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Good Afternoon Mr. Chairman and Committee members:
I am William J. Skinner, the president of the Maryland Taxpayers Association, Inc, since September 1996, and a resident of Montgomery County, Maryland since 1971. With me today is Mrs. Demaris Hodges, of Baltimore County, our Secretary, and David Curry, our Treasurer - a Maryland resident since 1966 and resident of Montgomery County since 1978. Also here is Charles Lapinski, a member of our Board, from Montgomery County to make brief statements or to answer questions. There may be other members of MTA in the audience.
Members of the Maryland Taxpayers Association are delighted with this opportunity to address the Appropriations Committee regarding Governor Glendening's proposed FY2000 operating budget. We hope a similar opportunity is available to address the Governor's capital budget.
We thank Chairman Rawlings for inviting us, as citizen representatives of the five million Maryland citizens, to testify today and give our views on the Maryland Budget. This occasion is a welcome change from the previously observed procedural framework in which citizens sat through hearing after hearing listening to State Secretaries speak first, followed by agency personnel asking for what they want, then assisted groups rationalize their requests, and finally, if there is time left, other citizens were allowed to speak. MTA members are supporters of self government by the people for the people and welcome the chance to make input beyond the ballot box.
I want to recognize the active participation of Chairman Rawlings and Delegate Flanagan in our Maryland Institutes on State Budget Analysis held in Columbia. We thank both of them for taking the time to share information and thoughts with citizens who are concerned enough about the Maryland Budget to spend half of a Saturday with us.
The MTA and its sister organization, the Maryland Tax Education Foundation, Inc., a brand new, non-profit, educational organization which is now exempt from taxes under the Internal Revenue Code, have sponsored four of these Institutes, at which more than 100 persons have been educated on the budget process and the operating budget expenditures. The MTA is also a non-profit, non-partisan organization and it does not merely attack spending more money, but also has given specific suggestions, year after year, for how the General Assembly could reduce spending and use the savings to improve government. MTA has also recommended management improvement ideas over the years which could reduce the cost of Maryland government.
The MTA started in 1990 with the county taxpayer organizations as its main contact with Taxpayers. Since 1996 MTA has emphasized individual memberships and we are growing. Our Board of Directors is made up of members designated by the county organizations, their alternates, and individuals elected to one year terms. No one in MTA is elected for life, and our founding president, John D. O'Neill, is now our chairman emeritus, appropriately reflecting his many enduring years of assistance to Taxpayers, and his now reduced time commitment to MTA affairs. John O'Neill contributed to this testimony by his participation and suggestions at our recent Board meeting.
Our newsletter, the MTA News, is distributed to 2,000 to 3,000 persons per month by direct mail and through our county affiliated organization board members. This includes our membership, news media, state elected officials, and others.
The MTA testimony has been developed by a committee of our Board of Directors after actually looking at the budget documents, the Fiscal Briefing statements such as the one you received, the Spending Affordability Committee's report and briefing session, and information that we have obtained individually.
Outline of Testimony
Our plan of action here today is
to:
I. State the policy positions on which our testimony is based.
II. Address some philosophical issues regarding Maryland's fiscal policy formulation
process which are of concern to many citizens.
III. Elaborate on our policy positions.
IV. Suggest approaches the Committee should consider to make fundamental shifts
in collection and use of Taxpayers money.
I will begin with the general outline and others will add comments and specifics. We want to answer questions and we invite questions either during our presentation or at the end.
I. MTA TAX POSITIONS
The MTA Board has adopted six separate primary positions on taxes from the vast myriad of suggestions made by our Board members, a summer survey of our membership in which more than 150 participated, and by reacting to current taxing events. Let me simply remind you of these for the 1999 session:
II. Some Philosophical and Practical Issues.
Spending Affordability
First, the Governor's budget does not appear to be based on the Legislature's Spending Affordabilty Limit process. Perhaps the Spending Affordability process is completely broken if the Governor pays no attention to it and the General Assembly does not feel compelled to incorporate in it an element of the meaning of the word "affordability." What you have is something that might be called the "spending possibilities" committee recommendations. Each year, for the past few years, the figure that is adopted is one which ends up being an amount greater than personal income growth and greater than state revenue growth, but slightly less than what the Governor recommends in growth. This means that these are spending possibilities, but it does not mean the spending is affordable, particularly when it is greater than income growth.
