Tuesday, June 16, 2009

On Fiscal Responsibility

Fiscal responsibility is a term which has varied meanings depending on who you ask. In some circles, it implies the implementation of "pay as you go" programs where you make certain you have the money to pay for a government program, or increase taxes to pay for it. In others, it implies fiscal conservatism and government trimming of excess. In both cases, government is striving to make certain that a balanced budget is maintained - but the means and outcome are not always the same.

In the case of the first definition - it is considered okay to expand government programs so long as you are willing to increase taxes or divert the money from another forum. This is not something I find acceptable. On a regular basis, our government does not run 100% efficiently. This can be seen in the audits performed every three years by the Office of Legislative Audits (example - Maryland Energy Administration). The additional problem is that the same problems appear to continue to snowball year after year with little to no enforcement of the results of the audits. This is a problem which leads to wasted time and money. That said, the first definition is how the State of Maryland prepares its budget, with their own brand of "fiscal responsibility." The Maryland Budget and Tax Policy Institute prepared a nice summary of the fiscal year 2010 budget for the state of Maryland. You may not notice one major issue in the state budget. The budget is still spending $2.5 billion more than it is taking in using the stimulus money to fill the holes in the budget. This serves as a temporary patch, but if funding is not cut or trimmed in any way, down the line this will become a problem. O'Malley doesn't seem to mind, because this means his budget will be good to go through the end of his term in office - and will only begin to sour after the 2010 gubernatorial election. This will allow him to coast through a reelection campaign with a seemingly "balanced budget" with little to no care taken to actually fix the budgetary issues. We need to fix this and I have a few suggestions.

First, as I mentioned before - if we cut a mere $1,000 from everyone state legislator and the Governor's annual income, we can save over $180,000 a year. I say we start by being even bolder - I propose cutting $20,000 from the Governor's income and $5,000 from each state legislator. That will total an annual savings of $960,000. It's less than a million, but it's a start. Next - freeze "Assistance Payments" and "Home Energy Programs" to fiscal year 2009 levels (page 26). This provides a net savings of approximately $100 million without severely handicapping the organizations. Cut the increase from the fiscal year 2009 teacher pension contribution levels in half to $70 million dollars. Between these three items that I have come up with, without a complete understanding of all the ins and outs of the state budget - I have found $171 million dollars of savings without even meeting with an auditor and with minimal overall impact on the function of the State.

Next, I have two audit related suggestions. We need to provide teeth to our statewide audits. We should cut appropriate funding levels for individual departments based on audit findings. Grant the Comptroller, Governor, or State Legislature (however would be the most practical) the ability to pull portions of a department's funding if they do not comply with the findings of their regular audits in a reasonable timeframe. I also propose that every 6 years, a statewide audit should be performed by an independent organization. Bidding for the audit contract should be open to Maryland based firms or nationwide firms with Maryland offices that have been active for at least 2 years. Contracts will be reviewed 2 years prior to the required audit date by a committee composed of the Comptroller and legislators from the Office of Legislative Audits.

My final suggestion is simple - if state funding is not used by a department by the end of the fiscal year, that money will not be reallocated to the department. It can be added to the General Fund or immediately put into the State Reserve Fund. Either way works. Funding for subsequent years for departments that use less money than allocated will be decreased proportionately unless mitigating circumstances require a change.

Between the cuts, the audit reform suggestions, and the reallocation of saved funds - we can find ways to balance our budget after the stimulus money has run dry so that by 2011 we will not be $713 million in debt as the Governor predicts. As always, suggestions are welcome and encouraged. I do not fully know the budgetary process and may be a bit naïve in my suggestions - feel free to tell me so. Thank you for your time.

1 comment:

The Right Miller said...

My proposal is as follows:

Taxpayer protection (Taxpayer Bill of Rights, Tax Reform)

Zero-based budgeting (clean sheet every year; every program must rejustify)

Performance Plan (each program defines success and provides measures to determine progress; periodic reviews required)

Sunset laws (programs that don't deliver are eliminated)

This is what is required to revive Maryland's fiscal health. Sometimes the system gets so bogged down with the residue of previous programs or the continuation of programs that don't deliver and aren't measured, you just need to start over.