From State Sen. J.B. Jennings:
THE 2015 GENERAL ASSEMBLY SESSION & THE FY 2016 BUDGET
The 435th Maryland General Assembly convened on Wednesday, January 14, 2015. And, for the first time in 8 years, I believe there exists a real opportunity for Republicans and Democrats in the state legislature to work together to get state spending under control and improve the business climate in Maryland.
The legislative session is always shaped by the Governor’s agenda, his budget and his policies priorities spelled out in the in the bills he introduces. Governor Hogan was sworn into office on January 21st and therefore, it will be his policies and his budget that will influence the course of the 2015 session.
Needless to say, I am excited to have the privilege to serve as Senate Minority Leader during Governor Hogan’ first year in office. I am optimistic that the Governor’s proposed budget and legislative priorities will help to create a better Maryland for all Marylanders.
It cannot be emphasized too strongly that Governor Hogan inherited a fiscal mess, which he characterized as “much worse than we ever anticipated.” What he faced was a huge structural deficit over the next 18 months. With 80% of state spending legally mandated by formulas, Governor took on the daunting task of balancing the budget with spending cuts instead of borrowing and budget gimmickry. Governor Hogan’s first budget is structurally balanced. For once, the budget does not spend more than we have to spend. And not only that, the budget completely wipes out the $802 million shortfall left by Governor O’Malley.
Last week, I, along with several of my colleagues, had the opportunity to meet with Governor to receive a preview of his budget. Shortly thereafter on January 22nd, Governor Hogan introduced his FY 2015-2016 budget to the General Assembly. Highlights of the budget bill include:
– Aligned general fund spending – $16.4 billion with general fund revenues of $16.4 billion to create a structurally balanced budget.
– No taxes, fees or tolls were increased.
– No agencies were eliminated and no layoffs or furloughs were proposed.
– State agency spending was reduced across-the board by 2% for a savings of $118 million.
– Commits record funding to K-12 education – $6.1 billion with $45.3 million in new support.
– Fully funds school construction at $280 million.
– Raises higher education spending by 1.3% to commit $1.2 billion.
– Commits $1.36 billion to Safety & Correctional Services.
– Commits $390 million in capital funding to environmental and land preservation programs.
– Provides over $1 billion to the Health and Safety Net.
– Expands opportunities for businesses in investments and tax credits.
– Provides $2.9 billion for Department of Transportation projects.
The Governor and his advisors are examining and seeking solutions to one of Maryland’s the most serious problems, a dangerously underfunded State Retirement and Pension System. In 1996, the pension fund was 97% funded. The experts consider 80% funding healthy. Most states today fund their pensions 75%. Maryland’s pension fund is 68% funded. It is underfunded by $18.7 billion – that’s over $2 billion more than the entire $16.4 billion proposed operating budget. It is important to note that to the bond rating houses the extent to which a state funds its pension system is considered an important factor in deciding a state’s credit rating. Currently, Maryland has the highest AAA credit rating. But there is no guarantee it will keep that rating if it continues to underfund its pension system.
Another serious problem plaguing Maryland’s fiscal health is its massive borrowing. In two years, the debt service payment will reach $500 million annually. All too often borrowing provided a quick way to repay funds taken from the Transportation Trust Fund and other pools of money meant for other purposes. Now, that way of doing business has come back to haunt us with annual escalating debt service payments.
After producing a balanced budget that keeps spending safely below revenues, the Governor has to tackle Maryland’s other fiscally debilitating problems: an underfunded pension system and mounting debt service payments.
Other legislative issues I expect to be addressed by Governor Hogan this session include: storm water management and phosphorus management, as well as education, drug and transportation policy.
I will be reporting to you weekly during the session. Please do not hesitate to contact me on these or any other issue of concern to you. As always, I encourage and welcome your input.