Gov. Larry Hogan is right that voters elected him to bring more fiscal restraint to Annapolis, and we support him in that goal. But his decisions on how to handle his unresolved spending conflicts with the General Assembly — most notably, the $68 million lawmakers had set aside for K-12 education — make no sense on either political or policy terms.
There's been plenty of over-heated rhetoric on both sides in recent days, but the situation the governor faced boiled down to this: He had four worthwhile things on his plate in need of funding and enough money to cover three of them. The legislature set aside $200 million in this year's budget for its priorities — fully funding the Geographic Cost of Education Index, a school funding formula that helps districts where the cost of education is higher; maintaining the 2 percent cost of living increase state workers received in January but which Governor Hogan proposed to take away in July; and supporting assorted health care initiatives, including higher reimbursement rates for doctors who treat Medicaid patients. Governor Hogan wanted to maintain the level of over-payments into the state pension system the legislature had committed itself to previously in order to make up for years of under-funding, but which this year's General Assembly had slashed by $75 million. (For the record, Mr. Hogan was right to insist that the legislature should stick to its original pension plan, and we said so at the time.)
From a policy standpoint, two of those four priorities have a direct relationship with each other. The COLAs help state employees right now, but boosting the state's pension fund helps secure their retirement. To have chosen pensions over COLAs would have been entirely consistent with Governor Hogan's message that he wants to trade short-term thinking for long-term solutions. But last month, Mr. Hogan decided to fund the COLAs, a decision that not only increases the costs of running state government from now on but which also increases the eventual costs of retiree benefits, thus diminishing to some extent the value of his contribution to the pension system.
Meanwhile, Mr. Hogan's choice on education funding looks good in the short term but bad in the long run. By digging in his heels and refusing to spend $68 million for education in Baltimore City and 12 counties, he boosts the state's short-term bottom line. But he simultaneously announced that he would allow legislation mandating full funding of the GCEI in future years to become law, effectively tying his hands and those of his successors. He knows that's a mistake, and he said so Thursday — more than 80 percent of the state budget is already mandatory spending, and at some point, enough is enough. His rationale is that the legislature would have overridden his veto anyway. But that probably wouldn't have been the case if he had released the money this year and shown a willingness to work in good faith with the legislature. There are enough Democrats in the General Assembly who know more mandated spending is a bad idea to sustain his veto — if, that is, they aren't at war with a governor who ignores their priorities.
And here's the craziest part of it all: Governor Hogan can't just shift the $68 million from GCEI to the pension system. The General Assembly passed the budget, and it specified that the money could be spent in the coming fiscal year on education, not on pensions. It is law. There is language in the budget that allows Mr. Hogan to dedicate part of the state's undedicated fund balance, up to $50 million, to shoring up the pension system, but not until fiscal 2017, more than a year from now. Between now and then, the legislature will come back, and it can just cut it again. The General Assembly has shown all too well its willingness to shortchange the pension system; now it's liable to do it out of spite.
Much of the criticism of Mr. Hogan's decision has focused on its effect on Baltimore City schools, which would have gotten an additional $11 million if he had released the GCEI funds. The contrast between the need to do more for the city's children, so clearly demonstrated during the aftermath of Freddie Gray's death, and a decision to shortchange the school system could not be more stark. Mr. Hogan defends himself by asserting that there is a tremendous amount of waste and mismanagement in the city schools and that Baltimore City's government spends a much smaller percentage of its funds on the schools than most other jurisdictions.
As for the former, we don't doubt that the school system could be run more efficiently, and we certainly fault CEO Gregory Thornton for doing so little to explain what he would do with the extra $11 million. But we also doubt that Mr. Hogan has real facts at his disposal here. Recall that on the campaign trail, he asserted that he had found $1.5 billion in waste, fraud and abuse in state government. We haven't heard much about that since he took office.
As for the city's commitment to education, the state has measurements for how much effort local jurisdictions are making to fund education, given their tax base, and Baltimore isn't at the bottom of that list. Moreover, although Mr. Hogan correctly asserts that Maryland is spending more on education in this budget than ever before (something that has been true every year in recent memory), Baltimore is actually getting less state support than last year. And because the city has so many low-income, learning disabled and other disadvantaged kids, it needs more state support.
We'll grant Mr. Hogan that the shrill attacks on him during the last few months from the Maryland State Education Association and others were over the top and ultimately counter-productive. But Mr. Hogan's response — refusing to fund the most popular form of state spending and promising instead to do something he cannot do — serves no purpose at all.