Laslo Boyd: Surplus Politics

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Last week we may have seen the prologue to the 2018 Gubernatorial Election as well as a foreshadowing of the 2016 General Assembly session.  Public statements were exchanged, criticisms were volleyed back and forth, and there was a scramble to reach the moral high ground.

The precipitating event was the revelation that Maryland will have an unexpected and more to the point, unprojected, budget surplus going into next year.  In response, Democratic leaders in the General Assembly called on Governor Hogan to release education funds withheld from local school systems in his first budget.  Hogan’s Office swatted away the request, indicating that the surplus would disappear in future years and that he is committed to maintaining the fiscal discipline that voters expect from him.

On Monday, Warren Deschenaux, Executive Director of the Department of Legislative Services, confirmed the Governor’s position that deficits are expected again starting in the 2018 budget year.   However, if you think that the debate is only about numbers and that Deschenaux’s comments are the final word, you would be mistaken.

The exchange between Democrats and Hogan is really about priorities, politics and positioning.  And, even before you get to substance, you need to acknowledge that revenue forecasts are more art than science.   Over the years, there have been unexpected downturns and upturns in how much money the State collects.  The key variable is the condition of the economy.  Income tax proceeds, for example, can be impacted by the health of the Stock Market and whether it’s been a good or a bad year in terms of capital gains on sales of stock.

This year’s surplus had not been anticipated when the budget was finalized last April.  We can look at current trends, factor in estimates about shifts in the economy, and then make an educated guess about incoming revenues three, four or five years from now.  The professionals who do that work are generally pretty accurate, but not always correct.

That reality supports the philosophy of caution about increasing spending commitments, but it shouldn’t lock you into a mechanistic approach to future budgets.  Constructing the state budget is about using the best available data, making choices about what is most important, and then rounding up enough votes to endorse a decision.

As to the specifics of this current debate, let’s start with the Democratic position that the surplus provides an opportunity to increase state support for education.  One of Maryland’s strengths is having a well-regarded public education system that enjoys strong political support.  In calling on Hogan to make up for the shortfall in funding in the last budget, Democrats are asserting both that education spending is a top priority for them and that they believe they are on the winning side of that issue politically.

Hogan does not have to put the money in this year because aid based on geographic cost of living differences has been a discretionary part of the legislatively enacted formula for education spending.  Last year, after the standoff with the Governor, the General Assembly enacted legislation to make that funding mandatory starting in 2017. 

In the meantime, however, Hogan continues to assert that he is already providing adequate funding for schools and that his mission is to reduce, if not overall spending, at least the rate at which it increases. 

Both sides give the impression at this point that they look forward to defending their position in the next election. 

Count on this issue being a defining one during the 2016 legislative session.  The Governor gives every indication that the requested funds will not be in his budget submission.  He will be roundly criticized by Democrats for that decision.   Moreover, the process of negotiating over all his top priorities will keep coming back to whether he can be persuaded of the urgency of providing more support for kids and schools.

It will be incredibly difficult for Hogan to maintain the stance that his refusal is purely about fiscal constraint.  To support his position, he would have to avoid proposing increases in other spending categories.  Otherwise, he will be accused of favoring other priorities over education. 

Additionally, and this point may become the most significant one in the debate, he will not be able to propose any reductions in taxes if he wants to keep asserting that he is concerned about future deficits.  This will be a dilemma for the Governor since running for reelection on a platform of reducing taxes is a much more appealing prospect than having as his major claim to fame that he kept the deficit under control.

After an initial 2015 love fest that focused on Hogan’s apparently collaborative style, it has become very clear to Democratic leaders that the Governor is every bit as combative and partisan as Bob Ehrlich was.   He has also shown that he is capable of petty acts that don’t make a lot of political sense, such as his silly Facebook post criticizing a legislative hearing on his decision to close the Baltimore City jail.

More significantly, however, Hogan at this point is popular with Marylanders.  Whether he can maintain that level of support will depend both on the choices that he makes and on the alternatives that Democrats provide to those choices.  This coming session will reveal a lot about those dynamics.



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Laslo Boyd's professional experience includes serving as education advisor to the Governor of Maryland, Acting Secretary of Higher Education, senior administrator in several higher education institutions and university professor.  His work in political campaigns has involved strategic communications, public opinion polling, and development of position papers.  Dr. Boyd has consulted for a wide range of clients in higher education, government, and business.  He has provided political commentary and analysis in both print and electronic media.