Spending Committee: Retain Flexibility To Address Federal Activity

At today’s Spending Affordability Committee decision meeting, the committee recommended that the approved 2019 state budget reduce the structural deficit for fiscal 2019 by at least 100 percent, and that the General Fund for fiscal 2019 maintain a minimum ending balance of at least $100 million.

However, responding to motions made by Delegate Maggie McIntosh, the committee voted to include language that allows reconsideration of these spending restrictions, to provide the State ample flexibility in light of uncertainty surrounding federal actions. Delegate McIntosh specifically referenced the need to respond to consequences from federal tax reform and reauthorization, or the lack thereof, of the Children’s Health Insurance Program.

In addition, the committee approved the following report language:

The committee recommends that any federal tax law or spending changes that impact State and local finances be a primary consideration in the development of the fiscal 2019 general fund budget. The fiscal committees should undertake, as part of the normal legislative process, a critical examination of each federal tax law and spending change that affects State and local finances and how those changes impact the State’s overall fiscal situation. In addition, special attention should be paid to how these changes may affect, positively or negatively, lower and middle income taxpayers in the State.

The committee recommended that the Rainy Day Fund balance contain at least 5.0% of estimated revenue, and authorized the use of any funds above that balance to address imminent cash shortfalls in fiscal 2018 and 2019.

For the capital budget, the committee recommended authorization of $1,075 million in new general obligation bonds for the 2018 session.

In addition, it decided that for planning purposes, out-year annual authorizations should be limited to 1 percent growth, so that capital spending does not increase at a greater rate than state property tax revenues (the revenue source that pays the debt service). The proposed limit keeps the State well within the Capital Debt Affordability Committee (CDAC)’s debt affordability criteria.

In  response to questioning from Senator George Edwards, Department of Legislative Services staff informed the committee that over 15 years, this would add about $15 million in debt service liability.  In response to a question from Senator Edward Kasemeyer, however, they indicated that construction inflation is currently around 3 percent.

The committee concurred with CDAC to the authorization of $24 million in new academic revenue bonds for the University System of Maryland.

Recognizing a report on state employment vacancies provided at the last Spending Affordability meeting,  the committee recommended discontinuing the position cap that the State has had in place for a number of years.  Instead, the committee encouraged the Administration to quickly fill positions in understaffed agencies. To the extent that agencies are unable to fill positions because of hiring standards, excessive turnover expectancy, or inadequate compensation, the Administration should develop a plan to address these barriers through targeted compensation enhancements, reduced levels of turnover expectancy, or a re-examination of hiring requirements. In addition, the committee required the Administration to submit a plan to address the high number of vacancies to the budget committees no later than June 1, 2018.

 

The draft report is available here.