In the grand scheme of last-minute collapses in Maryland budget negotiations, the one Monday night wasn't so terrible — the 2012 debacle that led to two special legislative sessions and a gambling expansion referendum was much worse. Nonetheless, the acrimony between legislative Democrats and Gov. Larry Hogan at the end of the Republican executive's first General Assembly session was entirely unnecessary and avoidable. Both sides could have made concessions that would have made the final result better for the schoolchildren, state employees, pregnant women and others who will be worse off as a result of the failure to find common ground. But only one person can ameliorate the situation now, and that's Governor Hogan.
A new way to budget
When Mr. Hogan introduced his budget in January, he emphasized his effort to eliminate immediately the long-term imbalance between Maryland's projected revenues and spending while at the same time helping to shore up the state's pension system. He left no room for tax cuts and indeed had not proposed any at the time. He promised a new day for how Maryland handles its finances, and he delivered it — though doing so would not prove as easy as he made it out to be on the campaign trail.
When he was running for governor, Mr. Hogan said his plan was to eliminate waste and fraud. But when he put together his spending plan, it was a different story. Although the budget included slightly more money for K-12 schools than former Gov. Martin O'Malley's last budget did, Mr. Hogan's proposal included less than Maryland's education funding formulas called for — and thus less than the counties and school districts were expecting. Some counties, including some that supported Mr. Hogan in the 2014 election, actually got less for education in Mr. Hogan's budget than they'd gotten the year before. State workers, who had gotten a 2 percent cost of living increase on Jan. 1, were due to have it stripped away on July 1. And Mr. Hogan's proposal called for reductions in Medicaid provider reimbursements and changed eligibility rules in a way that would have stripped coverage from some low-income pregnant women.
The governor said at the time that he did not want to make cuts to schools or employee pay but had no choice if he was to keep his campaign promise of putting Maryland on sounder fiscal footing, and he publicly encouraged the General Assembly to find other spending reductions in order to enable larger investments in education without straying from fiscal responsibility.
Headed in the right direction
And that's just what they did. The House Appropriations Committee, under the leadership of new Chairwoman Maggie McIntosh, developed bipartisan consensus around a set of spending cuts that enabled the restoration of about $200 million for education, employee salaries and health care. We faulted them at the time for accomplishing part of that feat by reducing a supplemental payment to the state's pension system by $75 million. Governor Hogan congratulated the committee in a statement that reiterated his desire for discussion of tax cuts but did not mention pensions. The full House overwhelmingly supported the revised plan, and the Senate followed suit, eliciting another statement of congratulations from the governor. If he was unhappy with the way things were unfolding, it was evidently news to the vast majority of Republican legislators who voted for the budget.
Then weeks dragged by as the legislature and the governor engaged in something of a stand-off. They watered down or killed his legislation on taxes and charter schools, and he sent down supplemental budgets that didn't address the priorities they had overwhelmingly voted to fund. As is the way of Annapolis, things appeared headed to a climactic final negotiation, but the makings of a deal from which all sides could declare victory were easily evident.
The deal that wasn't
The legislature could give him a repeal of the stormwater management fee requirement that Mr. Hogan had made such an issue during the election, some reform to the state's charter school law and perhaps a minor tax break for one of the special interest groups Mr. Hogan had targeted for relief, like military veterans. (In the end, they did all that anyway.) Mr. Hogan could then restore the spending the Democrats wanted and claim that he had changed the trajectory of Maryland's budget and set it on a more fiscally responsible course. And he would have been entirely justified in doing so; even with the Democrats' changes, the budget would remain markedly different from what it would have been if Anthony Brown had been elected.
Toward the end of the legislative session, Mr. Hogan sent down another supplemental budget request that would have restored the $75 million overpayment to the pension system. That irked legislative leaders, as it appeared to be a step to drive the two sides' positions farther apart rather than bring them closer together. Nonetheless, a deal easily could have been struck. The money to reverse the pay cut for state workers was roughly equivalent to the money Mr. Hogan wanted for the pension. There is a clear nexus between the two — one shores up state workers' finances today, the other does so in the future. Mr. Hogan could have made a clear case that the pension is in the greater long-term interests of both the state and the workers. Democrats and their allies in the unions might have preferred the money be spent on the workers' current pay, but as deals go, it would have made sense.
Over the weekend, Mr. Hogan proposed instead a deal that would have split the difference on school funding, provided money to maintain state workers' current pay and left cash to divide among assorted health care priorities — though not as much as Democrats wanted — and kept the $75 million pension payment. But the Democrats balked, and it's easy to see why. At that point, they held all the cards.
The Democrats' winning hand
House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller had in hand a budget deal they could push through their chambers, on a party-line vote if necessary, at any time, that provided Mr. Hogan with none of the items he was negotiating for. Knowing that, they likely figured Mr. Hogan would come back with a better deal before adjournment. If not, he could still allocate the money after the fact, and why wouldn't he? They had restricted the $200 million so that it could only be spent on the priorities they had identified, and they had done very nearly as much as Mr. Hogan wanted to improve the state's long-term fiscal health. Meanwhile, they gave him some of what he wanted on charter schools and enacted a "rain tax" repeal that he cheered.
But Mr. Hogan didn't come back with a better deal, and now he's vowing not to spend the money. There are two groups of people who are delighted by this turn of events. One is the governor's hardest-core supporters, who have lit up the comments section on Change Maryland's Facebook page with atta-boys. The other is the state's most partisan Democrats who want nothing more than to defeat him in 2018. They have been eager to turn Mr. Hogan into the second coming of Bob Ehrlich — that is, a Republican governor they could portray as more interested in Washington-style confrontation than getting things done for the people of Maryland — and now they have an opening.
Bad policy and politics
Indeed, what Mr. Hogan thinks he's getting out of this is a mystery. He's not winning on substance; refusing to spend the $200 million on employee salaries, education and health care isn't putting another dime into the state pension system or expanding in any way the tax relief he provided for Maryland voters.
And the politics of it are a sure-fire loser. Perhaps Mr. Hogan doesn't expect many votes from state workers or the 1.1 million Marylanders who rely on Medicaid. But surely he should be concerned about the parents of the 725,000 students who will be affected by his refusal to restore money for education. Most of those families live in counties that voted for Mr. Hogan and the impact of that should quickly become clear. The Sun's Erin Cox, Michael Dresser and Timothy B. Wheeler reported that the schools in Carroll County — a hotbed of Hogan support if there ever was one — would cut 50 teaching positions as a result, and Baltimore County Superintendent Dallas Dance said he would not be able to afford renovations to three high schools. If Mr. Hogan is unaware of just how passionate Dulaney High School parents are about minor things like potable water, we expect he won't be for long.
The biggest nightmare for the Maryland Democratic powers-that-be isn't a Republican governor who stands tough and fights. They know how to beat one of those, and right now they're in a stronger position than they were against Mr. Ehrlich. What Mr. Ehrlich was best known for clashing with the legislature about was the legalization of slot machine gambling, something a majority of the state's voters supported. Democrats would be happy to have a fight in which they're on the side of education funding, which the state's voters care passionately about, and Mr. Hogan is on the side of shoring up the state's pension system, in which voters have heretofore shown little interest.
What Democrats are afraid of is a Republican governor who is eminently reasonable, learns from his mistakes and governs from the center. This is Mr. Hogan's first big opportunity to show Maryland that's what he's going to be. He should reverse course and spend the $200 million the legislature has set aside. If he's not willing to do it for the sake of the hundreds of thousands of people who would be helped by those funds, he should at least do it for his own.