Tuesday, March 24, 2009

We Know Times Are Tight, But …

There were constant references to the sorry economy we're living in as the Appropriations Committee of the Maryland House of Delegates completed its preliminary work on the proposed state budget, cutting over $700 million.

The bad habits of the past persisted, both in substance and process. The lawmakers continue to envision increased spending in future years, and the decisions, while taken in public, were for the most part worked out in private. The full report of their work did not go online until late Monday. One has to be well versed in the intricacies of state budget to make sense of the more than 40 mandate reductions and swaps from special to general funds. It was complicated this year by the infusion of federal stimulus dollars.

Some of these structural and procedural problems have been identified in 2008 policy papers by Free State Foundation Senior Fellow Cecilia Januskiewicz, who formerly served as Maryland Budget Secretary.

"In these fiscal times, we can't do all the things we would like," said one delegate, in the repeated refrain. Yet, they were persistently looking for ways to do half of what they would like to do, or a third of what they wanted to do, despite a write-down of $700 million in expected state revenues just two weeks ago. The lawmakers had spent literally hundreds of hours in subcommittee hearings combing the budget for cuts, yet we're unable to achieve their goal of increasing the fund balance (surplus) to $250 million. It is now only $50 million, leaving little wiggle room if there is more bad revenue news in the months ahead. The legislature's top fiscal expert had suggested a $400 million fund balance as a cushion.

Lawmakers did wind up cutting over $700 million from Gov. Martin O'Malley's proposed $ 32 billion budget, with more cuts still to come. Yet they rejected hundreds of millions of other potential cuts proposed by the analysts from Department of Legislative Services, such as cutting the funds that would allow a fourth year of tuition freezes at state universities. In Maryland, the legislature can only cut the governor's budget.

Ultimately, many of the "cuts" were simply reductions in proposed spending increases. Sometimes they "level funded" them -- kept a spending program at the same level as last year.

There were indeed actual reductions from this fiscal year's spending, but seldom is a program taken completely off the books. A rare exception was the "Principal Fellowship Program" in the state Department of Education. Passed in 2005, the program was designed to give incentives to effective school principals to move to troubled schools in other jurisdictions. The money was not spent in fiscal 2007 and 2008, and no principals had been nominated this budget year. The savings? A measly $159,745.

The Sellinger program for public aid to private higher education did suffer a real $5 million cutback from this year. But as the education subcommittee did several times, the budget language restores the funding in subsequent years, and even includes modest increases. Sellinger aid is based on a percentage of what the public colleges and universities receive, and the committee chairman, Del. John Bohanan, who headed a commission on higher education funding, said there is "gentleman's agreement" that the $45 million will go to financial aid for Maryland students at these private schools such as Johns Hopkins University.

Technically the legislators cannot restore cuts the governor has made. But more than half of state spending is mandated in law, and the legislature must approve any reductions in these formulas in the Budget Reconciliation Act. It is there that some of O'Malley's "cuts" in growth can actually be put back. This is what legislators did with the formula for the Maryland State Arts Council which O'Malley was going to cut by $6 million. Powerful and well-organized lobbying by myriad arts organizations in every legislative district got $3 million of that restored.

Who's representing the interest of the average taxpayer in this process? Reporters are about the closest thing to average taxpayers observing the process, leaving it up to the legislators to represent their constituents. For the most part they don't hear from their constituents except those who want to increase the budget or stave off a cut for programs they support.

The hearing rooms where the decisions are actually made are filled with lobbyists for programs, many of them paid by state tax dollars. At the education subcommittee, not only was the University System represented (by a former senator who was once vice chair of the Senate's budget committee), but each major state university had their own lobbyist on hand.

Even for experienced hands, the process is difficult to follow, as the proposed budget revisions were found in four different documents, suggesting options and budget language. Legislative analysts would jump around from one document to the other. These documents were placed on a table as the work session began, producing a feeding frenzy of lobbyists struggling to get copies. There were not enough copies of one key legal sized document outlining alternative budget choices.

In addition to the public meetings, there had also been unannounced private meetings of key committee members. There will always be private discussions among lawmakers, but when key decisions are made behind closed doors, then the public process becomes theater with the lines rehearsed, as the rapid proposal and passage of budget amendments showed.

All told, it is a troubling drama for anyone concerned about growth in state spending and transparency in government.