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Hogan's penny pinching

The low-paid food service workers at the Springfield Hospital Center who stand to lose their jobs under Gov. Larry Hogan's budget proposal got the attention and sympathy, deservedly so, of Democratic lawmakers when union leaders brought them to Annapolis on Tuesday. They are a reminder that cutting government spending comes with a human cost, and we certainly hope the Hogan administration comes through on its promise to find them other jobs in the government or the private sector. But they also appear to be just the tip of the iceberg when it comes to the ways in which Mr. Hogan's administration is working to rein in the cost of government.

Maryland's fiscal picture looks as good at the moment as it has in recent years. Thanks to a rebounding economy, Maryland now expects to finish the current fiscal year with about $420 million more in tax collections than analysts expected at this time last year. The budget for the current year, fiscal 2016, is in "structural balance," meaning that ongoing revenues exceed ongoing expenditures. The same is projected to be the case in fiscal 2017, the budget for which Mr. Hogan unveiled last week, and for fiscal 2018. Projected deficits, albeit small ones, return in 2018, but the state has enough cash on hand to carry it through at least the next five years. (The governor's proposed tax cuts would change that modestly.) The governor is proposing to keep the state's rainy day fund better stocked than the 5 percent bond ratings agencies expect and to sock away nearly $450 million in unallocated funds.

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Despite the flush balance sheet, the governor has made a number of penurious decisions. He is funding step increases for state workers but not a general cost-of-living increase. He is eliminating a net of 553 positions in state government (though most of them are currently unfilled). He did not set aside money for legislators to allocate for pet projects in their districts. (It's about time someone did that.) He's proposing to issue $61 million less debt for capital spending than the state's Spending Affordability Committee recommended, a decision that could help contain what are projected to be rapidly accelerating debt service payments in the future.

It's not all austerity — Mr. Hogan is providing sufficient funding for the University System of Maryland and Morgan State University to hold tuition increases to 2 percent next year, and he is boosting Highway User Revenue payments to the counties. But the overall trend is clear, and it goes beyond the obvious.

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The Hogan administration is employing a somewhat novel device in its budget proposal called "targeted reversions." Governors' budgets routinely include a estimate for funds agencies won't spend in the coming year for various reasons that will "revert" to the general fund. Typically, it has been about $30 million, and it is offset by "deficiencies" — that is, money state agencies have spent in excess of what was budgeted. Mr. Hogan's Fiscal 2017 proposal contains a $30 million estimate for general reversions, but also $303 million in "targeted reversions," that is, money from the current, approved budget that agencies have not spent and do not intend to. Much of it is related to declining Medicaid caseloads, but it also includes tens of millions that won't be spent by state agencies for various programs. And that's on top of the governor's planned, 2 percent across-the-board spending cuts in state agencies for the current fiscal year, which was achieved in large part by deciding not to fill vacant positions or holding them open longer than planned.

Lawmakers complained last year about the across-the-board cuts, saying the tactic robbed them of their proper oversight role. But the fact of the matter is that a governor, by virtue of his position as chief manager of the state government, has tremendous authority to determine how agencies conduct their business in ways that are often hard to evaluate. Moves like outsourcing food service at Springfield Hospital (and the Regional Institute for Children and Adolescents-Gildner) may result in greater efficiency, or they may result in worse service. Deciding not to give state workers a raise at a time when state revenues are coming in much higher than expected may help put the governor in a position to offer substantial tax cuts in the years ahead, but it may also contribute to low morale, high turnover and poor performance. Union officials predicted that some cost saving measures the governor sought in state correctional institutions could actually put guards at risk.

Voters elected Governor Hogan on his promise that he could rein in state spending without adversely affecting the delivery of state services. We don't doubt that a fresh set of eyes can find ways to pinch pennies, but at some level, you get the government you pay for. We certainly hope he proves wise enough to recognize the tipping point.

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