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Maryland Public Policy Institute’s Four Ways the Hogan Administration Could Save Maryland Billions

Posted: February 9, 2015 at 10:04 pm   /   by   /   comments (0)

markUncaphernewThis week an apparently puzzled Washington Post editorial page writer questioned, how Governor Hogan could cut taxes and also increase spending in a piece “Larry Hogan’s proposed budget for Maryland doesn’t match his rhetoric.”

One almost feels sorry for the Post’s mystified failure to understand the elementary concept of setting budgetary priorities – almost, but not quite.

A more thoughtful analysis of Governor Hogan’s choices comes from the Maryland Public Policy Institute, which published this week an excellent report “Four Ways the Hogan Administration Could Save Maryland Billions.”   As MPPI points out, while spending cuts alone can balance next year’s budget, longer term reform is required to address the state’s deeper fiscal problems and restore Maryland to long-term solvency.

Frankly, MPPI’s ideas are not new.  They have been made in previous published reports over the years by the policy group, Maryland’s premier conservative think tank.  Collectively they present real opportunities to “Change Maryland” for the better, saving taxpayers billions in the process.

1) INDEX STATE RETIREMENT FUNDS.

Every year, the state pays Wall Street money managers to look after the massive public employee retirement fund. In 2012 for example, money management fees on the $40 billion fund came to nearly $250 million.  In return for all these hundreds of millions in expenses, the fund has consistently underperformed market medians. Last year alone, these sub-par returns caused the state to earn $1.16 billion less than it should have.   A special ‘hat tip’ is in order for Montgomery County’s own Jeff Hooke for his solid research on this topic.

2) REFORM TRANSPORTATION SPENDING.

The state will spend about $4.3 billion over the next five years on transportation projects. Right now, the budget splits these funds evenly between roads/highways and public transportation. However, public transit accounted for just 3% of all travel in Maryland in 2008 and under 10% of commuting, according to a 2012 MPPI report by Wendell Cox, Transportation Policy in Maryland.   This 50-50 split likely fails a careful benefit-cost test, and the state needs a better metric.

3) GROW THE TAX BASE IN BALTIMORE CITY.

Aid to local governments accounts for $7 billion-over 20%-of Maryland’s budget for fiscal year 2015. Of that $7 billion, Baltimore City gets $1.26 billion.  A healthy, thriving Baltimore City would not need such heavy subsidies from the state, but instead would increase state revenues as the tax base blooms. Stephen J.K. Walters and Louis Miserendino, authors of How to Make Baltimore a Superstar City, have a plan to reverse the 60-year trend of declining population that has plagued Baltimore. In a nutshell, their “Cash on Delivery” plan would lock in a competitive property tax rate in the city to take effect in four years (allowing for one full reassessment cycle).

4) ACTUALLY SAVE THE BAY.

Maryland is poised to spend upwards of $14 billion over the next 10 years to “Save the Bay” by meeting the federal Environmental Protection Agency’s pollution goals for 2025. But research conducted by James Simpson for his report A Better Way to Restore the Chesapeake Bay  shows that the current plan will actually do little to reduce pollution levels overall-a paltry 3.4% reduction in nitrogen levels. Further improvement will require additional multibillion- dollar expenditures that Marylanders will likely be even more hard-pressed to afford.

Regular readers of MCGOP’s Party Line will recognize that in the past we have reported on or echoed on each of these same ideas.  (Full disclosure, I am also a past contributor to MPPI’s policy blog.)

The Post’s mystified editorial writer might also want to step up their coverage of the Maryland Public Policy Institute – especially after taking note of the identity of one of their “Emeritus Directors,” one Lawrence J. Hogan, Jr.