O'Malley's fiscal house of cards [Commentary]

Gov. Martin O'Malley released his fiscal year 2015 budget this week, and once again he made his long used but false claim that he has cut the state budget.

The budget when Mr. O'Malley's first took office was $28.8 billion, according to the Department of Legislative Services; his latest proposal would spend $39.2 billion. The back of the envelope math tells us the budget has grown by $10.4 billion — an increase of roughly 36 percent. The legislature can cut from his proposal.

Where are the cuts? Well that depends on your definition of the word "cut." A normal person would take the word cut to mean spending less money than the previous year. But this is Annapolis, where the definition of a "cut" is merely a reduction in spending growth. You see, the state's leaders believe they are entitled to spend as much as they want, and spending any less than that is a cut.

This is how Mr. O'Malley can talk about simultaneously making both record spending cuts and record investments, i.e. spending.

Even Mr. O'Malley was finally forced to admit that reality at his budget press conference. "A lot of these cuts were cuts to spending growth, but a lot of that growth we intended," he said.

Mr. O'Malley boasts that this budget eliminates a $584 million deficit without raising taxes. He claims there are $457 million in cuts.

Not really.

Again, we're talking the Annapolis definition of cuts here. Real world math shows a general fund spending increase of $741,000. You can do the math for yourself on page 97 of Mr. O'Malley's own budget book.

A large part of how Mr. O'Malley closed the budget gap was capping the annual payment to the woefully underfunded state pension fund. Capping the state payment at $200 million frees up $172 million to plug the budget deficit. However, Maryland's pension and other post employment benefits funds — depending on how you calculate it — face shortfalls anywhere from $28.4 billion according to the Maryland Public Policy Institute and $78 billion, according to State Budget Solutions.

Mr. O'Malley's budget gimmick may not mean a tax increase today, but given his tepid policy response to these unfunded liabilities, it could very well mean a big tax increase down the road.

Mr. O'Malley also brags that he has put the state on a "path to retire the structural deficit by FY 2017." He said very much the same thing in 2007 after enacting the largest tax increase in state history. Seven years and $9.5 billion worth of tax increases later, the structural deficit is still with us. And with no political will to address the spending problem in Annapolis, don't bet on it retiring — at least not on Maryland's pension plan.

Let's not forget that Mr. O'Malley also asked for and received a $75 million increase in the debt limit, to ring up more debt on the state's credit card. He's already amassed $1.4 billion in bond debt just to replace the cash he raided from special funds to shore up the general fund. Annual subsidies from the general fund for debt payments will reach $575 million by 2019, thanks to Mr. O'Malley.

Mr. O'Malley's hagiographic Power Point presentation depicts his administration with the lowest average annual rate of budget growth (2.2 percent) of any administration dating back to Marvin Mandel. However, when you account for the total budget (we pay for the debt spending as well), it's likely much higher. In real dollars, Mr. O'Malley has increased spending far more than his most recent predecessors.

Earlier this week, The Mercatus Center at George Mason University released a report ranking the fiscal condition of the states. The report ranked the states on several short-term, mid-term, and long-term fiscal metrics including cash solvency (Maryland was 41st), budget solvency (43rd), long-run solvency (43rd), and service-level solvency (32nd). Maryland ranked 44th in overall fiscal condition.

The report attributed the position of the states at the bottom of the rankings to "years of poor financial management, bad economic conditions, or a combination of both."

Sounds like the O'Malley era in a nutshell.

Mark Newgent is a frequent contributor to Red Maryland, a conservative radio network and blog whose content appears regularly in The Baltimore Sun and on baltimoresun.com. His email is marknewgent@gmail.com.

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