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Reform Md.’s budget process with a single constitutional trade

Sights and sounds from the first day of the Maryland General Assembly. (Barbara Haddock Taylor, Baltimore Sun video)

Governor Larry Hogan’s decision to withhold $245 million earmarked by the General Assembly has been front page news. These funds were dedicated to numerous worthwhile projects — school construction and the BSO among them — that the legislature had found unsupported or under supported in the budget submitted by the governor. The cost of these projects was offset within the budget total by reductions made to other programs, and total appropriations were less than the governor proposed.

We go through this song and dance every few years, typically when the executive and legislative branches are controlled by different parties. Why? Article III, Section 52 of the Maryland Constitution forbids the General Assembly from adding funds to any program of the executive branch. While the legislature may authorize new spending by repurposing funds, only the governor can implement it. Maryland is the only state in which the legislature’s power of the purse is so circumscribed.

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This provision stems from the intersection, a century ago, of progressive-movement thinking and political expediency. As described thoroughly (and sympathetically) in a monograph by the late Annapolis Alderman Richard Israel, the progressives were influenced by concepts of scientific management, efficiency and the separation of public administration from politics. They abhorred the give and take inherent in legislative decision making, preferring instead to entrust governance to a neutral administrator.

At the turn of the 20th century, Maryland’s budget system was a mess. Revenues were not forecasted comprehensively, and spending occurred through a combination of continuing appropriations, omnibus appropriation bills and special appropriations. With the budget of 1914 came a reckoning. In that year the comptroller reported that spending exceeded available funds by almost $1.5 million (8%).

With a gubernatorial election coming in 1915, both parties pledged to revise the budget system. It was the Democratic Convention that ultimately appointed what is known to history as the Goodnow Commission, directing them to report to the 1916 session of the General Assembly. Goodnow, then President of the Johns Hopkins University, was involved in the municipal reform movement and is regarded as one of the parents of the discipline of public administration. He had previously argued for an executive budget system in New York State and in the revision of the Baltimore City Charter. Based on the commission’s recommendations, the legislature prepared a constitutional amendment that was approved by the voters in 1916. Article III, Section 52 came into effect with the 1918 budget.

After 100 years, what have we learned about the theory and practice of our budget process? For one, governors are not above politics, even as fiscal administrators. The progressives were naive to think otherwise. Similarly, it is naïve to think that the legislature can perform its representative function without participating in the formulation of fiscal policy.

Accordingly, the legislature has adopted strategies to mitigate the impairment of Section 52. The so-called fencing refenced above is one such tool. Acting within its authority to reduce appropriations, the legislature identifies the amount of appropriations it deems unnecessary and authorizes the governor to apply those funds to another program of higher priority. It remains in the discretion of the governor to move the funds, but, whether that is done or not, the funds are deleted from the original appropriation.

Legislation also can be enacted that dedicates revenues to specified purposes, thus limiting the governor’s ability to reallocate them without legislative consent. This likewise makes these funds unavailable to deal with fiscal crises.

And mandated appropriations stipulate the amount that the governor must include in future budgets for specified programs. Public education represents the most substantial such commitment, but there are many other mandates in areas as diverse as aid to local government, housing and economic development.

These adaptations, particularly mandates and dedicated funding, while understandable, are unwholesome from the standpoint of the budgeting process. This particularly is so in times of fiscal stress. This is why nearly every budget in the past decade has been accompanied by a Budget Reconciliation and Financing Act, which serves to ad hoc waive certain mandates and dedications.

So here’s my crazy idea: Why don’t we take what works from our budget process and discard the parts that stem from the ideological confusion of the early 1900s?

I propose a simple constitutional trade: Eliminate the ability of the legislature to mandate funding outside the area of public education and allow the legislature to add funds within a stipulated total, possibly subject to a line item veto. This will undoubtedly unnerve advocates for programs that benefit from mandates, but in the era of the BRFA, what will we really lose except the song and dance?

Warren Deschenaux (wdeschenaux@gmail.com) is the former chief fiscal analyst and director of the Department of Legislative Services in December 2017.

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