Let me elaborate. The Bureau of Revenue Estimates says that revenue growth for FY 2000 will be 3.1% to a total of $8.422 Billion. They estimate personal income growth at 5.25 % in 1998, and at 4.8% for 1999 and 2000. The Spending Affordability Committee, on the other hand, says that the Legislature can spend 5.9% above the appropriations approved in the 1998 session. When you plan to spend more than you expect to earn, this means some "tooth fairy" must pay the remainder, does it not? And the Governor proposes a budget even larger than that suggested by the Legislative "affordability" Committee, requiring the Legislature to cut money just to keep to its own already outsized levels of "affordability."
The average Taxpayer likely believes that if he or she makes 4.8% more aggregate income in FY 2000 and the State spends 5.9% or 7.6% more than the year before, then someone has to take out a loan or spend the savings account. What is the logic of always increasing spending over income growth? There is no way that one can characterize "spending affordability" as spending more than you earn or spending everything that comes in plus savings and borrowing to boot.
The Maryland Office of Planning indicates that more than 10,000 income earners are leaving the state each year than are immigrating to it. A few short years ago, this figure was only 5,000 per year. Many former Marylanders are not being fooled.
Budget Documents Availability
The Governor's operating budget is priced at $150 per copy and is made available a few days before the Legislature begins consideration of its contents. It has never been quite clear where the volumes can be purchased, but the price is quoted often enough to make the average citizen simply forget the request after paying Federal, state and local taxes, not much is left. This year as in the past, MTA officers had to borrow or beg for copies of the Maryland Budget. We each have our own Senators and Delegates to ask and they usually end up having to contact the Governor's office for extra copies.
This is a real Sunshine issue. This year MTA's President asked the Governor's Office where he could get a copy and the staff person did not have any idea. He pointed out the problem we had in the past and wondered if they could be of assistance. No real help or suggestions were forthcoming.
So MTA went to the main Montgomery County Library in Rockville to see what the situation was there. The stacks had copies of the Budget marked with receipt dates of late March and early April for the past three years. Accessibility to documents at the University of Maryland College Park libraries is perhaps even worse. All documents regarding the State of Maryland, even statistical data published by the State, are held in the MeKeldin Library's Maryland Room where users must register requests for documents with librarians who then retrieve them for the user. This facility is closed evenings, weekends, and holidays.
You know what this means, don't you? It means that during the past three years of the present administration, that citizens do not have timely access to the budget. This places an unnecessarily heavy burden on legislators to adequately fulfill a checks and balances counterweight role to an already extraordinarily empowered Governor.
MTA believes Legislature should encourage citizens to know what is in the budget rather than hiding it until after your legislative session is over. You were elected to do the job of adopting the budget, but if you are going to insist on doing this job without citizen input, then you have to be very responsive to citizen requests. Would it not be a better plan to make the budget documents available to citizens on a wider basis and solicit input into the process? Why assume that citizens, operating with imperfect knowledge delegate all thought processes to winning candidates in our quadrennial elections. Why not use informed citizens to help you develop sound, sustainable Maryland fiscal policies throughout your terms of office? Make the information more readily accessible and MTA believes citizens will provide input.
Budget Document Content
Fiscal policy has two legs -- taxation and expenditure. Stated another way, fiscal policy entails costs as well as benefits. State budget documents pay considerably more attention to beneficiaries of state funding that to who pays even while the picture of beneficiaries is quite incomplete. Sunshine in government calls for greater disclosure of the geographic distribution of expenditures and tax receipts. The Summary of "Total Aid by Subdivision" in budget documents is useful, but it needs supplementation with data on the geographic distribution of State government employment and payroll and contract expenditures. Data on tax collections by subdivision are also needed to give legislators and the public a clear idea of just how their tax dollars are used.
Maryland Is Not An Island, But It May be a Backwater
Twenty four state expect to cut taxes this year according to an AP story issued 1/13, stating that because the states are flush with the largest surpluses in history (that means since writing down such things started), the states are opening their sessions with "talk" of cutting taxes.
