a penny if Hogan gets his way.

The stormwater anti-pollution programs must continue — unless a county wants to get sued by the federal Environmental Protection Agency.

Miller’s compromise bill offers a sensible way out for everyone. That’s why Hogan has thrown his support behind it.

Regardless of the outcome, this phony “rain tax” war will continue. Hogan will milk it for all it is worth — even if the facts aren’t on his side.

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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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Sticky Tax Conundrum

By Barry Rascovar

Feb. 23, 2015 — Sometimes a simple, sensible-sounding tax reform runs smack into sticky realities. The result is a puzzle for Maryland legislators trying to do the right thing.

That’s the case this session with bills (SB190, HB209) designed to clarify state law regarding the “taxable price” of discounted hotel rooms sold over the internet by travel websites.

Advocates claim companies like Orbitz and Expedia are ripping off the state by buying blocks of discounted rooms from hotels, re-selling them to Maryland consumers at higher rates but paying state sales tax on the original, lower purchase price.

Expedia logo

If that’s true, we should change Maryland’s tax laws and close this alleged “loophole.”

But it’s a complex situation in which the role of the internet travel companies isn’t transparent. There’s a yawning gulf between what lawmakers believe and what may be the true facts.

Confusion Abounds

Even the legislature’s fiscal analysts seem confused. They aren’t even sure if the proposed reform will result in more tax revenue. Opponents flatly assert the Department of Legislative Services got the facts wrong.

Travel agents maintain they are not purchasing discounted, hotel room blocks and then re-selling them to the public at a higher price. They maintain they aren’t in the room-selling business.

They say they are acting as an intermediary between the hotel and the consumer. The hotel negotiates a discounted room rate with the travel company, which then advertises this discounted rate. When a sale is made, the customer pays the discounted rate to the hotel, plus a service charge or fee that goes to the intermediary.

That extra charge isn’t taxed.Orbitz

The travel agents claim the hotels pay all the room taxes on the discounted, negotiated price. There’s no jacked-up extra room charge to consumers by Orbitz or Expedia other than that service fee.

Murky Issue

If all this is true, legislators need to take a closer look at those tax-reform bills. It may be a case of not understanding the true situation.

But it gets murkier.

The comptroller’s office is suing internet travel agents on much the same grounds. The case is before the Maryland Tax Court. Meanwhile, four counties already have sued the big internet travel sites and settled out of court.

While all this is going on in court, it seems senseless for the General Assembly to further confuse matters in ways that could mess up the current tax case and lead to years and years of new litigation.

There are other problems with the bills.

The measures would impact local travel agents, local tour operators and vacation rental managers. It would impose a new administrative tax burden on many small travel-related businesses.

Double Tax?

It also could wind up as a double tax on these local travel businesses, since they already pay a corporate income tax on their service fees.

Here’s another complication: This would amount to a new tax on services — an area where Maryland has tried not to impose levies. Is this opening the door to a broad application of the state sales tax to all service businesses?

Given the results of the last election, a drive to add more tax levies that will be paid by consumers seems ill-timed and poorly thought through. That’s especially true given the uncertainty about what’s really going on in the discounted hotel room-rate industry.

This is not the first tax squabble where well-meaning lawmakers have run into unexpected obstacles because the issue is poorly understood and hard to simplify.

For years, liberal lawmakers have pushed for a “unitary tax” on out-of-state corporations. The combined-reporting bill runs into insurmountable headwaters each session because it’s not a black-or-white issue. Previous studies show the reform might prove counter-productive and yield little in new revenue over the long haul.

Tread With Care

The best course for legislators on the room-tax issue is to proceed with caution.

Let the comptroller’s court case play out. That will provide additional definition of the “taxable price” of these discounted rooms, which is strongly under dispute.

There’s also need for more legislative study.

How do these internet travel sites really work? Do they jack up discounted room rates or not? Are they true intermediaries between the hotels and consumers, collecting only a service charge?

