Saturday, December 19, 2009

Fix Maryland's SAP ("Spending Affordability Process")

The Maryland General Assembly's "Spending Affordability Committee" has just issued its annual report that supposedly tells Maryland's legislators what the cap on the state's spending should be for the coming fiscal year. In this case, according to the Gazette's report, the SAC recommended zero growth for the state's operating growth for fiscal 2011. This uncharacteristic spending restraint is projected to cut in half a $2 billion budget deficit.

Of course, the projected budget deficit should impel Maryland's governor and legislators to find further spending reductions. And, before – wrongly -- getting giddy over the SAC's recommendation of seeming fiscal restraint, please have in mind that, as a Free State Foundation study put it last year: "The spending affordability process is broken and should be abandoned. Instead of ensuring fiscal responsibility, it facilitates fiscal irresponsibility."

The Free State Foundation paper, entitled, "Structural Solutions for Maryland's Structural Deficit: Pathways to Reform," explains many reasons why the spending affordability process is broken. Here is a pertinent excerpt:

"Another problematic aspect of spending affordability is that the spending

limit is an aggregate limit on general and some special funds. This combination

prevents legislators or citizens from comparing estimated State general fund

revenues to "affordable" general fund appropriations. If such a comparison could

be made, the imbalance between revenues and expenditures would be clear.

The spending affordability process is vague and malleable and, thus, easily

manipulated. The General Assembly reduces special fund appropriations but

authorizes an increase in the appropriation (and thus spending) during the fiscal

year through the use of budget amendments. The General Assembly also reduces

general funds and authorizes the use of special funds in lieu of the general funds

through budget amendments."

The FSF study not only explains why the "spending affordability process" is broken and facilitates fiscal irresponsibility. It contains nine recommendations for changes in Maryland's budget process that, if implemented, actually would help achieve fiscal responsibility. Read the entire study here.