State Comptroller William Donald Schaefer pegs the cumulative, available surplus next January at $1.7 billion. That was before the impact of Hurricanes Katrina and Rita on Maryland’s economy (higher gasoline and heating fuel prices could cut into that surplus but lower than expected mortgage rates will boost state revenues). It also came before Schaefer announced a $27 million windfall from a tax settlement with MCI.
Schaefer immediately urged Ehrlich to restore about $100 million in state social programs reduced during Maryland’s deficit days. Schaefer also suggested higher pay for state workers.
There’s no end to ideas for Ehrlich’s consideration. Every special interest wants a chunk of that money. Yet as Schaefer warns, ‘‘A surplus today can easily turn into a deficit tomorrow.”
Katrina and Rita remind us how quickly government fortunes can make a sharp turn for the worse.
Prudence, as well as Ehrlich’s conservative view on restraining government spending, dictates that most of the surplus go into one-time spending items, such as the Intercounty Connector or school construction.
Politics, though, dictates that surplus funds be parceled out to as many thankful voting constituencies as possible by expanding on-going social programs.
Expect Ehrlich to halve the difference. There will be plenty of money spread around to worthy social causes, such as the ones Schaefer suggested. A pay raise for state employees, for instance, is a given. The only questions are how large and whether part of it will be in the form of a one-time bonus.
Restoring money to assist the low-income elderly in nursing homes — a Schaefer recommendation — is smart politics. So is more money for developmental disability services, an area Ehrlich has viewed favorably in the past.
Yet Ehrlich wants to make sure he isn’t throwing so much new money into existing programs that it sends the state into debt again.
That’s why much of the surplus will be steered into one-time investments, such as state buildings. A prime target will be the state’s schools. Baltimore County Executive Jim Smith and other Democrats want a $400 million increase next year. Republican Ehrlich could come close — or even up the ante.
If he does, it would be a great election-year gambit: ‘‘I put half a billion dollars into your children’s public schools. I’m that committed to improving education for future generations.”
An added benefit could be gained if Ehrlich uses excess cash to pay for the entire school construction program next year. Down the road, there’d be no bonds to pay off or interest payments. What a blessing for taxpayers if Ehrlich could continue such a feat for a few years.
Another likely target is the state’s consolidated transportation trust fund. Ehrlich could accelerate repayment of money borrowed from the trust fund in the state’s lean years. He could make a major down payment on the ICC. He could dump enough new money into transportation to pay for a dizzying array of road improvements throughout Maryland just as next year’s campaign heats up.
Surplus funds also are pouring into the state’s property tax account, thanks to still-soaring real estate values. There should be more than enough money in the account for a hefty reduction in the state property tax rate.
Schaefer remains dubious, but he can be persuaded — if the revenue numbers remain strong. Ehrlich wants to wipe out the earlier property tax increase he forced the Board of Public Works to adopt back when the state was swimming in Parris Glendening’s pool of red ink. This is his best opportunity and he’s likely to have the tax-revenue data to support his case.
All this good news for Ehrlich will happen in an election year. Money to improve school buildings, new and better roads, pay raises, more social service spending and a tax cut — it’s a governor’s best ticket to re-election.
Even better, there’s little the Democratic General Assembly can do to stop Ehrlich from crafting such a politically self-rewarding budget. Sure, Democrats could cut out some spending requests but they can’t re-direct that money to their own pet programs. Besides, such cuts would make Democrats look like ogres in voters’ eyes.
Let Montgomery County Executive Doug Duncan and Baltimore Mayor Martin O’Malley duke it out for the Democratic gubernatorial nomination. Let them scream at each other about the need for more state social services, more roads, more schools, more health care, more state worker pay — and fewer taxes.
Ehrlich will simply go about the business of governing and budgeting with a bulging surplus.
Maryland’s economy began pumping out more tax revenue than anyone anticipated at just the right time for the governor. It’s more luck than political skill, but to voters it all looks like the handiwork of the incumbent.
Barry Rascovar is a strategic communications consultant in the Baltimore region. His Wednesday morning commentaries can be heard on WYPR, 88.1 FM. His email address is brascovar@ hotmail.com.