Governor O'Malley Signals a Balanced Approach to Balancing the Budget

Traditionally, Maryland governors use their speech at the annual Maryland Association of Counties (MACO) convention in Ocean City to unveil their key policy initiatives for the year. On Saturday, Governor O’Malley spoke to the assembled local officials about the budget situation facing Maryland. The Baltimore Sun’s coverage is here.

The Governor told the hard truth that extending Maryland’s “steady diet of cuts” will be unhealthy, and we now need a balanced approach to balancing the budget.

As detailed in our recent report, the $5 billion already cut from the budget is already hurting us in the present and harming Maryland’s economic future. Schools are increasing class sizes and eliminating programs. Staffing shortages are affecting security in prison and parole operations. There is a waiting list for child care assistance. The list goes on and on.

At the same time, the state faces a billion-dollar shortfall of revenue needed just to maintain services at this pruned-back level. Closing this gap with a cuts-only approach will hurt Maryland families now, and harm our economy for years to come.

Federal budget actions are likely to make the state’s financial situation more precarious. The congressional “super committee” is slated to issue its recommendations by November 23. Medicaid, the largest single item in Maryland’s state budget, is at risk. Medicaid covers nearly 550,000 low-income Marylanders. And 58% of them are children.

Medicaid costs are shared between the state and the federal government. One likely way the federal government will reduce its deficit is to foist more of the costs of Medicaid onto the states.

That would further increase Maryland’s shortfall in the future.

So, the Governor is ready to think about a balanced solution that includes revenues. We think that is the correct approach.

The Governor says he is not yet ready to talk about what specific revenue measures he will propose. The revenue package should be fair. It should not have a disproportionate impact on low-income residents. It should help Maryland towards a sustainable economic future.

Our recent report suggests some reforms that will add revenues in a fair and economically viable way. Modernizing the sales tax to include more services, reforming corporation taxes to eliminate tax dodging by big, multi-state companies, and making the income tax more progressive are all good options.

It’s time for Maryland to think about putting our state’s finances in sound condition and investing in our future prosperity.