Overall, the immediate response to the $47.9 billion spending plan from Hogan (R) was positive from both sides of the aisle, even as legislative analysts warned about a ballooning deficit in future years.
“We’re, of course, happy to see no tax increases and no cuts to services,” Senate Minority Whip Stephen S. Hershey Jr. (R-Kent) said Wednesday morning, not long after the governor briefed General Assembly leaders on his budget.
House Appropriations Chairwoman Maggie McIntosh (D-Baltimore City) said that many of the priorities of her chamber and party — money for education in particular — appeared to be fully funded.
“I’m not going to be a complainer here,” said McIntosh, a frequent Hogan critic. “At first blush, it looks good.”
Hogan proposed tax rebates for first responders, military members and solar projects on public buildings that together would cost nearly $18 million in the fiscal year that starts in July and climb to $47 million annually four years later.
Legislative analysts who started to pore through the budget raised red flags about a “troubling” spending pattern in the plan, according to a summary of their findings provided to The Washington Post.
They said the governor’s budget appears to spend $37 million more than it would take in and said it charts a financial course that would require dramatic budget cutting in the future.
Hogan’s staff disputed whether his budget was balanced, but agreed that Maryland faces a widening gap between revenue and expenses in the future.
Maryland is required to have a balanced budget each year. But analysts said Hogan’s proposal would set in motion a scenario where state spending exceeds its revenue by $709 million in the 2022 fiscal year. Over four years, planned spending would exceed revenue by a total of $3.7 billion, a scenario that requires policymakers to trim programs by that much to balance the books.
That so-called “structural imbalance” comes as the General Assembly’s leading Democrats are pushing an education overhaul that would require as much as $4 billion a year in additional state and local spending when fully implemented. Analysts warned that enacting those reforms without a way to pay for them would “exacerbate” the problem.
The projected imbalance also comes from a governor who campaigned on fiscal restraint and characterized his fiscal 2021 budget as “structurally balanced.”
The mismatch between future spending and the resources to cover the tab has periodically bedeviled Maryland governors. Hogan’s predecessor Martin O’Malley (D) also faced deficits that required widespread cuts, though the Great Recession dramatically worsened the problem.
Hogan spokesman Michael Ricci said the administration disagrees with analysts over how to account for major IT projects, a conflict that gives rise to most of the $37 million budget discrepancy. Ricci also blamed the legislature for passing spending requirements that hamstring the governor’s ability to rein in future costs.
“It’s good to hear that [the analysts’ memo] shares our concern about these fiscal challenges, and we look forward to working with the General Assembly in a collaborative fashion to pass a final budget,” Ricci said in an email.
In the meantime, analysts plan to pore over the budget to see how the governor managed to limit overall growth by 1 percent even though some high-dollar spending priorities increased by 4 percent or more.
“How that math works, I don’t know yet,” McIntosh said, suggesting analysts might uncover other budget cuts. “That money gets transferred from some place else.”
She said, for example, the entire state should be pleased Hogan found $80 million to move forward with expanding the 125-year-old Howard Street Tunnel, a bottleneck that prevents double-stacked cargo containers from leaving the Port of Baltimore. However, the governor funded the project in part with $5 million that would have otherwise gone to repaving roads in the city.
“That means the potholes in front of my house won’t get fixed,” McIntosh said.
The budget now moves to her committee and the Senate Budget and Taxation Committee, which will each review it before separately recommending revisions. The General Assembly can trim spending, but it cannot increase the budget without the governor’s approval.