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March 28, 2005

General Assembly Journal 2005 - Part 11

Richard B. Weldon Jr.

We're dealing with the Fiscal Year 2006 budget right now in the General Assembly. Since the whole slots debacle remains off the front burner, the discussion has turned to how to balance the budget for next year.

So, now the House Appropriations Committee brings forth their draft budget. There are some interesting and confusing aspects to how the House leadership proposes bringing the budget into balance.

First, let's talk about the blatant, troubling stuff that government does that you can't possibly get away with when managing your own money. The Appropriations Committee is proposing use of "overattainment" in the FY '06 operating budget.

Overattainment is one of those examples of government-speak. It's a word that causes the Spell Check to underline automatically, forcing me to ignore the fact that MS Word refuses to acknowledge this as a word.

The fiscal analysts that project the future revenues use a variety of tools to determine how much money the state will have to work with. Overattainment indicates the amount of revenue that will exceed the projections.

Instead of waiting to apply the amount of revenue that exceeds the projections to future budgets, the House leadership has decided to apply that amount to the upcoming budget year.

Imagine you're sitting at your dining room table, balancing your checkbook. Things are looking up on the national economic scale, and chances are that your stock portfolio might post gains over last year.

Instead of waiting to apply those potential increases towards your children' s future college tuition, you decide to go out now and buy that Cadillac CTS you've always wanted. Even though your current income does not cover that added expense, you're not worried, you're stocks will probably overattain!

The House leadership isn't satisfied with spending money we don't have. They're also busy laying political traps for Gov. Robert Ehrlich.

One very clear example: Governor Ehrlich made a policy choice two years ago to follow the statutory obligation to pay for service on state debt out of revenue derived from property taxes.

Prior to his election, the practice had been to use property tax revenue for other things, and to supplement debt service payments with general fund transfers.

When the bond debt repayment was shifted back to the property tax base a couple of years ago, the State Board of Public Works voted to increase the state property tax rate by five cents. That increase allowed property tax revenue to fully cover the debt service on the bonds.

In the House Appropriations Committee draft budget, the Democrat leadership has proposed eliminating that increase. Once again, the burden to pay the debt service would shift back to a general fund subsidy.

That creates some interesting complexities. First, the Democrats get to claim they're cutting taxes. Even though they're not (think shift, not cut), they get to make the claim. That steals a traditional Republican platform plank.

Second, they spend the money generated by the increased tax rate, so any surplus of revenue is not available. As it is currently projected, there would have been an excess of revenue, allowing Governor Ehrlich some flexibility in solving other problems.

Third, and most interesting, the Democrat leadership has laid a trap for the Governor and Republican senators and delegates. Eliminating the property tax increase, heretofore used to cover the debt, creates a real problem for Governor Ehrlich and the Secretary of the Department of Budget and Management, Chip DiPaula.

They know full well that without the property tax money, it will be necessary to find $200-$250 million in revenue somewhere else in the budget. You can't tell the bond-holders that you just don't have the money to service the debt!

Since every other account in state government has already been cut, some dramatically, there aren't too many choices as to where to find $250 million.

Governor Ehrlich and Secretary DiPaula will be facing a terrible choice in an election year. They can further cut state agencies and programs. Some of these cuts would impact the Governor's base, which could have disastrous results.

If they didn't want to cut the budget, the Governor could bring up the good old five cent property tax increase again. The Board of Public Works has the authority, in fact the constitutional obligation, to insure that the state can make the debt service payments.

Imagine the campaign ads, the state Democrats claiming that they cut the property tax rate in 2005, but the Governor raised it in 2003 and 2006.

Looks to me like the perfect trap.

Speaking of traps, the House dealt with the Minimum Wage increase on second reading last Tuesday. Yours truly proposed an amendment that would exempt businesses that provide a funded health benefit program for employees.

My thinking is that we'd rather encourage employers to provide health benefits than pay an extra $1 per hour in wages. The cost of a health insurance premium far outweighs the benefit of an extra dollar per hour.

The public policy benefit of increasing health coverage is substantial, and the cost benefit reaches far beyond the minimum wage worker and their family. Adding employees to the rolls of those covered by health insurance will save multiple millions in uncompensated care.

My amendment got shot down, although a number of Democrats voted for it along with most of the Republicans.

The House will pass the Minimum Wage Increase Act, probably along party lines. It will be up to the Governor to decide whether or not to sign it into law.

He (the Governor) faces the wrath of organized labor if he vetoes the bill. He faces the wrath of the business community if he signs it.

Feels like another trap.

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