Bill Would Improve Maryland's "Cushion" Against Future Recessions


ANNAPOLIS (March 10, 2010)—Maryland needs to strengthen its "rainy day" reserve fund to prepare for future budget crises, a state senator testified Wednesday at the Senate Budget and Taxation Committee.

Sen. Jim Rosapepe, D-Prince George's, was speaking in support of his bill that would divert unexpected budget surpluses—extra money that the state's analysts had not projected—into the rainy day fund until it swells from 5 to 22.5 percent of general fund revenues.

"The whole point of it is to save money in good times to cushion impacts in bad times," Rosapepe said in an interview before the bill hearing.

"Instead of allowing the governor to take those unexpected surpluses and spend them, and submit a budget that spends that money without legislative policy action ... all unbudgeted surpluses would go to the rainy day fund," he said at the hearing.

Under the bill, the state would not need to contribute extra money to its reserve fund until the economy recovers, he said, and even then the General Assembly could vote to redirect the money to cover operating expenses.

From 2007 to 2009, the state dropped its projections for fiscal year 2011 revenue by 22.5 percent—the origin of the figure used in Rosapepe's bill.

Had the state enacted similar legislation during the boom of the 1990s, Rosapepe said, the state would have had more than $2 billion in reserves to deal with the current recession—which could have been used to avoid layoffs and furloughs of its employees.

The Anti-Deficit and Fiscal Responsibility Act would try to get the same result for any upcoming financial downturns, he said.

"What you would hope would happen would be that it would be drawn down during the next recession to avoid the kind of budget cuts that we've made," Rosapepe said.

Under existing law, the governor may use rainy day funds to balance the budget without approval of the legislature unless his changes draw down that reserve fund to below 5 percent of the general fund.

The legislature would be able to redistribute the surpluses to cover operating expenses under Rosapepe's bill "but the governor couldn't—that's the whole point," Rosapepe said.

"Current law doesn't require a vote of the legislature to spend this money," Rosapepe continued. "This is much more fiscally conservative."

No witnesses testified to support or oppose Rosapepe's bill at the Wednesday hearing, and no Budget and Taxation Committee members had questions about it.

However, Sen. Ulysses Currie, D-Prince George's—the committee's chairman—said at the hearing that the bill "sounds like a pretty good concept."

"We might not have been where we are today had we had that" during the last period of large surpluses, Currie said.

Capital News Service contributed to this report.

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