Alternative Fact of the Week: The 'Hogan Lockbox'

We don’t know if Gov. Larry Hogan has national political ambitions, but a new online ad this week from his re-election campaign gave a hint that he has what it takes to be president these days — a comic disregard for the truth. Democrats have every reason to complain about the ad Mr. Hogan released this week in which he urges voters to support the “Hogan lockbox” constitutional amendment on the ballot this fall. Creating a new “lockbox” to ensure that casino money enhances Maryland education spending rather than substituting for what we would otherwise dedicate for schools from the general fund was not his idea. Democrats proposed it first, and he followed along. The bill that put the amendment on the ballot was not his. And he proposed creating the lockbox in statute rather than enshrining it in the constitution (a position we favored, incidentally). He signed the bill that put the amendment on the ballot (even though governor’s don’t sign amendments), but to claim credit for it is pretty rich, indeed.

But Maryland Democrats, never fear. Your party isn’t about to get outgunned in the game of playing fast and loose with the facts about gambling revenue. Yes, the same people who brought you the false promise that the money from slots and table games would boost Maryland education are at it again.

You see, the proposed amendment says that casino money could only be used to supplement, not supplant, state K-12 education funding as required by the 2002 Bridge to Excellence Act (a.k.a. Thornton). In the first year, $125 million in casino money would be used for that purpose, in the second, $250 million, in the third, $375 million. Starting in fiscal 2023, all casino money would go into this new lockbox. But here’s the rub: Maryland is well down the path of a re-evaluation of the Thornton formulas by the Commission on Innovation and Excellence in Education (a.k.a. the Kirwan Commission). The group hasn’t put a price tag yet on its recommendations, but it anticipates a re-evaluation of the formulas to provide more support for poorer districts; expanded pre-K; better college and career training in high school; new pathways for teacher professional developmen, and so on. Odds are the price tag at full implementation will be well into the billions per year.

So what happens if and when Kirwan replaces Thornton? Legislators gave a variety of answers to that question, but the consensus among those involved in drafting the proposed amendment is that anything the state spends above and beyond what would have been mandated by the Thornton formulas (as adjusted annually for inflation), counts. If the state mandates universal pre-K for 4 year olds, it can use the casino money for that. If it requires new vocational education programs, it can use casino money. If it simply changes the amount the state is required to give to any or all counties through its formulas, whatever the difference is between that and what Thornton would have required is fair game for casino cash.

So, essentially, Maryland now uses casino money to pay for education spending that is required by law and would otherwise be covered through general tax revenues. If this amendment passes and is followed up (as expected) by legislation stemming from the Kirwan Commission … Maryland will use casino money to pay for education spending that is required by law and would otherwise be covered through general tax revenues. This isn’t the end to “budget gimmickry” Democrats are claiming but really more of the same.

From a fiscal perspective, that’s not actually a bad thing. Both Governor Hogan and the Democratic leaders of the legislature know a big bill is coming due from the Kirwan Commission, and neither is eager to raise taxes to pay for it. What this amendment does is to set the stage for the state to gradually increase its education funding over the next few years to at least get closer to what the new Kirwan formulas might require — much in the same way the state ramped up Thornton spending over time (though that eventually did precipitate tax increases). It’s of a piece with the Hogan/Democrat plan to reserve some of the income tax windfall the state is expected to get as an unintended side effect of the Trump tax cuts as a down payment on Kirwan.

The promise that casino money would go to education was cynical to begin with. The people pushing for gambling knew from the start that the money was fungible. Now, both the Democrats and Governor Hogan are embracing a new version of that fiction — and fighting over who gets credit for it. But although we’re throwing flags on both sides where the politics are concerned, the actual policy at work here is pretty sound. We should decide how much to spend on education based on what it costs to produce a top-quality system that prepares all Maryland students for success, not based on how much people plunk into slots machines. That’s what happens now, and that’s what will happen if the amendment passes.

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