Governor’s budget – a solid start

Governor O’Malley’s proposed budget employs elements of a balanced approach and significantly reduces the state’s structural deficit. In his budget message, the Governor emphasized creating jobs, building on our quality education system, protecting public safety and restoring the environment. The budget is relatively free of accounting gimmicks and temporary measures.

The budget makes $800 million in cuts; with the result that the state will expend fewer general fund dollars in fiscal 2013 that it does in the current year – the 2% growth in the general fund budget is wholly attributable to a required payment from the general fund to the state’s Rainy Day Fund.  Some of these cuts will have severe consequences for the lives of real people. We’ll be reporting on details as we learn them. The largest cut is a transfer to Maryland’s counties and Baltimore City of responsibility for $240 million in teacher retirement costs.

The budget also uses new revenues so that our state won’t depend on cuts as the only solution to this year’s revenue shortfall. The largest revenue measure would phase out income tax exemptions and deductions for high-income filers.  No one likes to raise taxes, but if you have to, it’s good to have a proposal based on people’s ability to pay. These revenue increases will be much less damaging to Maryland’s economy than would further cuts to education, healthcare and infrastructure.

In future blog posts, we’ll explore some of the specifics.

Most everyone will find some things they don’t like about this budget proposal – including us here at the Budget and Tax Institute. Overall, though, it is a very solid starting point for legislative deliberations.