Hawaii will reduce the corporate income tax; Idaho will cut the marriage tax; Massachusetts will cut the personal income tax; New Jersey will cut the school tax; Oklahoma will cut the sales tax; and Texas will cut taxes on over-the-counter medicines, diapers, first aid items, access to the internet and back to school clothing.
Tax cut promises were made by successful candidates for Governor in Maryland, Arizona, Kansas, New Mexico, Wisconsin, Illinois, Iowa, and Ohio. But we all know what happened in Maryland. The election promise in Maryland for accelerated tax cuts vanished along with the promised 1,110 new reading teachers. The reasons for this disappearing act are not even discussed in the budget. It is as though every politician knew, in advance, that the promise was empty, unbelievable and just put out there for the news media to print. Why doesn't the news media now report on legislators' protests of the lack of follow through on campaign promises by the Governor?
A year ago, 16 states predicted they would cut taxes. Ultimately 35 states did cut taxes. Maryland was included, but is now about to be mentioned and re-mentioned in the next article, by those same researchers, as a state with a Governor who does not follow through. MTA membership regards the Governor's post-election reversal of his position on taxes as a demonstration of his intent to deceive -- a standard military tactic in dealing with the enemy. Can you help us answer the question: does Governor Glendening regard voting taxpayers as the enemy?
Several states will refund surplus taxes this year. Only Alaska, Hawaii and Nevada took in less than they expected. Minnesota, Ohio, Colorado, Massachusetts, Missouri, and Oregon will be sending money back to Taxpayers. South Dakota will create a property tax reduction fund this year to make sure it can give the money back.
Whatever happened to Maryland's Tax Reduction Fund? It has been absorbed, subsumed, obliterated, and merged, as far as we know.
Partner with Business
Maryland needs a new mindset where it is the partner of business, not the controller of business, or the gift giver to business. Taxes and regulation are part of the income statement of each Maryland business because these governmental impositions reduce profits and job creation. New business growth will result from fiscal tightening and reducing taxes because business will grow and actually produce more revenue for use by the state. Maryland needs to get out of the way and let business blossom.
Reserve Fund for Welfare
MTA is very interested in what the Associated Press called a "reserve fund for welfare" that is proposed in Maryland. Frankly, we do not see this in the budget and request that you jump on this and find out what the Governor is doing.
Personnel
Maryland State government is increasing personnel at a time when requirements should be decreasing. Medicaid roles have come down, and education enrollments and prison population have leveled off. In 1997 the contractual and budgeted personnel were at the 80,994 level; in 1998 at 81.911 level; in 1999 projected at 83,204; and in the year 2000, we expect 85,038. The increases are 917 in 1998, 1,293 in 1999 and 1753 in the year 2000. Over three years this is 3,963 new employees.
During these three years, 500 persons were transferred out of Human Resources to Lockheed Martin and Montgomery County, so the increase is 500 greater than the 3,963 or 4,463 new employees. Is the State of Maryland substituting government payroll checks for welfare benefits?
General Fund
The Budget contains $8.625 Billion of expected revenues, plus $154.8 million in additional tobacco taxes, $54.3 million from the Tobacco Settlement, and $249 million from prior year surpluses. This is a total of $448 million in this budget funded by money from other sources than the current year General Fund revenues. Neither the Tobacco tax or the Tobacco settlement should be used in this manner. MTA says save the Settlement for those individuals and families affected by cancer and disease. Wait thirty years before putting this money in the General Fund. The prior year surpluses should be returned to the Taxpayers as excess revenues collected above appropriations. This money can be put to better use by the Taxpayers.
So far as we know the Federal government has not decided that it is going to waive collecting its portion of the Maryland Tobacco settlement.
General Fund spending is climbing at a faster pace than it did during the administration of William Donald Schaefer. Our attached chart on Maryland Spending - General Funds (Figure 1) shows that clearly. Maryland spending patterns from 1986 to 2000 show that General Funds spending increases $4.140 Billion or 99.16 percent while the Consumer Price Index rises 60.69 percent.
Likewise spending in Maryland on Higher Education has increased 210.18 percent from 1986 to 2000 while the CPI is only 60.69 percent. Overall Maryland spending has greatly outstripped inflation since 1986, rising almost twice as fast as the CPI or 113.63 percent compared to 60.69 percent. (Figure 2)
Next Five Years
For FY 2000 the budget has grown 6.94%, and 7.3% in the General Fund.
