O'Malley's rough fiscal ride

O'Malley indulges in a bit of self-serving (though generally accurate) speechifying at his last BPW meeting.

Gov. Martin O'Malley's last meeting as chairman of the Board of Public Works was nothing short of a love fest. He was showered with love from Treasurer Nancy K. Kopp, who praised him as "the right man at the right time" to navigate the toughest economic downturn in several generations. Comptroller Peter Franchot gave him some love in the form of a piece of art featuring Frederick Douglass and a call for a standing ovation "because he deserves it." But the most love came from Mr. O'Malley himself, who took the occasion for a lengthy defense of his record as the state's fiscal steward, much maligned these last few months by the man who will soon replace him, Gov.-elect Larry Hogan.

A few minutes into the meeting (which, true to form, he started late), Mr. O'Malley stripped off his suit coat, rolled up his sleeves and walked over to a large screen on which he ran through a series of slides setting the state's present budget situation in a context ranging back as far as the administration of Marvin Mandel. The gist of it: A pair of irresponsible decisions a dozen or more years ago in the form of an income tax cut and a new education funding formula put the state in a massive hole that was not sufficiently addressed until a 2007 special legislative session Mr. O'Malley called, which involved tax increases, legalization of casino gambling and spending cuts. Then the Great Recession hit, blowing another $2 billion hole in the budget, which the governor managed by more budget cuts and tax increases while seeking to protect key investments in areas like education and health care. But just as the state was recovering, it was battered again by "misbehavior in Congress" that led to a government shutdown and budget cuts that had a disproportionate effect on Maryland's economy, which brought him back to where he was today, seeking more cuts and other measures to close a $400 million hole in the current year's budget.

Was this exercise a bit self-serving? Sure. And it left out some key details, like the state's increasing debt burden under Mr. O'Malley's watch that will have repercussions for years to come. But in the broad strokes, the governor's narrative is true. He made it his priority to maintain the state's hefty investments in K-12 and higher education, expand access to health care among the poor, make the income tax more progressive and generally maintain the level of public services in the state. He was elected and re-elected on that platform, and he carried it out under extraordinarily difficult conditions while simultaneously addressing funding crises in transportation and state worker pensions.

To what extent the love for Mr. O'Malley today was shared in the Hogan transition headquarters remains to be seen. The outgoing governor's decision to seek cuts at the Board of Public Works before his departure had not been expected, and so it is certainly a positive development from the perspective of Mr. Hogan (and the state generally) that Mr. O'Malley chose to make them. The sooner the current fiscal year's budget could be brought back into balance, the less severe the cuts would need to be. Still, Mr. O'Malley is leaving a bare $6 million cushion in the state's general fund, and only about half of the $400 million in budget actions the governor is taking are in the form of spending cuts. The rest come from fund transfers and other tactics, some of which will require the legislature's approval. Moreover, it's not clear how much of the cuts amount to one-time reductions and how much (if any) will improve the long-term shortfalls Mr. Hogan will have to face, starting with the fiscal 2016 budget he is required to introduce by Jan. 23.

That said, Mr. O'Malley's ninth and final round of Board of Public Works cuts certainly beat the effort former Gov. Parris N. Glendening made in a similar situation 12 years ago, when another Republican governor, Robert L. Ehrlich Jr., was about to take office amid a budget crisis. Mr. Glendening also took several actions, but he made fewer cuts and instead relied on drawing down the state's rainy day fund to balance the books. Mr. O'Malley is leaving that fund intact. That should earn him some love from the most important evaluators of his fiscal legacy: the bond rating agencies.

We have disagreed over the years with some of the tactics Mr. O'Malley has used to balance the budget, but we cannot deny that he has repeatedly been forced into painful decisions by circumstances largely beyond his control. As such, today's actions were a fitting end to his fiscal legacy. Here's hoping Mr. Hogan has the good fortune to govern in less interesting times than his predecessor.

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