Hold the victory speech, Gov. Martin O?Malley. The new $31.5 billion Maryland budget may come in under supposed “affordability” guidelines. But all the built-in assumptions about income and job growth it holds could prove false as the subprime mortgage crisis disrupts economies around the world and at home.
What?s affordable right now could be way out of reach next year at this time. Maybe not. But home sales plunging over 30 percent in the past year in the state, prices falling and skyrocketing foreclosures are not harbingers of good times to come. Neither is news that the Federal Reserve slashed interest rates and the main talk on Capitol Hill is which type of “fiscal stimulus” package is needed to block a recession.
All this makes estimates for an extra $216 million in sales taxes in the next fiscal year as a result of a 20 percent increase look optimistic. Same goes for money generated from the corporate income tax. It?s recent increase to 8.25 percent from 7 percent is supposed to boost collections in the next year. But what makes legislators think more businesses won?t decide to vacate Maryland instead of fork over more money? Computer services in particular ? the ones saddled with the sales tax for the first time ? have no incentive to stay in the state.
And maybe more importantly ? new ones have no incentive to move here.
And what if investment income falls more than already anticipated? The DowJones Industrial Average closed at its lowest level in 15 months Tuesday. Any of the conditions noted above could change. But the protracted and global problems related to subprime lending keep emerging and will affect access to credit in the upcoming year. Exposure to bad loans has forced major lenders to seek billions in bailouts from the investment arms of foreign countries.
Maryland is not isolated from these events. As Comptroller Peter Franchot said in his recent “State of the Treasury” speech, “The conditions that define our current economic landscape provide cause for really serious concern.”
Any slowdown in tax receipts will make it more difficult to fund core services and the ever-expanding cost of retirement benefits for state employees. The unfunded costs of providing postretirement benefits rose from $477 million in 2008 to $491 million in 2009.
That means the best route for legislators is to cut the governor?s budget. They have the power, if not the will.
Encourage them to rigorously dissect the budget and remove the waste by contacting General Assembly leaders at the numbers and addresses included below. They may not like reality, but they must not avoid it by slapping us with the bill.
Speak out
Contact these leaders and tell them to cut state spending:
Gov. Martin O?Malley
410-974-3901; 800-811-8336; MD Relay 800-735-2258
fax: 410-974-3275; tdd: 410-333-3098
E-mail form: www.gov.state.md.us/mail
IN THE SENATE:
President of the Senate
ThomasV. Mike Miller Jr., Dist. 27 (D) Prince George?s, Calvert
301-858-3700
President Pro Tem
Nathaniel J. McFadden, Dist. 45 (D) Baltimore City
410-841-3165
IN THE HOUSE
OF DELEGATES:
Speaker of the House
Michael E. Busch, Dist. 30 (D) Anne Arundel Co.
301-858-3800
Speaker Pro Tem
Adrienne A. Jones, Dist. 10 (D) Baltimore Co.
410-841-3391
Majority Leader
Kumar P. Barve, Dist. 17 (D) Montgomery Co.
301-858-3464