If the state starts taxing this travel-agent service, shouldn’t it do so uniformly on all business services? Would this be wise tax policy? Would it put Maryland businesses at a competitive disadvantage?

The more we learn about this room-tax issue, the cloudier things get.

With so much room for doubt, legislators would do well to pass on these tax-reform bills until they get a clear picture of what’s at stake and how the discount room-rental industry really works.

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Growing Maryland

 By Barry Rascovar

Feb. 16, 2015 — If there is one area where Gov. Larry Hogan Jr. can sing “kumbaya” with Maryland legislators, it is economic development. The path has been blazed for him by the legislature’s Augustine Commission.

A year ago, top Democrats in the General Assembly recognized Gov. Martin O’Malley had badly dropped the ball on growing jobs in Maryland. So they assembled a commission, led by former Lockheed Martin CEO Norm Augustine, with the assignment of suggesting how to turn things around.

Commision Chair Norman Augustine

Commission Chair Norm Augustine

The group came up with 32 recommendations, all sensible and none of them novel. It won’t take much for the Republican governor and Democratic legislators to find agreement on most of those suggestions.

Underlying the bipartisan nature of the commission is the fact that Hogan’s new budget secretary, former Sen. David Brinkley, served on the panel alongside Republican Del. Wendell Beitzel. Two key Democratic chairmen, Del. Dereck Davis and Sen. Ed Kasemeyer, were on the commission, too.

Key recommendations:

  • Consolidate economic development programs, develop one-stop shops for businesses and put more emphasis on technology industries.
  • Reverse the state’s hostile, rule-enforcement approach toward businesses through customer-service training and a new, “what can I do to help” attitude.
  • Put state money into university-generated business development and address the needs of underperforming public schools.
  • Focus on unskilled high school graduates who need vocational training and apprenticeship programs.

One of the more shocking findings of the commission is that 44 percent of kids in Maryland public schools qualify for free or reduced-price lunches, and most of them come from minority families struggling to eke out a living.

The state’s public schools aren’t giving them the right kind of education. These kids graduate without the tools to find jobs. Their path up the economic ladder is blocked.

Unskilled and Unemployed

Even worse, there are jobs out there for them — some 132,000 currently unfilled positions in Maryland. Employers told the commission they simply cannot find in-state workers who possess the right technical skills.

This glaring mismatch between education preparedness and job qualifications is one of society’s neglected weaknesses. Educators haven’t addressed it. Neither have the politicians.

They are too focused on creating college-prepared students. Those from the lower rungs of education are left to flounder with few, if any, employable skills.

Quick Fixes

Hogan and legislators can start addressing this situation with some quick fixes.

Find a pot of money for the state’s community colleges, which already lead in offering job-training and apprenticeship programs. What’s missing has been a major financial investment from the state and local governments in these specialized skills courses.

The state also needs to offer local school systems extra funds if they bring back vocational education in a big way.

High school students should be pursuing career paths and job-readiness courses, especially those not interested in college.

Such an approach is sorely needed in low-performing districts like Baltimore City and Prince George’s County and in rural jurisdictions where employment opportunities are limited.

Singing in Unison

The good news is that both Hogan and Democratic leaders in the General Assembly are singing from the same hymn book.

An even better sign: The Augustine Commission concluded what’s really needed is “a cultural change” that depends “on leadership, not money.”

If each side fully commits to the objectives laid out by the panel, Maryland actually could make progress in growing its business base and creating a workforce that is job-ready.

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Hogan’s Continuing Campaign

By Barry Rascovar

Feb. 11, 2015 — When is Gov. Larry Hogan Jr. going to stop campaigning and get serious about governing?

He started on the right foot with his “placeholder” budget that lets him tread water till he wraps his arms about the state’s fiscal problems next year.

He followed the same approach with his State of the State address. In most respects, it was a bland, “placeholder” address.

