Marta Mossburg: Legislators need financial literacy more than children
By: Marta Mossburg
Examiner Columnist
October 6, 2009
According to Maryland legislators, they are not to blame for the state's financial mess. It's the children!
A group of Maryland legislators is supposed to release a report in December on steps to improve "financial literacy" in the state. They want to accomplish this by developing a voluntary K-12 curriculum for public schools and adopting standards to measure its success.
A preliminary report released in December 2008 made the recommendations because, "The current nationwide financial crisis and the distress that it is causing millions of American families persuaded the task force that the need for all people to be financially literate is both compelling and urgent."
While a noble goal, it is not Maryland's children who created the state's $2 billion "structural" deficit. Legislators are responsible for that problem, which they created over the past decade. They are also the ones who desperately need a tutorial in basic economics. Twenty years from now the state will benefit from more informed residents. But Maryland needs help now.
Where does Comptroller Peter Franchot, the state fiscal chief, stand on this issue? Joseph Shapiro, a spokesman for Franchot said, "He is focusing his efforts on the schools initiative."
He should consider re-prioritizing his efforts. Here are a few reasons why:
A routine Democratic talking point is that the tax cut passed in 1997 and the 2002 Bridge To Excellence in Public Schools Act, commonly referred to as Thornton, are responsible for the deficit.
In a 2007 press release, Gov. Martin O'Malley said, "either the tax cut or the increased education funding likely would have been affordable by itself. Together, they created a structural budget deficit that reaches more than $1 billion annually."
If that is the case, it follows that those who voted for both are responsible for the deficit. Comparing the two roll call votes reveals that Senate President Thomas V. Mike Miller, Senate Majority Leader Edward Kasemeyer, Speaker of the House Michael Busch, House Majority Leader Kumar Barve, and House Deputy Majority Leader Dan Morhaim are among the culprits. If the state's most powerful elected officials don't understand that passion for education does not mean the ability to pay for it, who will?
And they have not learned from their mistake approving Thornton without a funding source. In 2006, every single legislator voted to enhance teacher pensions in the state despite an inability to pay for them. That means Republicans must also take responsibility for the financial mess.
Then-Lt. Gov. Michael Steele told The Washington Post in April 2006, ""It's a first step, but I'm very pleased. ...We've been paying teachers a lousy pension."
Whether pensions are lousy is a separate question from whether they are affordable -- something lost on the man now leading the Republican National Committee.
Those pensions are a large reason why education spending as a portion of the general fund has risen from 33 percent of the budget in 2007 to 38 percent in 2010. Because pension payments will only go up, other state services will suffer.
For a taste of what's to come: According to the "90 Day Report," a legislative roundup of the legislative session published by the Department of Legislative Services, teacher pension payments are up 22 percent from last year and more than double obligations in 2001.
Last but not least, legislators passed a slate of new taxes in a special session in 2007 just as the financial meltdown started. They put Maryland at a major competitive disadvantage to neighboring states, particularly Virginia, which wrangles with this state for federal contracting jobs. Those taxes rank Maryland in the bottom five of business tax climates according to the Tax Foundation.
It's worth noting that California, a high-tax, richly regulated and bankrupt state after which Maryland models itself, is considering slashing taxes across the board to lure back its diaspora and refill its treasury. Learning from its mistakes could be very helpful for Maryland legislators.
So could a refresher course on public finance, pensions and other subjects requiring a basic understanding of math. As the evidence shows, emotions pass bills, but they can't pay for them.
Examiner columnist Marta Mossburg is a senior fellow with the Maryland Public Policy Institute and lives in Baltimore
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