Maryland Gov.-elect Larry Hogan (R) on Thursday ordered his budget adviser to prepare a list of options within 10 days to help him address the “serious fiscal situation” he is inheriting as he prepares to take office next month.
At an afternoon news conference, Hogan said it was too soon to talk specifics but warned that he will have to make some “very difficult decisions” to close projected shortfalls of nearly $300 million in the current fiscal year and $600 million in the coming fiscal year.
In doing so, Hogan pledged he would end the state’s chronic problem of spending more in its roughly $16 billion general fund budget than it collects in taxes.
“We can’t continue to simply continue to say ‘yes’ to every demand for increased spending,” Hogan said. “It means we’ll have to have the courage to say ‘no.’ Many worthwhile things that we’d like to have simply aren’t going to be possible until we turn our economy around.”
Hogan, an Anne Arundel County businessman, made tax cuts a rallying cry during his campaign and pitched himself as a leader who can control state spending.
While the shortfalls Hogan face are sizable, Gov. Martin O’Malley (D) confronted a larger gap early in his eight-year tenure and used a combination of tax increases and budget cuts to deliver balanced budgets.
The still-fragile economy has prompted O’Malley to make repeated spending cuts in recent years, and aides said he has directed state agencies to slow their spending in coming months to help close the projected $300 million gap in the current budget.
In a statement Thursday night, O’Malley chief of staff John R. Griffin said O’Malley’s administration had “done more to constrain spending than any administration in recent Maryland history.”
“We’ve also invested in key priorities — education, innovation and infrastructure — and still we’re one of only seven states to maintain a AAA bond rating throughout the recession,” Griffin said.
On Thursday, the governor-elect sidestepped a question about how much tax relief he will be able to provide in the near term, given the budget outlook. Leaders of the Democratic-controlled General Assembly have questioned whether it would be responsible to cut taxes at this point.
Sen. Richard S. Madaleno Jr. (D-Montgomery) said that while the state faces fiscal challenges, he thinks Hogan is “overdramatizing” the difficulty he and lawmakers will have balancing the budget.
Madaleno, the incoming vice chairman of the Senate Budget and Taxation Committee, said Hogan reminded him of the “Star Trek” character Scotty, who often overstated the challenge of assignments given him.
“You tell the captain it will take a week to get the engines back on, and you get it done in three hours, and you look like a miracle worker,” Madaleno said.
Hogan’s budget proposal for the coming fiscal year, which begins in July, is due two days after he is scheduled to take office on Jan. 21.
Hogan has pledged not to raise taxes and said Thursday that his team might seek to adjust several formulas written into law that control how much the state spends each year on priorities including education and health care. Doing so would require buy-in from the Democratic-controlled legislature.
“If we can take the strong medicine now, I believe that we can begin to heal our state’s economy, and that will benefit all Marylanders,” Hogan said.
His budget adviser, Robert R. Neall, walked reporters through several charts showing long-term strains on the state budget, including rising debt service and pension costs.
Hogan criticized O’Malley and state lawmakers for having relied on “unwise budget gimmickry” to balance budgets in previous years. Hogan has said he would end the practice of diverting money from other funds, such as a separate transportation budget, to balance the state’s primary operating budget.
“They drained our checking, savings and retirement accounts,” Hogan said. “They maxed out every credit card. They tapped into the Christmas fund, the college tuition funds, they even broke into every one of the kid’s piggy banks, and we still don’t have enough to pay the bills.”
During the campaign, Hogan pledged to roll back as many of the tax increases as possible that took place during the O’Malley years. The governor-elect has remained vague about his plans in that regard.
So far, the only tax that Hogan has pledged to address in the coming year is a stormwater remediation fee that he has derided as the “rain tax.” The levy, which the state authorized, is imposed by 10 of Maryland’s most populous jurisdictions to fund programs to reduce pollution from stormwater runoff.
Hogan has said the state should not require counties to impose a fee. Such a move would not cost the state any revenue because counties collect the money.