Hogan's fiscal rhetoric meets reality

Hogan is right: Maryland's budget needs some “strong medicine.”

When Gov.-elect Larry Hogan proclaimed the need for "strong medicine" to cure Maryland's fiscal state, he drew some jeers from the Democrats in Annapolis. The O'Malley administration bristled at the notion that he was bad-mouthing the incumbent governor's fiscal management. Sen. Richard Madaleno likened him to Scotty on the old Star Trek — forever complaining that it would be impossible to fix the engines as fast as Captain Kirk demanded and then accomplishing it with ease.

Let's say two things right off the bat. Notwithstanding the fact that the Board of Revenue Estimates is expected at its meeting today to once again downgrade Maryland's projected tax collections for this year and next, the shortfall Mr. Hogan will face when he takes office in January will be likely smaller than the ones either of his two predecessors confronted. And Mr. Hogan could, theoretically, paper over it in the same way that governors in Maryland have been doing for a decade or more.

But that would be a terrible idea. The gimmicks the state's leaders have employed — for example, diverting transfer tax money from Program Open Space to the general fund and then backfilling Program Open Space with the proceeds of bond sales — have left the state in a precarious position. We are close to our self-imposed debt limit, and debt service is ballooning. Unless the state raises its property taxes — which no one wants — it will have to devote more and more of its operating budget to paying off bonds. Making up for years of under-funding for the state's pension system and meeting the state's obligations to set aside money for retiree health benefits are further squeezing out resources that could otherwise go to priorities like education, health care and cleaning up the Chesapeake Bay.

To his credit, Mr. Hogan says he wants to make an honest reckoning of Maryland's ongoing revenues and expenses. To the extent that he sounds dire in doing so, that's a reflection of how much he needed to recalibrate his campaign rhetoric to meet the state's fiscal reality. When he was stumping for votes, Mr. Hogan made the task of reducing state spending sound easy and painless — something that could be accomplished through elimination of waste, fraud and abuse — and he raised expectations that he would be able to quickly cut taxes. What he did Thursday wasn't so much a matter of dumping on the O'Malley administration as it was preparing his supporters for the rough ride ahead.

Mr. Hogan made the observation Thursday that the vast majority of the budget is formula-driven, which presents him with a double-edged problem. The governor-elect's fiscal adviser, former state senator and Anne Arundel county executive Robert R. Neall, notes that the formulas do not take into account growth in the state's economy or tax revenues. They increase every year whether the state can afford it or not. But addressing that problem isn't something the governor can do on his own. Though he has tremendous authority over the budget, he needs to get the General Assembly's approval to monkey with the formulas for things like K-12 education, Medicaid and support for community colleges. That's not an easy task for any governor, but it could prove even more difficult for a Republican executive faced with a Democratic General Assembly.

But it is a reckoning that is long overdue — a point, incidentally, that Lt. Gov. Anthony G. Brown made in his endorsement interview with The Sun this fall. Marylanders made clear in this election that they do not want the state to try to tax its way out of the problem, and the continued fiscal belt-tightening in Washington means Maryland's economy is unlikely to grow its way out. That means tackling the spending side — not because the state has been fiscally reckless so much as that it is suffering the consequences decisions made with the best of intentions.

There will be many devils in the details of what Mr. Hogan proposes in the weeks ahead. We may or may not agree with the way he chooses to balance competing priorities, but we don't dispute the parameters of the problem he's faced with or the need to tackle it forthrightly. This is a question of math, not spin, and of the difficult choices that must be made for the numbers to add up. We certainly hope the Democrats in the General Assembly will see it the same way.

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