Maryland's incoming governor on Thursday warned that tough choices will be needed to get the state's long-running budget problems under control to help the state's economy.
Gov.-elect Larry Hogan and his fiscal adviser Robert Neall gave a general outline of problems facing the state. While he avoided specifics, Hogan said state government must have the courage to avoid increased spending.
"If we can take the strong medicine now, I believe that we can begin to heal our state's economy and that will benefit all Marylanders," Hogan said at a news conference.
Maryland faces a shortfall of about $300 million for the current fiscal year, which ends June 30. The state also has a projected $593 million budget hole in the next fiscal year.
Hogan, a Republican, has asked Neall to present policy options in 10 days on how to get as close to a balanced budget as possible for the next two years. Hogan will submit a budget plan to the Legislature two days after he is sworn in Jan. 21.
Maryland has struggled with what is known as a structural deficit for years. That means while the state has technically balanced its budget as required with the help of temporary reductions, a deficit has returned with stubborn regularity because the state's revenues don't cover planned spending.
"As a result, we're going to have to make some very difficult decisions, because state government cannot continue to spend more than it takes in," Hogan said.
Maryland also is projected to have higher debt-service costs in future years. Property tax receipts, which have typically paid for debt service, are not keeping pace, so more money from the state's general fund is being drained away to cover the expense. Pension fund payments also are a concern.
"We've got to set a clear set of consistent decisions that are really grounded in fiscal discipline to reduce the size and scale of general fund expenditures, notwithstanding these obstacles," Neall said. "These obstacles are just a sand trap on the golf course that we're going to have to get around."
Maryland's governor has strong budget powers. For example, the Legislature can only cut from the budget submitted by the governor in January. However, Hogan pointed out that about 81 percent of the state's budget includes mandated spending. That only leaves about 19 percent in non-mandated spending the governor can cut without approval from the Legislature.
Hogan said it's time to discuss making permanent changes to some of the mandated spending.
"It's something that we're going to continue to try to look at and will certainly be part of the things that we discuss over the coming weeks," Hogan said.