By Naomi Eide
ANNAPOLIS—One year after Gov. Larry Hogan shocked the state’s political establishment and won the gubernatorial election on essentially a single-issue campaign, his administration has worked to cut spending and reshape the state’s budget priorities.
Though details were few, Hogan’s campaign promised Marylanders he would cut $1.7 billion in waste from the state government and roll back taxes while upholding government priorities and making the state friendly to businesses.
Since his Nov. 4, 2014, election, Hogan, a Republican, has rolled back road, tunnel and bridge tolls, and pared back fees from some state agencies.
Mileah Kromer, a professor of political science at Goucher College, said that people always like to see the fulfillment of campaign promises.
“I think that his pushing to cut fees over the summer was well received,” Kromer said. “He is certainly pursuing the policy initiatives which he talked about.”
“You could say he is looking out for the taxpayer,” said Warren Deschenaux, executive director and chief budget analyst for the Department of Legislative Services.
“Governor Hogan will have control of the budget, so he will have the opportunity to squeeze further and create savings,” said Deschenaux. “When he has done that, we will look at that and see what he has accomplished.”
Every January, the governor submits the budget to the Maryland legislature, which in turn makes cuts and restrictions. The General Assembly must approve the budget bill in April, one week before the end of the session to avoid going into extended legislative session, according to the Department of Budget and Management. The budget year runs from July 1 through June 30.
In September, eight state agencies reduced more than 200 fees, which, according to the Hogan administration, are expected to save taxpayers approximately $10.2 million per year over the next five years.
Hogan has helmed the announcements of additional windfalls for Maryland residents—though they would have taken place regardless of who was in Government House—including a reduction to taxes businesses pay to fund unemployment insurance, and up to $200 million in local-tax refunds.
“We’ve been through a process of making large and small adjustments now for most of the last decade,” said Deschenaux. “There could still be more room for the budget to economize,” looking at “what can and cannot be accomplished with the resources that have been devoted.”
Most businesses in Maryland will pay between $25.50 and $127.50 less per employee per year because of growth to the Unemployment Insurance Trust Fund. The rate changes were triggered by a formula calculated at the end of September.
Hogan also touted in September that some residents can apply for tax refunds as a result of a U.S. Supreme Court decision, which said it was illegal for taxpayers to pay local income tax in both Maryland and other jurisdictions.
Agencies’ fee changes that were at Hogan’s discretion will have varying levels of impact on Maryland residents.
For example, in the Department of Labor, Licensing and Regulation, fee changes are expected to affect approximately 59,000 individuals, based on the number of licensees or applicants. According to Summar Goodman, a spokeswoman with the department, those affected are expected to save a total of more than $1 million a year. For example, broker and salesperson license fees paid to the Maryland Real Estate Commission were each reduced by $20.
Fee changes in the Department of Natural Resources are expected to benefit approximately 4,500 people, from tree experts to game husbandry license holders and those who qualify for a Golden Age Pass for launching boats in state parks, according to Karis King, a spokeswoman with the Department of Natural Resources.
Though the administration has reduced and eliminated numerous agency fees, “the people of Maryland, I’m sure, have not noticed any reduction in services or quality of what the state does,” said House Minority Leader Nicholaus Kipke, R-Anne Arundel.
Following cuts to spending and fees, Delegate Tawanna Gaines, D-Prince George’s, vice-chair of the House Appropriations Committee, said she is concerned about the effect of reduced revenue on future projects, such as scheduled maintenance and repairs to toll roads.
The toll rollbacks were expected to save Marylanders $2.1 million in the first week, and $270 million over the next five years, according to a news release from the Maryland Transportation Authority in May. The rollbacks eliminated the E-ZPass Maryland monthly account fee, which cost $1.50, and reduced toll rates on the Bay Bridge. On the Bay Bridge, the cash rate for a two-axle vehicle is now $4 instead of $6.
“I want to know, if you cut the fees, what are you going to replace it with?” Gaines asked.