But then he and his speechwriters lost their focus and started waving the Republican Party’s bloody flag during that speech rather than reaching out sensibly to Democrats.

Hogan addresses legislature

Gov. Larry Hogan Jr. addresses MD General Assembly

He said little that was new. There were no rhetorical flourishes. He offered no surprises or initiatives.

Instead, he reverted to campaign mode, re-hashing his partisan themes and denigrating the prior Democratic administration.

Everything Gov. Martin O’Malley did was placed in the negative. Larry Hogan and the Republicans are here to save Maryland!

No wonder Republicans applauded and Democrats responded with silence and growing anger.

Taxes are too high. We’re overregulated,. We need to get government off our backs. We’re anti-business. Maryland is in trouble. It’s headed in the wrong direction.

Sure, Maryland is beautiful. It’s citizens are hard working. But we’ve got to “get Maryland back on track.” Clearly Hogan thinks he knows how to do it.

Economic Turnaround

He pledged to turn Maryland’s economy around.

Who is he kidding?

Maryland is at the mercy of large, macro-economic trends and developments. He’s promising more than he can deliver.

Limited Role

Like any governor, Hogan can only nibble around the edges to make Maryland’s economy stronger and create jobs.

He is fortunate the national economy continues to show steady improvement. If that continues, Hogan will be the beneficiary. But he can’t claim he helped cause it.

His State of the State Address laid out a number of steps he wants to take in his first year, but few are realistic or achievable. They are far too partisan.

The worst aspect of his speech was the overwrought refrain about the dreadfully misnamed “rain tax.”

What an evil! Why, it’s almost sinful to ask counties to raise funds to prevent stormwater runoff from polluting the Chesapeake Bay and its tributaries.

Demanding an end to the “rain tax” is good Republican red meat.

The fact that the tax is pretty much voluntary already is irrelevant to Hogan. He’s in this fight for long-term political gain. He’s using this gambit to undercut Democrats.

He’s also making enemies in the General Assembly — powerful enemies he will need as friends in short order.

Democrats’ Response

There was few references to bridge-building in Hogan’s speech, or in the press conference he called to introduce his “rain tax” abolition bill. He was using tired campaign rhetoric.

No wonder Democratic leaders responded with coolness, followed by sharp criticism.

Then they delayed approval of his Cabinet appointments.

The battle lines are hardening far earlier than anticipated, and Hogan is to blame.

The new governor’s State of the State address was so short on specifics as to make it a useless document for determining how he intends to find common ground with the dominant political party in the General Assembly.

His “rain tax” remarks this week added fuel to the fire.

Hogan -- State of the State Hogan can win most of his budget fights with the legislature, but he is a sure loser on all other legislative matters if he doesn’t stop his partisan rants. He needs to figure out where he and House Speaker Mike Busch and Senate President Mike Miller are in agreement.

Delivering a budget that necessarily tightened the state’s purse strings was bound to cause ill will and anger. Hogan has done little since then to bridge the gap with Democrats.

In his State of the State address, Hogan pledged to “create an environment of trust and cooperation, one in which the best ideas rise to the top based upon their merit, regardless of which side of the political debate they come from.”

A week later, that remark seems a mere platitude.

Until Hogan drops the partisan politicking, his legislative agenda is dead in the water.

He’s got to start acting like a governor, not a candidate.

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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.

 

Hogan’s Placeholder Budget

By Barry Rascovar

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

Gov. Harry Hogan Jr.

Gov. Harry Hogan Jr.

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

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

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

‘Just a Start’

The new governor laid this out clearly on Friday:

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

Think about the sweeping nature of what Hogan is saying.

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

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

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

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

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

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

Former Sen. Bobby Neall

Former State Sen. Bobby Neall

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

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

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

Tough Road Ahead

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

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

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

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

Fixing messy budget situations is never pleasant or easy.

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

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

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