The personnel costs for 1,753 new employees is $285 million per year, almost 8% of the total payroll. This is made up of $60 million for the new people, plus $112 million as shown on page 16 of the fiscal briefing, and $123 million in additional pension benefits. Adding new employees every year at this rate will drive Maryland into bankruptcy for sure.
Debt service will increase from $152 million to $190 million. But look at the next few years that are projected on page II-973 of the Budget. Maryland debt is increasing from the $190 million in FY 1999 to $225 million in FY2000, to $270 million in FY 2003.
Does this begin to look like Prince George's County in 1994?
The Calvert Institute did a thorough analysis of Maryland debt. While the MTA does not fully endorse the recommendations, we commend the study and the resulting conclusions for your consideration. We know that some of you have read Calvert's Report, but we think you all should read it as soon as possible if you have not done so.
Per capita costs of State government debt has risen dramatically in recent years. Between 1992 and 1997, per capital expenditures on interest on debt rose 22 percent from $97.12 per person to $118.15 per person. Debt service projections shown in the Governor's Budget suggest continuation of this extremely adverse trend of rising per capital interest charges in the face of declining market interest rates.
Maryland ought to forego new debt until old debt is paid. There is a finite amount that your children and grandchildren will accept as prudent debt for them to pay back. We need to be mindful that spending what we do not presently have means someone else has to pay it back. "Better you than me" seems to be the Maryland slogan on this issue.
State Agencies
This budget shows that spending is up for all agencies by 8.4 %. Suppose we all spent 8.4 % each year when we expect our income to go up only 4.8%. Are we stupid or just hopeful? Are we dyslexic? Can't we see the numbers correctly? Doesn't it matter which way we see them?
The legislature started an audit of the Department of Human Resources in January 1998 which is expected out in March 1999. Is there a legitimate reason that this will come too late for this Committee and this General Assembly to read it, react to it and do something about it? There should be a Federal investigation of the waste of Federal money by the Maryland Department of Human Resources in this area. This is serious. Maybe some people should go to jail. What is this Committee doing about it? MTA can not tell.
The FY 1999 budget was up 6%, $548 million over the FY 1998 budget. Between sessions another $74 million was spent. General fund spending was increased $617 million after Reserve Funds appropriations. This budget shows that $249.5 million surplus for FY 1999 is being spent in FY 2000 after absorbing $70.4 million in deficiencies expected in the FY 1999 budget. Every year we talk about deficiencies in January to March, but the department Secretaries know about these deficiencies in December. This gives them six months to make corrections in spending. What is wrong with making spending corrections over six months and eliminate all deficiencies? Is state government unable to say no, wait, not this year?
The increase in capital projects was made from FY1998 to FY1999 at $65 million. Now we see an expected $70 million in deficiencies. And the $65 million in "one timers" have not been found. FY 2000 budget increases another 7.3%, or $605.9 million and that does not count the $50 million or so that is expected to be spent between sessions.
When the Legislature orders audits of agencies, why does it take two or more years sometimes to get a report? When you get a report, does anyone other than the Subcommittee review the audits and how does the Legislature use the audits to affect change when the audits are two and three years old? Some MTA members see a real scandal in the failure of anyone to get and use audits.
Reserve Fund Investment Problem
The reserve fund is expected to receive only 5.3% interest income this year. If this money was invested with the pension fund, another $32 to $42 million would be earned for Maryland. MTA has suggested a change in these investments for years, and nothing is done. It now comes down to asking, Which banks in Maryland and what other institutions are state officials favoring to allow them to have all of this profit from Taxpayers money?
MTA notices that Maryland banks are reporting very large profits. Are they making this profit using Taxpayers' money?
Local Social Security Tax Recovered in APEX
The state has increased aid for local governments from $2.550 Billion to $3.436 Billion over the last six years. This is a 35% increase. In 1992 the State allowed counties to raise the piggy back tax to replace the non-payment of social security tax for teachers. Since at least half of this social security tax is recovered in the APEX formula now, why does the state continue to permit the counties to collect a high piggy back tax? Some legislators tell MTA that this arrangement was the deal they cut with the counties. County elected officials are only one party to the equation! What about the justification given to the Taxpayers who have to pay the taxes?
