Welcome to Maryland's Money Matters

The people have spoken. The blog of the Maryland Budget and Tax Policy Institute is now "Maryland's Money Matters." Congratulations to Bonnie Braun at the University of Maryland - College Park. And thanks to everyone who nominated names and voted.

Happy Holidays from MBTPI

MBTPI is on vacation next week, so the blog will be dormant as well. Please note that our office is moving over the holidays.  Starting January 3^rd, we will be located at 1500 Union Avenue, Suite 2500, Baltimore, MD 21211.  

Have a safe and happy holiday!

A Christmas (Budget) Carol

My family and I love to see Charles Dickens’ Christmas Carol performed at this time of year. (I must admit that the Muppets’ version with Michael Caine is one of our favorites.)

(c) 1992 Jim Henson Co. from IMDb.com

Ebenezer Scrooge’s London is apparently the ideal model for the “you’re on your own” crowd in America today.  Scrooge and his fellow financiers and factory owners are able to create great wealth, free of any government constraints. They keep most of this wealth for themselves. As a result, the mass of workers are on starvation wages. Poverty is the norm. Working conditions are inhumane and unsafe. Scrooge's clerks don't have the coal they need to keep warm. London’s factories pollute the air, creating Victorian London’s famous “pea soup fog.” Without access to affordable health care, Tiny Tim is doomed.

Those were the good old days of limited government, and free markets unconstrained by regulation that today’s conservative activists seem to want back.

The conditions Dickens portrayed in 1870’s London were real. The rest of the story is a fantasy. There were no ghosts of Christmas past, present and future to convince the Scrooges of the day to mend their ways. Instead, the determined efforts of real workers, leaders of the labor movement, progressive public officials, conscientious citizens, “muckraking” journalists, and responsible business people over many years brought about reforms through public policies. These policies included restrictions on child labor; a five-day work week; minimum wages; unemployment compensation and injured workers’ compensation; progressive taxation; safety and sanitary regulations; and many other measures that we have taken for granted for decades.

Today, we must rebuild and re-energize the progressive coalition to protect these reforms and to expand opportunities. We can start with a few good policies here in Maryland in 2012:

• A budget that protects education, health care, and supports for families struggling in the poor economy.
• A law to end housing discrimination based on the tenants’ source of income.
• An increase in the state minimum wage to cover Maryland’s actual cost of living.

The ghosts of Christmas will not be calling on Governor O’Malley and the members of the legislature to promote these policies. We need to do that.

Happy Holidays to you all. We look forward to working with you in 2012 to help Tiny Tim and all of Maryland’s Cratchits.

Spending Affordability Committee recommends a path to structural balance

Last week, the Maryland General Assembly’s Spending Affordability Committee issued its final report.  The committee’s major function is to issue a recommendation for how much the budget for the coming year should be allowed to increase. The recommendation is not binding – either on the governor or the legislature.

However, the legislature generally uses the spending affordability recommendation as a policy target. If the governor’s proposed budget exceeds the recommendation, the legislature will usually cut it back.

This year, the committee’s major recommendation is that the 2013 budget should “reduce the estimated structural deficit for that year by at least 50%.”

The “structural deficit” is a measure of the state’s fiscal sustainability.  Every year the state is required to balance its budget. During the recession and its aftermath, it has  done so by depending on temporary measures to stay in the black, such as drawing down funds that have built up in the state’s accounts. This can get us through a rough year or two or four, but it means we always have a new budget problem the next year.

The committee estimates the structural deficit at $1.1 billion, so the recommendation requires $550 million in ongoing budget balancing actions –revenue increases or more budget cuts. By cutting the structural deficit in half, the committee aims to restore the state’s financial health without abrupt disruptions to education, health care, and other state-funded functions.The recommendation is sensible and responsible and the governor should seek to meet it.

However, in doing so, the Governor should use a balanced approach. Maryland has already cut $2 billion from annual spending for education, health care, transportation, public safety, and other important services since 2007.

Source: Spending Affordability Committee, October 2011

Further cuts are going to throw more Marylanders out of work; damage the services we need now from our state counties and schools; and withdraw the investments we need to secure Maryland’s prosperous future. It’s time to turn to some reasonable and fair revenue options.

Unemployment falls, but still twice the rate in 2007

Maryland’s unemployment rate continued to fall in November, according to data released today by the Bureau of Labor Statistics.  After rising to 7.4 percent in September, the state unemployment rate fell to 7.2 percent in October and 6.9 percent in November.

While this is good news, the state’s jobs crisis is far from over.  There are still 134,000 fewer Marylanders working today than when employment peaked in February 2008.

As the governor prepares his budget and the legislature readies for the 2012 session, it is imperative that they craft a budget that focuses on creating jobs for Marylanders through increases in targeted spending funded by new revenue streams.  The Capital Debt Affordability Committee had the right idea yesterday, when they recommended issuing an additional $150 million in state bonds to fund needed infrastructure investments now rather than later, creating construction jobs and taking advantage of low borrowing rates.  Maryland can’t afford more job-killing budget cuts.