“Agencies only ask for what they need,” Gaines said. “It costs money to maintain what you have. We don’t have more than we need.”
The governor is “never going to cut fees so much that the state can’t pay its bills,” said Todd Eberly, political science and public policy professor at St. Mary’s College of Maryland.
Cutting the fees that people pay is a relatively small amount when compared to the the state’s overall budget, Eberly said.
This year, Maryland is expected to bring in more than $16.4 billion in general fund revenue, which includes money brought in from income tax, sales tax and state lottery receipts, according to the Board of Revenue Estimates.
There is an “inherent inertia” in a state government that does not want to change, said Gerard Evans, an Annapolis-based lobbyist and adjunct lecturer of public policy at the University of Maryland, College Park. “I still think he’s getting resistance from the bureaucracy, from the government.”
“But even in this short period of time, I sense a whole new mood in the state and the bureaucracy,” Evans said. “It’s still a young administration. It does take time.”
Under Hogan’s leadership, Kipke said, state agencies were required to find savings in their departments, cutting fees and using resources more wisely.
When he proposed the budget in January, Hogan cut all state agency spending by 2 percent to disrupt “the ongoing cycle of excessive spending and borrowing” from tax hikes.
“He’s not Mr. Politics, he’s Mr. Action,” said Kipke. “He’s actually doing it.”
The state budget is based on a mandated spending formula, according to Delegate Kathy Szeliga, R-Baltimore and Harford County, and the House minority whip.
Less than 20 percent of revenue generated from within Maryland falls under non-mandated spending, which the governor has some discretion to allocate.
Out of the total revenue generated in-state last fiscal year—a combination of general, special and higher education funds—$23.4 billion, or 81.1 percent, was mandated spending. That left about $5.5 billion in general funds that the governor had some flexibility with, according to the Department of Legislative Services.
Delegate Eric Bromwell, D-Baltimore County, said, “I think (Hogan)’s absolutely doing a lot of things he said he wanted to do” and has taken steps to identify taxes and fees that can be cut without the involvement of the legislature.
Bromwell, personally, said he has always voted against tax increases, advocating for spending more wisely and creating a more efficient government.
Hogan has not been in office for a full year yet, but he has worked with his new administration to set priorities in reducing fees and taxes, including changes to the “rain tax,” Szeliga said.
The General Assembly passed the stormwater management fee—nicknamed the “rain tax”—in 2013 to help fund federally mandated programs for environmental cleanup caused by polluted water runoff in urban areas.
The “rain tax” repeal, passed in April, allows counties to find other ways to meet their requirement without collecting the fee.
“Tax policy makes a difference and Hogan knows it,” Szeliga said. “We’re trying to turn it around.”
Hogan’s campaign platform was rather general, without much detail, whereas the campaign of former Lt. Gov. Anthony Brown, a Democrat, had a more detailed platform, according Roy Meyers, a political science professor at University of Maryland, Baltimore County.
Though it is too early to tell whether Hogan is living up to his campaign promises, Meyers said, he has sent signals during the Board of Public Works meetings by being tight with the taxpayer's money and sensible with spending.
Hogan, along with Comptroller Peter Franchot, a Democrat, has questioned how some vendors are spending state funds. Since January, he has criticised several requests to fund sole-source contracts, and has pushed back on requests for retroactive or emergency payments without full explanations.
For example, Hogan questioned requests from Maryland universities for additional construction funding beyond originally approved estimates.
“We’re trying to be fiscally responsible...and I hear some people at universities talking about wanting to raise tuition rates, and we’re here talking about $35 million more than you thought you were going to spend,” said Hogan at a Board of Public Works meeting in February. “It just seems out of whack to me.”
“Those statements have more public relations value than dollar value,” Meyers said. Hogan is “reassuring his political base that he is trying to live up to his campaign pledges.”
Hogan is good at establishing a point of view in a simple way, which solidifies public support for his government, Meyers said.
Erin Montgomery, a spokeswoman with the governor’s office, said that the platform Hogan was elected on has happened. “We’re just getting started.”