County Government Surpluses
We have now reached the prosperity level where every county has a surplus in most categories. The larger counties spend half their income on education and they continue to look for state money and new taxes. Perhaps is it time to reduce the cap on the piggy back tax to let the Taxpayer keep their money instead of sending it to the State to refund to the Counties.
Pension Costs
For six years MTA asked the state to increase the assumed rate of return on pension investments from 7.5% to 8.0% to cover costs of pensions. We also asked that state employees be required to contribute 5 % of salary like all other states. Had this been done, the yearly costs of pensions would have been lower and the budgets would not have cost the Taxpayers so much. But the Governor and his staff ignored our suggestions until they discovered, in an election year, they could give away a large retroactive increase in pension money.
Each year MTA asked that the Legislature and Governor take action on this, MTA was told year after year it was too risky. Comptroller Louis Goldstein even told us in writing that he and legislators thought it would create a hardship on state employees to contribute anything more than 2%.
MTA researched this issue in other states. We found that 5% to 8% was the amount state employees put in their retirement. Then your legislative staff did a study and confirmed the same thing.
MTA is reminding you of this again, to point out we were correct before, and we will be correct again. Listen to what we are saying if you want to be responsible with Maryland tax money.
Maryland is the only state in our region of the United States that does not have an annual audit of pension funds by an independent, objective auditor. What Maryland has is an actuarial firm to guide the Pension Trustees and last year another actuarial firm to guide them both. Get a public audit out each year and make comparisons with other states. Then Maryland can keep up to date and avoid the 1984 crisis again of not having money to pay current pensions.
III. Elaboration on MTA's positions.
1. No new taxes. Means no more new taxes, increases in existing taxes or expansions of taxes.
2. Tobacco Settlement. MTA has a fundamental problem with the State spending money it does not have and part of which could be claimed by the Federal government. Besides this money is for persons injured by Tobacco, and there are claims now being made by farmers who are claiming injury. Just to include this in the budget as income assumes that some other program will take care of the medical claims and loss of income claims that are surfacing. Fiscal prudence demands that these funds, when received, be set aside, invested and used for the claims, not for on-going operations of new Government programs.
3. Capital Gains Tax Decrease. The Federal capital gains tax was decreased, making sales of stocks more attractive. Maryland did not decrease its tax, resulting in a windfall from people who sell more stocks. Maryland should decrease its capital gains tax by the same level as the Federal government or by exempting certain amounts from tax as Senator Haines has proposed for years. Maryland may find that it attracts even more sales if the tax rates are more favorable.
4. Repeal State Inheritance Tax. This tax only brings in $130 million and over half of that is spent in keeping the Register of Wills offices open. This tax is a tax on dying and Maryland does not need to impose penalties for dying. The state Estate Tax can be reduced or phased out as well and at the least the Federal forms ought to be accepted for the Maryland tax.
MTA thinks maybe we have reached the stage where some people try to minimize their estates to avoid taxes. If we allowed estates to grow without taxes and penalties, it could be that Maryland would keep more retirees here and make more money on their activities.
5. Ten percent Tax Cut. Make it happen this year. Complete the promise to make the cut. MTA has explained eleven ways to get the money to pay for this cut and pay for the next cut as well. See separate page from MTA News.
6. Constitutional Amendment. Adopt a plan that will send back revenues received over and above the amount you authorize to be spent. Last year there was S.B. 603, or the 2% kicker bill based on Oregon's constitutional provision. This year I understand there may be a sales tax reduction bill that says when the levels of General Fund taxes are received, the sales tax is reduced to compensate. Let us see these plans and make one of them happen so that the Legislature controls expenditures.
IV. Suggested approaches the Committee should consider to make fundamental shifts in collection and use of Taxpayer money.
State employees: Why do we always need more employees? Take for example the Department of Human Resources, where we are spending more than $200 million on a new computer. Where are the efficiencies in this? Is there not supposed to be the ability to get more work done with fewer employees as a result of the new computer? Then why are budgets for employees increasing at the same time the computer budgets are increasing. People are getting off welfare programs, yet we keep adding more state employees to track fewer and fewer recipients.
