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As Long as We Remember...

March 2, 2010

A Proper Budgetary Alternative

Farrell Keough

A friend of mine has a home on the corner of a busy road. Because of this, he is able to sell a myriad of things in his front yard – from cars to lawn mowers to any number of items.


Recently, he found something on the corner of his lot that was not placed there for sale. You see, he lives in the country and a horse escaped.  Unfortunately it was hit by a car and had to be put down. I suggested he put up a sign: “Horse for sale – very low maintenance!” While he did find the humor in that proposition, truth be told, moving an animal of this size requires some heavy lifting.


Speaking of heavy lifting, both Sens. David Brinkley R., Frederick/Carroll) and E.J. Pipkin (R., Eastern Shore) have presented their potentials for handling the overwhelming budget debt Maryland faces.


The approach from these two Senate representatives came in the form of a bill [SB 1004]. Two things should be noted about this method of dealing with our budget:


(1)Only the governor can submit a budget – Budget Reconciliation and Financing Act of 2010 (BRFA) (SB 141 & SB 142)*; and


(2) By submitting this proposal in bill form, unlike an amendment to an existing bill, SB 1004** can be vetted and the implications of its proposals can be reviewed by the Department of Legislative Affairs (DLS).


Never before has a bill been presented to deal with the issues of the governor’s budget; amendments have been the mechanism to allow for changes. An amendment can be slipped in during the process of legislative negotiation. This process generally means budget cuts are either withdrawn or severely lessened with little public acknowledgement.


Those in the legislature were virtually silent during presentation of this bill. Why? Because this proposal offers real and viable solutions to our ever increasing budget problems as well as the ability for negotiation to achieve consensus.

As noted by the DLS:


Although specific spending actions are detailed in the Alternative Plan, it can also be viewed as a framework for bringing spending and revenues into balance.


With a significant fund balance estimated for fiscal 2012 under the plan, there is the possibility, for example, that certain budgetary actions could be phased-in over two or three years. Obviously, other spending actions could be substituted for those in the plan.***


Senator Brinkley summed up this proposal very succinctly in a Washington Post article: “If you are not going to support these reductions, then tell the people where you are going to raise their taxes, because there will be no choice.”


This bill is very sweeping and extensive, but a few areas can be outlined which may or may not pose problems with its passage. As a generality, this bill looked at programs being funded at $5 million or more.


– This bill used the “assumptions” of the O’Malley proposal, (SB 141- BRFA), but stops many of the automatic “inflators” for many programs. These “assumptions” were included as this bill will be attached to the governor’s budget if it passes.


– Numerous university and college funding programs would be cut. These cuts originated with the governor’s proposed budget. It will also enforce that future funding for these programs will not automatically kick back in – a significant variation from the governor’s budget, which would allow these programs to continue with inflated payments in one or two years.


– Consolidation of programs within the college system in Maryland.  This process was already being promoted, but this bill would enforce this cost savings.


– Delete the Geographic Cost of Education Index Funding Formula. This mechanism was created to address the proposition that “educational resources cost more in some jurisdictions than in others due to factors outside the control of local jurisdictions.” “The program was not fully funded until fiscal 2010.” ***


– Cap Disparity Grant at $75 million. Due to variations in property values and taxing abilities in some counties, this program exists to further fund the eight counties that enjoy this additional money.


– Freeze Educational Aid Formulas. This will stop the statutory inflation factors for pupil and transportation funding for our local education aid dollars. Statutory school funding subsumes a huge amount of our state budget. These various cuts or freezes mean schools will continue to be funded – so that canard cannot be used – but the ever increasing costs are held in check.


– Eliminates 1% of the 51,405 executive branch positions – over 500 government jobs.


– Increases employees’ and teachers’ current state pension contributions from 5 to 7 percent. This savings can also translate to county budgets.


– Following the governor’s proposed reduction in police aid grants, this bill would keep that level at $45.4 million. This will be a potentially contentious aspect to the proposal. It was noted by Senator Brinkley that federal monies exist for these areas which many local governments have not applied.


– No monies for the Chesapeake Bay 2010 Fund. Created in the 2007 special session, monies from rental vehicle and gas tax revenues fund this program. During this time of serious budget shortfalls, this program cannot currently be funded.


– Require counties to fund circuit court law clerks.


– Require counties to fund 50% of the retirement costs for local teachers, librarians, and community college faculty.


These last two aspects require serious consideration. Senator Brinkley readily admits these two propositions simply shift the costs from the state onto the counties.


As Senator Brinkley noted, teacher pensions have gone up in cost two times what it was five years ago. That amounts to 15% per year compounded. While some of this increase can be accounted for by the economic downturn and investment losses, this kind of increase cannot be sustained.


Senator Brinkley noted there are only four possible actions:


(1) Do nothing and continue with the status quo.

(2) Have the counties phase this 50% share in over four years.

(3) Implement this bill immediately and deal with the difficulties of this funding shift.

(4) Bring in the unions and begin real and viable negotiations to reduce these costs.


It was also noted that contract negotiations with school and library related employees takes place at the local county level and not at the state4 level. While certain state requirements exist, the latitude to negotiate savings is much more likely to occur directly with those who are involved in the contract settlements.


At no level of Maryland government will budgets be easy to fix or will program cuts not need to be made. We cannot afford a tax increase yet again in this state. Proposing these hard cuts is generally not what we hear from our elected officials, but Sens. Brinkley and Pipkin have certainly stepped up to the plate to represent taxpayers and they deserve great credit for putting this plan together!


* * * * * * * * *


* Note: SB 142 (Creation of a State Debt – Maryland Consolidated Capital Bond Loan of 2010, and the Maryland Consolidated Capital Bond Loans of 2003, 2004, 2005, 2006, 2007, 2008, and 2009) works in conjunction with the governor’s budget bill to allow for a substantial debt.


** SB 1004 is considered ‘reconciliation’.


*** From the Department of Legislative Services review of SB 1004, “Alternative Budget Plan”. No hyperlink to document as of this publication date. A PowerPoint of the presentation is available, but without narration, it does not fully represent the magnitude of this proposal.


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