Happy New Year - A Look Back at Fiscal 2013

At midnight Sunday, June 30, Maryland will conclude fiscal year 2013 and start 2014.

The old fiscal year, 2013, was the budget that was rescued from a legislative train wreck in the 2012 legislative session.

Maryland was formulating that budget in fall and winter of 2011. The state faced a looming, billion-dollar shortfall. Expenditure levels had already been cut $1.6 billion below the cost of “current services” as they existed before the Great Recession. The $4 billion in assistance from the federal Recovery Act was drying up.

After a “steady diet of cuts” for the previous four years, Governor O’Malley proposed a “balanced approach” to balancing the budget. It included revenues from a modest income tax increase, a multi-year shift of teacher pension cost from state to local budgets, and significant restraints on expenditures - Especially in Medicaid and state agency operations.

The legislature agreed to a budget plan very similar to the governors. They agreed to and amended the governor’s pension reform legislation, that transferred teacher pension costs to local governments more gradually.  On the final day of the session, Senators and Delegates were rushing to agree on a compromise revenue package. They did reach an agreement of a $300 million income tax package that raised tax rates slightly on the 20 percent of households with the highest incomes.

But, the bills to transfer the pension costs, raise tax rates, and transfer some $150 million in special funds did not come to a vote before the end of the 90-day session. Instead, a $500 million package of cuts, known colloquially as the “Doomsday Budget,” was slated to go into effect. Education programs would have taken the brunt of these cuts, but other functions from health care to business development would also have been slashed.

Here is where Maryland showed more maturity than our national government. Maryland’s political leaders did not allow the Doomsday Budget to stand. They met in special session before the new fiscal year began, and they took the tough votes to approve revenue plans and the other legislation needed to balance the budget.

The fiscal year we are completing was based on a balanced approach to balancing the budget. 

Even though the regular legislative session ended in a deadlock, leaders came together to implement a responsible compromise. Maryland has been able to maintain our funding for education, health care, and other investments in our people, families and communities better than states that have relied exclusively on budget cutting. 

In addition, the compromise budget approved in the 2012 special session set the stage for much less dramatic budget deliberations in the 2013 legislative session. Maryland’s finances remain challenging, but the gap between revenues and the cost of current services is considerably narrower.

Next week, we’ll review the status of the new fiscal year 2014 budget just starting. 

In a few weeks (likely early September), Comptroller Franchot will report on the fiscal year close-out, and we’ll get our first chance to assess Maryland’s financial posture going into fiscal 2015.

So, have a happy fiscal New Year. And however you choose to celebrate, please do it safely.