Take for example, the Office of Information Management at DHR. In 1989 before the new computer installation was started to do a better job and reduce the costs to the Taxpayers, that Office had a budget of $10 million. Now, the same office has a budget proposed at $67 million. Is there a direct relationship between better computers and more budget? It seems that this is true for the past 9 years. Where are the projected savings that justified the expense?
What elements are controlling the need for more employees? Are all employees working a 40 hour week? Freeze the number of jobs. Reduce the number of holidays and sick leave days to a level close to private industry. All that has happened in recent years is that the state took out three holidays and put in another personal leave day. So we have state employees with 22 personal leave days, 14 holidays and 4 sick days for a total of 40 days. We have seen advertisements for state jobs that imply more than 50 days off after the first year. Change the turnover assumptions. There seem to be 6,000 job openings every year that are used as a slush fund in the budget. Do we really need this kind of budgeting? Read the Calvert Institute study on State Debt and recognize that all departments have unfilled jobs that cause budgets to be bloated and unnecessarily large.
Converting 1400 contract employees to full-time employees will increase the cost to Taxpayers. Keep the contract employees to allow the flexibility in moving them and dropping them when tasks are completed. Making them full-time requires more benefits money, more pension money and this will further drain resources and increase spending.
Pay for Performance: Is this a plan to allow more favoritism or is it a plan that will allow true rewards for outstanding work? What are the controls? Whenever these programs are started, 80 percent of the people get the money. How will this program be different?
Why does the General Assembly need new employees and a 14.2% budget increase? We see that you have reduced contract employees and added new full-time employees for a net reduction of 15, but your spending is way up. Will this make it possible to save Taxpayers money or spend more money? How does it make sense to spend more for less? Are these jobs hard to fill?
Change Debt Policy: Why continue to increase the level of debt and the cost of debt service or interest? What level of debt is going to be acceptable during your four year term? Double that presently on the books or one half of that one the books?
Education Spending: It is claimed that one third of the increases in the budget are for education. Will this be throwing good money after bad? Where are the changes in law and in teaching that will make this expense worth anything. Make parents the customers again, not the teachers and not the unions. Expand the Charter school law to make it possible to experiment on improvements. Get rid of education courses and have teachers qualify in subject matter areas or not teach it. Many educators agree that education courses for middle and secondary teachers are a waste of time in many cases. Is our objective a monument to education in the form of colleges of education or is the education of our children the monument we ought to be working toward?
The Governor wants to spend last year's surplus and phantom Tobacco money on one year PAYGO capital costs. As we view it, this seems to be about spending everything in sight as there are no controls or criteria for where school construction money is spent. The Legislature needs to systematize and regulate this spending and get it out of the realm of whim and political deals. Our children's education is too important to allow games to be played with the money for schools. Maryland's Governor uses school construction money as a hammer over the heads of legislators. This is an abuse of power and it is very wrong.
Montgomery County is leasing and selling school buildings at far less than market value, some call it "giving away' school buildings. The citizens are perplexed at this and wonder how long the Legislature will support such a system of waste.
One county is building a school for $33 million which is almost identical in size to a school in an adjoining county that cost $24 million. The Governor's school construction staff does not care, as they are only giving $9 million toward the building anyway. The rest has to be paid by the Taxpayers. There are no reasonable policies on school construction and renovation in place.
Funding Local Jurisdictions: If 33 percent of the General Fund revenues are now returned to local governments, it is past time to consider giving local government the power to tax so that the state does not have to deal with funneling the money through Annapolis, through the Governor's office, and through this committee. It is highly inefficient to route such a high percentage of money for services in this manner. Consider eliminating state aid to all but the very poor jurisdictions.
Maryland has two large lobbying groups who look out for the local governments. We have asked the Maryland Municipal League and the Maryland Association of Counties to share with us their operating budgets. The MML did honor our request and we learned that it's annual budget of $1 million is raised about half from dues from the city budgets (read Taxpayers) and another one third from "arrangements" with insurance companies for the cities who provide workers compensation insurance and liability insurance. There appears to be some sweetheart deals here that we do not fully understand and we wonder about the conflicts of interest this creates.