The Week Ahead

We’re getting close to the holidays, so this week’s calendar is rather light.  In addition to the items below, keep an eye on this blog in the coming weeks for posts about specific sections in our recent report, State of Working Maryland 2011.  Don’t forget to vote in the Name Our Blog contest!  

Tuesday, December 20th

• The Bureau of Labor Statistics releases state unemployment figures for November.  Maryland’s unemployment rate was 7.2 percent in October.
• The Maryland Health Benefit Exchange board has its regular meeting from 1-4pm at the Maryland Health Care Commission, Room 100, 4160 Patterson Avenue in Baltimore.

Last Week’s Highlights

In case you missed it, last week we blogged about reforming the gas tax, what MD gets for its tax subsidies, and the release of our annual report, State of Working Maryland 2011.

Working Marylanders Face Harsh Economic Problems

As the effects of the Great Recession drags on in Maryland and across the country, the state’s working families face continuing, severe challenges to their economic stability and overall well being.

We’re releasing State of Working Maryland 2011 today.  This annual report compiles and analyzes a wealth of statistical information that points to the deteriorating situation, and the necessary governmental responses. Even though Maryland now tops the country in number of millionaires (as measured by wealth), poverty has grown in the state, and is concentrated in both urban and rural areas.

Our findings include:

·         Over the last decade, the rate of poverty in Maryland has risen from 7.4 percent in 2000 to 9.1 percent in 2010, and for some populations poverty is much higher: 13.6 percent for African-Americans, and 12.8 percent for Marylanders of Hispanic descent. Baltimore City’s poverty rate exceeds 20 percent.

·         Maryland's unemployment rate remains stuck at 7.4 percent ­ the highest level since 1983 and twice the level prior to the Great Recession.

Getting and staying employed has become more difficult not only because of the difficult economic climate and paucity of jobs, but because work supports (such as childcare) have become less accessible; a waiting list for childcare support vouchers now looms.

·         Climbing up the income ladder has become more difficult as college affordability has waned. Over the past decade, in-state tuition costs at 4-year colleges have risen from 6.7 percent to nearly 10 percent of median family income.

·         Since 2000, median household income in Maryland has been flat, but income inequality has risen substantially. Maryland millionaires continue to do well, while others in the state struggle. 

But there are solutions to these problems. Maryland must invest to help spur job growth. The investments must be in human capital as well as infrastructure. State and local governments must help individuals become ready for work with appropriate training, and help them negotiate existing barriers to work, such as a lack of childcare or readily available transportation. Education must be a priority from pre-school to post-secondary.

If we leave working families to fend for themselves, our economic future will be grim and stark. If we invest in education, good jobs, and strong supports to help workers achieve independence, we can have broadly shared prosperity.

Money for Something?

Economic development tax subsidies are a large, and often obscured, part of Maryland’s budget. A report today by Good Jobs First (GJF) sheds some light on these programs and the safeguards built into them. Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs does what the title says; evaluate individual state programs based on job creation, job retention, wage, and healthcare requirements.

First the good news: GJF ranked Maryland fifth in the nation in terms of performance and job quality standards. However, individual programs fared less well. The five programs GJF looked at were:

• Enterprise Zone Real Property Tax Credit – requires recipients to hire new employees or make capital investments. Score: 15/100
• Job Creation Tax Credit – requires recipients to create 60 positions (limit is lower under certain conditions) for three years. Score: 60/100.
• MD Economic Development Assistance Authority Fund (MEDAAF) – requires a 5 to 1 investment for every dollar received, and includes a vague requirement for “significant” job creation or retention. MEDAAF replaces the Sunny Day Fund. Score: 95/100.
• One Maryland Tax Credit – requires recipients to create 25 jobs within two years, for at least one year. Includes some support for start-up costs. Score: 75/100.
• Sunny Day Fund – required “substantial” job creation, and a 5 to 1 investment for every dollar received. Score: 95/100.

See the Maryland appendix for more detail on GJF’s scoring.

In a time when Maryland is struggling to find enough revenue to pay for needs in education, health care and public safety it is important to remember that these tax subsidy programs combined account for roughly $76.5 million in tax side spending. Policymakers should make sure that these investments are generating the returns Maryland needs.

Part of the reason tax side spending is so obscure is that, unlike expenditures in the budget, they don’t have to be renewed. Once the debate over a particular tax credit ends, it recedes from the public eye unless legislators take positive action to try and end it. In an effort to improve the accountability of these expenditures MBTPI supported HB 620, which would have required sunset provisions for tax credit legislation, in the 2011 legislative session. The legislature should enact similar legislation in 2012 to ensure tax provisions continue to promote the general interest over time.

Look for GJF’s follow-up report looking at states’ monitoring and enforcement of these subsidy standards.