The powers that be in Annapolis are calling for a do-over on lawmakers' failure to enact key tax and budget bills before adjournment, but they face a growing chorus from Republican legislators and others who think the "doomsday" budget the state has in the meantime may just be a blessing in disguise. How terrible can it be, they ask, if the overall amount of state spending would go up next year by nearly $700 million? In what world does it make sense to complain about draconian cuts when the state is actually spending more money?
To some extent, these critics have a point. Not all of the cuts in the "doomsday" scenario are so terrible; some are perfectly good ideas. But comparing the bottom line from one year to the next is an inadequate way to analyze the wisdom of the spending plan Maryland was left with when the legislative session was gaveled to a close. The problem is not just that the collapse of the budget process forced lawmakers to cut expenditures they want to keep. It is also that they are forced to keep some items they wanted to cut.
Some State Budget 101 is in order. Maryland's planned $35.4 billion in spending next year falls into four categories: general funds, special funds, federal funds and higher education funds. The higher education fund is slated to grow by 3 percent, which roughly corresponds to the projected increase in tuition. The federal fund covers the portion of state services paid for by the federal government — the largest part of which is the federal match for state Medicaid expenditures. It is slated to decline slightly, mostly due to dropping food stamp caseloads. The special funds cover things like the Transportation Trust Fund, Chesapeake Bay restoration funds and open space funds. They are slated to go up substantially even under the "doomsday" scenario — about 8.5 percent — in part because of the doubling of the flush tax.
The general fund is what pays for the basics: schools, most state agency operations and grants to local governments for police, libraries and other services. It is also the source of the so-called "structural deficit" — the persistent gap between state revenues and expenditures that the governor and General Assembly are attempting to wipe out. If all had gone according to plan, the general fund would have grown by about 1.4 percent. But after two tax and budget-related bills were not enacted before the legislature adjourned, a series of contingency measures in the main budget legislation kicked in, forcing cuts that push the general fund to about $160 million below last year's level, a decline of about 1 percent.
Using the word "doomsday" to describe a 1 percent cut is certainly a bit of an exaggeration, particularly compared to what other states have endured since the beginning of the recession. And not all of the cuts it forces are truly devastating to core government services. Among them are eliminating for a year the state's stem cell and biotechnology tax credits and reducing aid to the state's private colleges. That's not ideal, but it's not "doomsday." Eliminating the scholarships that delegates and senators are allowed to hand out to whomever they wish — another of the "doomsday" reductions — is an idea that's long overdue.
Others exact a tougher toll. If the "doomsday" budget goes into effect, state employees, who have effectively seen their pay cut by furloughs in recent years, would lose their first raise since 2008 — a 2 percent cost-of-living increase that would have only kicked in halfway through the year. They would also be forced to pay more for their health insurance. Education aid to local governments would be cut by more than $200 million — including money targeted to help the state's poorest jurisdictions. And community colleges, which are struggling as it is to cope with increased enrollment sparked by the economic downturn, would see their funds reduced by 10 percent.
Those and the other "contingent reductions" are not the ones that lawmakers would have chosen if they were making a serious attempt to balance the budget with cuts alone; they were designed as a motivator to get the House and Senate to agree on a broader tax and spending plan, including income tax increases totaling about $247 million. Moreover, the failure of accompanying legislation that modifies statutory requirements for certain kinds of spending leaves something of a mess. Program Open Space, for example, is now double-funded through both the operating and capital budgets. The plan to start shifting some of the responsibility for teacher retirement costs to the counties and Baltimore City was a casualty of the inaction. Other spending that the legislature had agreed to cut, including millions in reductions to Medicaid and state agency operations, stays in the budget.
The legislature needs to return for a brief special session not because the overall level of state spending under the "doomsday" scenario is so terrible but because the money that is being spent isn't all going to the right places. While legislators are correcting that problem, they should also enact the modest revenue package they had agreed to before time ran out last week. It adds only slightly to the state's tax burden while setting the stage for the state to resolve its long-standing budget problems without jeopardizing its most critical priorities.