We are hopeful that MACO will share with us the same kind of information, but what we see here already with MML is a strong force in Annapolis that clamors for more spending at the local level.
There is something perversely suspicious about using Taxpayer dollars to lobby the General Assembly for more Taxpayer dollars. We will continue to monitor this issue and you need to be aware of the undue influences that can occur with this arrangement.
Transportation. More spending is needed say the road builders. Too much is being spent on mass transit, say the rural counties. The Governor wants a boost in gas tax; the Speaker wants an increase in sales tax, but where is the transportation policy that decides who pays the costs of getting around the State?
MTA believes Maryland spends $9,000 per lane mile for maintenance of roads while surrounding states spend only $6,000 per lane mile. Why do we allow this to continue? Why do we allow the State Highway Administration to spend tens of millions to acquire land in the path of suggested highway routes which are in complete violation of every land use plan considered in the past fifty years, particularly when traffic modeling does not support the needs for roads in those locations? This is the case with the proposed Intercounty Connector routes in Montgomery County.
During the Spending Affordability Committee meetings, Senator Hoffman pointed out we have no transportation policy. The Governor has shifted his Transportation Secretary in this term to gloss over some of the errors made in the first term, we believe. Every time the road builders make estimates of costs, these are in the Billions. Marylanders do not have more Billions, especially when the annual budget goes up a Billion every year.
How does the Baltimore Port Authority fit into Maryland s transportation policy? Is dredging the port while shipping continues to drop merely a waste of Federal and state funds? What are the real economics here? Is it still cost effective and if it is, where are the industries who are wanting to locate in Baltimore because of the port?
Recently a new county transportation employee was speaking to one of our MTA members at his store. Seems his county had plenty of money for new trucks, plenty of money for new employees, but no money for asphalt. This new employee was told by his supervisor to get in a truck and go get lost. This is not the way we want our taxes spent.
Gun Control Spending: Why the increase in $3 million for gun control spending. Applications for approval are already forwarded to the FBI for approval. What will we get for this money? Is it really the honest Taxpayers who are causing the problem and who should pay more taxes to control the guns of criminals?
Eliminate Offices: The Commission on the Courts recommended elimination of some constitutional offices -- Register of Wills and Clerk of Court, to name two -- when it reported a couple of years ago. MTA read the report, discovered that no financial data was made available to the Commission, and consequently, the Commission made no cost estimates. MTA said at that time, this report should not be implemented until costs were calculated. It is likely that the elimination of some constitutional offices may eliminate some costs, but this trade off cannot be merely speculated.
Consolidate some Departments: Some state agencies could be consolidated. Targets would be Agriculture, Natural Resources, Environment and Energy. There is a lack of enforcement of Environment laws in Maryland leading to all kinds of clean-up problems and costs for the next generations. Why not reduce some overhead and combine more of these state agencies?
Budget Document Cleanup: MTA has found many inconsistencies in the documents. For example, page II-957 has a total budget of $18.772 Billion, while the Priorities Booklet has a total of $17.699 Billion. It may be that capital spending is in one document and not in the other. But why not point this out clearly?
Another problem with the entire page is that the Tobacco Tax and Tobacco Settlement are not included on the projections. This leaves us wondering what is going on
Another example of wishful thinking is on II-973 where Local Aid is projected to increase 3.6 percent in the out years to 2003. This is completely misleading and unrealistic, since historical figures show much larger percentage increases from year to year and there is no plan in place to reduce this spending. They are all asking for more, not less.
Look at page 19 of the Fiscal Briefing document too, it shows percent changes from year to year greater than 3.6% in all but two years. So there is some basic doubt that the numbers game will add up in the end using these tools. But it may be all we can point to and it needs to be cleaned up.
Spending Without Appropriations
MTA continues to monitor the budget documents for the spending that is never appropriated by the Legislature. According to our comparison of the yearly budgets, $318.6 million was spent in FY 1999 that the Legislature never appropriated. (Figure 3. ) This makes the five year total of $1.729 Billion that the budget documents say was spent without appropriations.
We are aware that the S.B. 750, the budget bill, was supposed to sweep excess revenues into a reserve fund and require the Legislature to take action on them. However, we have not seen that action take place, the public has not seen that action take place, and so far as we know, the money has been spent again without the Legislature's approval. If we are wrong, why does the Budget keep reporting expenditures above appropriations without any public accountabililty?
