His $23.8 billion budget proposal for fiscal 2005, a 3.8 percent increase over fiscal 2004, is being criticized for its extensive use of short-term revenue items, as well as for its underfinancing of the Thornton Commission legislation for improving education around the state.
The proposal, which does not call for increases in sales or income taxes, also includes an unprecedented $326 million for education, a $2.50 monthly sewage fee to upgrade wastewater treatment plants to help protect the Chesapeake Bay and $500,000 to begin work on the Inter-County Connector to link Interstates 95 and 270.
Still, the budget plan was criticized as "not structurally balanced" by the Maryland Department of Legislative Services because of its heavy reliance on $470 million one-time revenue sources and transfers, many of which would require General Assembly approval. About $149 million in cuts and $180 million in new revenues are expected to close the gap in the spending plan.
The governor revised his proposal for legalized slot machines last week to include terminals at two non-racetrack locations. Legislation introduced last session passed the Maryland Senate but died in the House, as Speaker Michael E. Busch, an Anne Arundel County Democrat, would not allow it out of subcommittee.
And in the first week of the session, General Assembly members overrode three of Ehrlich's vetoes -- along party lines -- the first such legislative action in 15 years.
On a snowy afternoon last week, Ehrlich -- while snacking on tea, cheese and crackers in the kitchen of the Governor's Mansion in Annapolis -- talked briefly about the issues facing his administration this General Assembly session.
Governor Ehrlich, your budget proposal calls for no general tax increase, but is being criticized for not addressing many of the longer-range issues facing the state. Are you comfortable with bringing forth such a plan?
We feel very comfortable. In fact, a lot of the reviews have been positive.
The structural deficit has been narrowed from $1.5 billion to $2 billion, depending on where you begin, to around $700 million in a year -- incredible progress.
We've cut over $1.2 billion. We continue to fund basic government services -- and, in fact, we've increased government services for priority programs.
Clearly, Medicaid, although it received an incredible increase this year, is a program out of control -- that's true with every state, by the way, not just Maryland -- but Medicaid received a $302 million increase this year. That's an unsustainable trendline.
We feel very good about the progress we've made on the structural deficit. We're returning fiscal discipline to the state. It's about time. It was part of the mandate from the election, and we're following through.
A lot of our major agencies have been restructured to perform, in many cases, more efficiently, with less personnel ...
... But your proposal is based on 15 revenue assumptions that have to be approved by the General Assembly?
Most of them are very minuscule amendments, obviously, and a couple, obviously, are simply outside the budget -- such as the water surcharge. Most are very small.
We're in a difficult situation, not just [with] respect to the budget, but also the national economy. We were in recession, and during recessions, tax revenues to local governments are diluted. In this case, there was a major diminution as a result of a very significant recession at the national level.
When you read about a structural deficit, that's a euphemism, for some, for a tax increase -- which we reject -- but the fact is that Medicaid -- which we can control, by the way -- will still increase, but in a more structured, sensible way, and Thornton. This remains the biggest issue on the horizon: How are you going to fund it and under what time frame?
Critics say you're not financing the Thornton legislation by $45 million.
That's not what the attorney general says [chuckle]. The attorney general opined that was a discretionary part of Thornton, and we've funded public education in our budget to the amount of $326 million. Three-hundred and twenty-six million [dollars] is hard to argue with.
What are the other issues facing Thornton, from your perspective?
We keep begging the question of substance and performance ... where the money goes and how it's spent. Lieutenant Governor [Michael S.] Steele, beginning this spring, is going to chair a very high-powered commission to look at the non-fiscal side of public education, K through 12, in our state: how these dollars are being spent. Are these dollars in the classroom? Are they in teacher salaries? How are we teaching? Is social promotion still occurring in the state? If it is, we want to stamp it out.
Are you concerned about the financial situation facing Baltimore City's public school system?
Right. Baltimore. AWOL [chuckle]. Everybody's trying to get their arms around Baltimore City. There's a lot of money that's been spent, and some of it's missing.
The bang for the buck for taxpayers has not been there, clearly, and it has not been there for the parents of public school children. They're taxpayers. They're consumers.
We need to start looking at this as a market-driven issue, because parents are consumers. That's why vouchers are so controversial, charter schools are so controversial -- when parents of poor children are given a choice, they opt out of the system.
You revised your slots proposal to include machines at two non-racetrack locations. Why?
It is an accommodation to one of the Speaker's [Busch] major concerns.
Does this mean that you're becoming more conciliatory on this issue, Governor Ehrlich?
No ... well ... depending on whatever term you care to use. The Speaker has the ability to kill the bill. The votes were there last year. He wouldn't allow it out of subcommittee.
I said I was not going to waste time, effort nor political capital on moving a bill that was dead. [Busch] would have to move over the summer and fall. He did. This is our response to the Speaker's moving away from his original position, to accommodate one of his major concerns.
The President of the Senate [Thomas V. Mike Miller Jr., D-Calvert] is pleased with the bill. We think it will come out with a strong vote in the Maryland Senate. But, again, it's up to the Speaker. It's deja vu all over again.
Do you think it will die in subcommittee this year like it did last session?
We're optimistic that the merits of the bill will win out. Two of every three Marylanders support a slots program.
Adult Marylanders make adult decisions on a daily basis, and there are Marylanders who make the decision to cross state lines. This was a major issue in the 2002 gubernatorial campaign. We believe that, at the very least, a free vote on the House floor should be allowed this year.
You mentioned slowing federal revenues, but your proposal for the Inter-County Connector would require bonds that would be backed by future federal dollars. Can you rely on such financing, in this economy, for a project of this magnitude?
We are very comfortable with the funding for the ICC. We've received very little negative response.
First, there was confusion over how much of the Transportation Trust Fund would be used for the ICC, and now that people are more comfortable with the financing mechanism that we've adopted now, the debate has shifted to: "All right, the ICC is going to be built. It's going to be built right. We're going to use technology to build it in an environmentally sensitive way. You're going to get your road. It's a long-promised road."
But what about the other transportation projects that need attention around the state?
That is a legitimate issue, and we've been having meetings on a nightly basis here with various groups. Members of the General Assembly will be introducing a package we think can pass that will pump additional revenues, desperately needed revenues, into the Transportation Trust Fund.
Is the ICC as a toll road a viable option?
Is that possible?
Is that what you see?
More than likely. A very, very viable option at this point.
Why? May as well pay for itself?
Absolutely [chuckle]. These are decisions that will be made as we go along.
We're going through both state and federal regulatory procedures. By law, we must look at alternatives. There are alternatives that must be examined, cost-benefit analyses that must be conducted.
In the first week of this year's General Assembly session, three of your vetoes were overridden in a bold display of partisanship, the first for a governor in 15 years. Is this a new day in the Maryland General Assembly, Governor Ehrlich?
There's a Republican governor with strong poll numbers. We think it's a sensible legislative program. Of course, it's a new day in the Maryland General Assembly. In a very serious way, it's a new day.
There's some folks still angry about the election. There's some folks willing to work with the administration. Hopefully, the latter group will win out in the Democratic Party.
Clearly, if [the Democrats] want to act as a partisan entity, they can do anything they want. Their votes are 2-to-1. They have over a 2-to-1 ratio in the General Assembly.
But the feedback from the people has been positive, as reflected in various surveys -- and that plays out, too. This is unchartered territory. It's partnership government.
A lot of things need to be done in a more bipartisan way. That's not the way typical monopolies operate, and there's some quirks in getting used to the new environment.