Commentary by Barry Rascovar, for MarylandReporter.com
The New Year starts on a positive note for Gov. Martin OMalley. After years of depressing budget shortfalls and an achingly slow economic recovery, the governor received good news from the Board of Revenue Estimates (BRE) and the states Spending Affordability Committee.
The bottom line: Marylands budget picture is brightening just as OMalley prepares in another week to unveil his final spending plan as governor.
But there are cautionary notes attached to those reports warning of risks ahead, especially the unpredictable gridlock in Congress that could lead to a financial crisis over raising the nations debt ceiling. Still, the BRE reports a rising possibility of stronger, more sustainable growth in 2014 and beyond.
Projections for 2014
The states unemployment rate has dropped to 6.4% and is expected to continue inching downward.
Housing starts are projected to rise 14% this year and 26% in 2015. Casino revenues should rise 28% to over $1 billion, thanks to the fall opening of Horseshoe Casino Baltimore.
All this prompted the revenue board to project a 4.6% increase in state receipts, which in turn led the legislatures spending commission to recommend 4% growth in Marylands general fund budget.
Will OMalley use this good news to launch a new spending spree that cements his liberal legacy and helps his national ambitions? Or will he heed the warning signs and plot an incremental course that doesnt handicap the next governor?
How other governors acted
There are precedents for OMalley to consider. Gov. Parris Glendening ignored urgent appeals in 2002 from Lt. Gov. Kathleen Kennedy Townsend to make cuts in his final budget and start closing a projected $1.8 billion deficit.
Leaving the deficit unsolved further complicated the charge that this government was fiscally irresponsible, noted Del. Pete Rawlings, the late House Appropriations Committee chairman, in hindsight. It was a major factor in Townsends electoral defeat that fall.
On the other hand, Republican Gov. Bob Ehrlich accumulated a $2 billion surplus in the last budget of his term. He hoped to use this as a cushion in his second term.
Budget highlights 2014 gov picsOf course Ehrlich ended up losing to OMalley in 2006, giving the new Democratic governor a windfall he happily spent.
Years later it is clear that it would have been better to conserve that money for later use as state revenues plunged off the fiscal cliff during the Great Recession.
Reasons for Caution
Heres why OMalley and legislators would be wise to take a go slow approach in the next budget.
Even with all the good news, fiscal analysts are predicting a $188 million deficit by July and a nearly $400 million deficit the following fiscal year.
Most troubling are new costs.
Ballooning, unbudgeted Medicaid bills ($200 million) could grow further due to unexpected fallout from the disastrous start of Obamacare in Maryland.
The state also must contend with soaring debt costs ($150 million) as the governor continues to push for a higher borrowing capacity, and delayed salary increases ($190 million).
Whats left for successor
OMalley also should recognize that his chosen successor, Lt. Gov. Anthony Brown, has made a string of expensive campaign promises that cannot be met if OMalley lets the state budget spins out of control.
Will he follow Glendenings example and choose reputation-building over responsible budgeting? Or will OMalley look to Ehrlichs example and moderate his spending plans so as to leave a manageable budget situation for the next governor?
Those fiscal decisions will tell us a lot about OMalleys character as he concludes his term and prepares for entry onto the national political campaign scene.
All of Barry Rascovars columns can be found at politicalmaryland.com.