Maybe you would like to have a briefing on this by John D. O'Neill, who has been monitoring the data for us. I am sure he would come down for that specific purpose and explain this problem. He was unable to be present today and it would take more than a few minutes to explain it.
What is Not There?: On page 11 of the Fiscal Briefing Documents, the Legislative Services staff have pointed out four items that were not included in the FY2000 budget. There is one glaring omission. No where do we see an amount to pay for the 10 per cent tax cut. Put this in for FY2000 and get it over with. Maryland used to be serious about tax cuts and set up a Tax Reduction Fund. It is time to be serious again and reestablish such a fund.
What Not to Do: Commissions and task forces to look into efficiencies and spending in government do not seem to work in Maryland. Do you remember the High Cost Initiative Study initiated in 1994 that was to look at the extreme top 10 percent of Medicaid beneficiaries and find out what the costs were? Where is the report on that study? Can anyone find it?
Have you seen any reports of the Governor's Commission on Management and Productivity? Where are the savings claimed there? When MTA's proposals were submitted to them as our eleven points, this was condensed into a single sentence, and no investigation was made of our ideas.
The lack of knowledge about studies and commissions by the Legislature and others seems to indicate that these get buried in Maryland. The alternative is for you as elected members of the House to do your own investigations and make the necessary changes in law to implement them. Appoint a few members to be in charge of, or to "manage," some investigations and audits and report back after the summer. Let a Member of the House and a Member of the Senate hire an accountant or other researcher and appoint a Taxpayer member of the group to assist compile some data for further investigation. But keep this out of the Governor's hands, and keep it independent. Maybe something can be learned and acted upon before your four year term is out.
While we are knocking the lack of any reports from Commissions and lack of action on any reports made, let us suggest a couple of areas that ought to be studied by these small groups from the Legislature. 1) State police forces; and 2) Use of State Vehicles.
As for police forces, does the Legislature know how many there are and why these multiple state agencies could not be consolidated, perhaps placed under contractual services? Maryland has the State Police, Natural Resources Police, General Services Police, Corrections Officers, individual agency police forces, such as in the Comptroller's Office, and others. Generally, how does the ratio of highly paid supervisors to low ranking officers compare with other jurisdictions in the region? It is our impression that we operate our police forces like we operate our schools, with plenty of brass at the top and little money for the lower ranks.
As for vehicles, why do the Maryland Taxpayers have to spend money to get state employees back and forth to work? What does this cost? What are the real facts about damage to state owned vehicles being driven home every night? MTA hears the excuse that State employees are "on-call" as justification for allowing the vehicles to go home with employees. But are not all State employees "on-call?" We think they are. Commuting should be a personal matter as it is in the real world.
Many vehicles are used for a few thousand miles per year. What about car pools? How many "chase" cars, with extra expensive acquisition costs, do we need? How many of these special cars are driven by high ranking officers who never make a chase? Why does Baltimore City need so many cars per employee compared to Baltimore County and the other counties? Does not this support of so many vehicles in Baltimore City take money from the schools and other needs in Baltimore City? Why do State Taxpayers have to fund this kind of obvious waste?
Conclusion
Again, we thank you for the opportunity to give this testimony. We hope we have exposed some ideas that will help you with your Legislative tasks and improve Maryland government operations. MTA will continue to remind you of the things that we believe need looking into and to prod members to do something to save the Taxpayers from more new taxes. We thank you for the chance to offer our ideas and will be glad to answer questions.
The Maryland Taxpayers Association, Inc. (MTA) is a non-profit, non-partisan organization, approved as a Sec. 503(c)(4) trade association. Dues are $15 per family per year. Contributions are welcome, but probably not deductible. Consult your tax advisor. The Maryland Tax Education Foundation, Inc., mentioned in this MTA testimony, is a non-profit organization approved by the Internal Revenue Service as a Sec. 501(c)(3) educational and charitable institution. Contributions to MTEF are deductible. The addresses of both organizations is at the office of the president, 103 North Adams Street, Rockville, MD 20850. To contact MTA, telephone (301) 762-3784 or 1-800-2-KUT-TAX. Copies of annual reports are available on request.
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