In Maryland and Virginia, it’s deja vu all over again, as Yogi Berra used to say.
When the tech bubble burst in 2001, state revenues suddenly dried up and were replaced by red ink. Politicians in both Annapolis and Richmond should have learned their lesson then. They didn’t.
When the housing bubble burst in 2008, both states were again caught in a financial riptide, but this time it was even worse than before. Now facing multibillion-dollar deficits, legislators in both Maryland and Virginia must once again confront the consequences of their profligate spending.
If there’s a silver lining behind these severe budget crises, it’s the chance to get spending on a sustainable trajectory once and for all.
In 2006, Maryland was running a $1 billion surplus. How did the wealthiest state in the union, and with one of the highest tax burdens in the entire U.S., wind up $2 billion short after passing the largest tax increase in Maryland history?
Some of the answers can be found in the December 2009 “Fiscal Survey of States,” published by the National Governors Association and the National Association of State Budget Officers.
Since 2008, when gale-force recessionary winds hit, Maryland has employed a number of strategies to deal with plummeting revenue, including 3-to-5-day employee furloughs, targeted and across-the-board program cuts, reductions in aid to localities, and even dipping into the state’s Rainy Day Fund. Mandated K-12 expenditures and debt service are the only areas exempt from cuts.
According to the Maryland Budget and Tax Policy Institute ( marylandpolicy.org), “almost all projected budget growth is in Medicaid coverage and teachers’ retirement.” These two sacred cows supposedly cannot be touched or even modified even though they now threaten to bankrupt the state.
What Maryland has not done is substantially reduce the number of state workers. According to the NGA report, the number of full-time employees on the state payroll between 2008 and 2010 is down just 1.7 percent.
Virginia has done only marginally better, with a work force reduction of just 2.1 percent during the worst recession since the Great Depression.
An analysis by the Fairfax County Taxpayers Alliance (fcta.org) shows that spending in Virginia almost doubled in the past 10 years, with the state budget ballooning from $17.6 billion to $35.1 billion.
Despite history-making tax increases during that same period, lame-duck Gov. Tim Kaine’s proposed budget also has a whopping $4.2 billion shortfall over the next two years. Yet Kaine’s idea of belt-tightening is to require 105,000 state employees to contribute 1 percent of their paychecks this year, and 2 percent next year, to help pay for their gold-plated retirement plans.
Billions of stimulus dollars have allowed both Maryland and Virginia to avoid any serious trimming of their bloated work forces, as most private companies have been forced to do to stay afloat. If they don’t do it now, they never will.
It’s time to resurrect the Taxpayers Bill of Rights, which limits increases in state spending — in good times and in bad — to inflation and population growth, with any surpluses returned to taxpayers. Had Maryland and Virginia taken this course, they wouldn’t be in the fiscal mess they’re in now.
This is also the ideal time to establish a baseline budget that funds basic no-frills services, such as law enforcement, education and transportation. Spending based on current revenue, not iffy forecasts, with built-in increases only for inflation and population growth will accomplish two positive things.
First, being able to spend just what actually comes in each year will force each state’s politicians to make a list of real spending priorities — and stick to it. Second, if and when the economy recovers and revenues start to go up again, legislators won’t be able to fritter billions of dollars away as they did the last two times.
Barbara F. Hollingsworth is The Examiner’s local opinion editor.
