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baltimoresun.com

O'Malley gets serious about jobs

Our view: Leaders in Annapolis are right to focus on infrastructure as the key to creating jobs — and they're right not to rush the process

6:08 PM EDT, October 17, 2011

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Gov. Martin O'Malley has made two wise decisions when it comes to legislation to help create jobs in Maryland. The first is to focus on expanding infrastructure spending. That's something only government can do, and it will create jobs right away in struggling industries while providing long-term benefits for Maryland's economy. The second is to wait to handle the matter during the regular legislative session that convenes in January rather than trying to cram something through during this week's special legislative session. Trying to do something now might fit with the sense of urgency on jobs that is de rigueur for politicians these days, but waiting the three months until lawmakers come back to Annapolis will provide time to prepare a more substantial package and sell it to the legislature and public.

Perhaps the most crucial element of the plan the governor discussed in a news conference today with Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch was Mr. O'Malley's stated willingness to finance his proposals in part by increasing Maryland's gas tax, something he has been reluctant to embrace in the past. That signals a seriousness about this proposal and a willingness to make difficult choices in order to put together an effort large enough to make a real difference.

The central idea of the jobs package he described is quite different from the ideas he floated last month, when the governor first talked up the idea of adding a jobs bill to the work during this week's special session, which he convened for the purpose of adopting new congressional district maps. Originally, Mr. O'Malley was talking about increasing research and development and biotechnology tax credits — worthy ideas, perhaps, but not ones that would create jobs now. Those programs are designed to help fledgling companies in sectors in which the state has a great deal of long-term promise, but in the immediate term, the jobs they create number in the dozens, not the thousands.

Others, notably Mr. Busch, have been pushing instead for increased infrastructure spending. Given the hit Maryland's construction industry has taken in recent years, spending more on building and repairing roads, schools and other public works makes sense. The state has billions of dollars in unmet needs in those areas, so it could put people to work right away. And those investments would have long-term benefits in making the state's economy more efficient.

The key question is how to pay for it. Maryland is running close to its self-imposed debt limit. The state has committed itself to issuing debt that amounts to no more than 4 percent of Marylanders' personal income or 8 percent of state revenues. Under current spending plans, the state has significant capacity under the personal income standard, even if the economic recovery stagnates, but not under the revenue standard. A recent report by the state Capital Debt Affordability Committee found that if the nation falls into a double-dip recession, Maryland will probably exceed the 8 percent cap even if it adds nothing to its current spending plans.

The state could change its rules to allow itself to issue more debt to pay for the new projects, but that's a dangerous business. Maryland enjoys AAA ratings from all three major bond rating agencies, in large part because of a history of strong fiscal management, and changing the debt standards would be a step in the wrong direction. There's no way of knowing whether such a move would lead to a credit downgrade, but the state can ill afford to take the chance. Debt service is already the fastest-growing component of the state budget; paying higher interest rates would only make matters worse.

That means Maryland would need more revenue in order to support issuing more bonds, and the gas tax is the most sensible avenue to explore. There is a historical nexus between the gas tax and transportation funding, and the state's 23.5-cents-per-gallon levy has not been increased in nearly 20 years. A commission studying the matter recently recommended a 15-cents-per-gallon increase, to be phased in over three years, and the governor said he is open to that idea. It would be controversial, but it is necessary. Gas taxes have simply not kept pace with the state's need for maintaining its transportation infrastructure.

The final element of Mr. O'Malley's jobs plan is to order state agencies to review their regulations with an eye toward streamlining them to remove barriers to economic growth. That's an idea that has been given a lot of attention by Republicans nationally and in Maryland, and there is no doubt that improvements can be made. But the process needs to be conducted thoughtfully. One person's burdensome regulation is another's necessary protection. Rather than seeking a quick review — the governor ordered his cabinet secretaries to report back by Dec. 17 — he should create an opportunity for dialogue with businesses and public interest groups so that the state's goal of creating jobs and its responsibility for protecting the public interest and welfare are not mutually exclusive.