MARYLAND GOV.-ELECT Larry Hogan’s successful campaign was based on a promise to roll back taxes, which he said could be easily achieved by eliminating $1.75 billion in wasteful state spending. Now Mr. Hogan (R) has dropped the facile talk of “waste, fraud and abuse” and warns in somber tones that painful reductions in state spending are coming, while the promised tax cuts may have to wait.
In fact, spending cuts were never going to be as simple as Mr. Hogan suggested during the campaign, nor quite as agonizing as he hints they will be now.
Maryland has run a structural deficit for many years, and successive governors have found various ways to close the gap year after year. Those ways haven’t always been wise. But Maryland is one of just seven states that emerged from the “Great Recession” with its AAA bond rating intact.
The state’s problems derive mainly from its dependence on federal spending, which accounts for more than a quarter of Maryland’s economy. That spending has contracted sharply in the past couple of years, squeezing state revenue.
According to estimates, Maryland faces a shortfall of $1.2 billion out of $32 billion in projected spending between now and July 2016. It’s not clear whether Gov. Martin O’Malley, a Democrat, will order significant cuts before he leaves office Jan. 21.
Mr. Hogan, to his credit, has begun leveling with state residents. His promised tax cuts could have to wait, he says; Maryland will not undertake slash-and-burn rate reductions like those that have left Kansas a fiscal basket case.
Tough decisions are coming. Nearly 85 cents of every dollar in state spending goes to education, health care and public safety. No real budget scalpel will spare those areas.
Mr. O’Malley, whose two terms in office spanned the recession, made some real cuts along with increasing taxes; he also engaged in budgetary gimmickry. He did not fully repair the damage done by years of shortchanging pension and health insurance funds for retired state employees. He raided special funds for transportation and preserving open space to make ends meet in the general fund. He ran up the bond borrowing nearly to its self-imposed ceiling, saddling the budget with interest on the debt that will weigh on the state for many years.
The test for Mr. Hogan will be to find genuine spending trims, including by changing funding formulas for core priorities that guarantee spending increases over time. In many cases, that will require legislative action, meaning the assent of Democrats who control the General Assembly.
Mr. Hogan has been silent about where the cuts will land, which suggests he is also being cautious. Slash education spending, and creative and talented people will go elsewhere. Slash spending on transportation infrastructure, and Maryland will be a less attractive headquarters for businesses. Slash health-care spending and residents’ quality of life will suffer.
As he has acknowledged, the state faces “very difficult decisions.” Now that he has recalibrated his rhetoric to fit the realities of governing, Mr. Hogan, who won a solid majority at the polls, is well positioned to make them.