First in an occasional series
Question 1 on this fall’s statewide ballot asks voters to decide whether Maryland should join the 49 other states in allowing its legislature to reallocate funds across the programs of the budget. The proposal would, however, prevent the legislature from increasing total spending beyond that proposed by the governor. We believe voters should vote “for” this reform.
Let’s begin with a little history.
The governor’s extraordinary power was placed in the state constitution in 1916. That provision prevents the General Assembly from amending the governor’s operating budget to increase spending on any program beyond what the governor has proposed for the budget year.
The constitutional amendment came in response to deficits that were the result of poor budgetary practices. Back then, there was no unified state budget. Instead, separate appropriation acts for different activities were passed without rigorous accounting, eventually leading to the sum of appropriations exceeding the revenues available. Needless to say, this was an exceedingly embarrassing situation for political leaders of the time.
In this respect, Maryland was not unique. Around this time, academics and government reformers proposed that the remedy for similar problems across the country should be the “executive budget.” Some versions gave the executive ― whether mayor, county executive, governor, or president ― the responsibility for preparing a comprehensive budget, and cutting back agency requests when necessary. For more than a century, the benefits of this version of the executive budget have been substantial, particularly because of the contributions of civil servants with budgetary experience.
The stronger versions of the executive budget, in contrast, intentionally weakened the legislature. This approach was adopted by the state of Maryland, and also by the City of Baltimore (which is also considering this election a ballot provision that would restore some budgetary power to the City Council).
The theory of the stronger executive budget was simple: give one person power. It was thought that governors as managers could be above politics and more fairly and efficiently allocate resources than could result from the legislature’s deliberative process. If instead the government’s finances were mismanaged, the voters could hold the governor accountable by throwing the bum out in the next election.
This approach was a fundamental departure from the “checks and balances” basics of American government, in which it has been assumed that requiring negotiations between the executive and legislative branches will produce better public policy.
As we look to down the road to Washington, D.C., it is obvious that this expectation is not always met. But our disappointment there stems not from the constitutional arrangement but rather from the failure of the president and the Congress to do their jobs.
It is also important to note that Maryland’s budget system gives the legislature far greater power over the capital budget, which is financed through state borrowing. The capital budget process permits state legislators to add capital projects, subject to a total ceiling, which typically requires offsetting cuts to capital projects proposed by the governor. Additions by the General Assembly are subject to an item veto by the governor, which then can be overridden by a supermajority vote.
The proposed constitutional amendment would adopt much the same process for the operating budget. Opponents of the amendment in the past, and now, have warned that re-empowering the legislature would cause Maryland to lose its AAA bond rating. We note, however, that the 13 states that like Maryland hold AAA ratings do not limit legislative authority as Maryland does.
Bond raters have not objected to the General Assembly’s powers in the capital budget in part because it is subject to a debt affordability limit. Under the proposed operating budget rule, there would also be a limit, one established by the governor when the budget is submitted.
Allowing the legislature to act like a typical American legislature for the capital budget and not for the operating budget can lead to some nonsensical results.
Let’s look at how the current system might deal with a critical issue like emergency food assistance. Much of that help comes from federal funds, but state funds are also involved. For next year’s budget, if the state legislature believes that the governor provided less state funding for emergency food assistance than is necessary or desirable for the budget year, it cannot amend the budget to provide more funds. Yet it can add to the governor’s capital budget by providing capital grants to community food banks. This distinction make no sense. (Note that if this example comes true for the next budget, the constitutional amendment ― if passed ― unfortunately would not take effect until 2024.)
What makes even less sense is the idea that one person, even if that person is the Governor, should have such excessive power over the budget. As was well stated by William H. Allen in 1917, an advocate of the weak executive budget but an opponent of the Maryland approach:
“Nothing could be more unscientific and more absurd than to ask legislators to deal intelligently or honestly with executive proposals if the constitution prohibits them from considering at the same time evidence existing anywhere in the state that the governor’s proposals are inadequate.”
Good fences make good neighbors?
The natural result of this excessive gubernatorial power is that legislators and their constituents have found ways of adapting. To simplify, we will briefly mention two.
The first adaptation is when the General Assembly “restricts” and “fences” funding. By reducing appropriations requested by the governor, the saved amounts are then listed in the budget as being available for specific purposes proposed by the legislature, should the governor agree to release the funds for those purposes.
This approach is potentially a second-best workaround to the strong executive budget, allowing negotiations over some legislative priorities. However, it can fail when the governor does not want to participate in such a negotiation, or if the General Assembly uses this approach to blame the governor for not releasing funds.
The second adaptation by the General Assembly has been to mandate in law that the governor include funding in a later budget year; the constitutional provision only applies to the budget year.
Mandating future year spending has been a recurrent practice in Maryland, and it’s a double-edged sword of a budgetary adaptation. On the positive side, it can provide adequate funding for priority programs. On the negative side, when a sizable portion of the budget is mandated ― as is currently the case ― the budget can become too inflexible, creating some significant problems. Governor Hogan is not the first governor to point out this fact, and the General Assembly itself recognizes the problem by highlighting in legislative fiscal notes when mandates are proposed.
We will discuss the mandating practice and some potential solutions in future articles. The main point here is that by passing the constitutional amendment, the incentive for legislators to mandate spending will be reduced. When legislators believe the governor has underfunded a program, they can simply appropriate more, subject to making cuts in other programs and to the governor’s item veto (which could be overridden).
In sum, the strong executive budget adopted over a century ago has outlived its usefulness. Rebalancing the executive and legislative powers of the operating budget will allow citizens and legislators to propose modifications to the governor’s budget, requiring the governor to engage with those proposals. It will allow more voices to be heard and make it more likely that the competition for the state’s limited budgetary resources will allocate funds where they are most needed. We encourage you to vote “for the constitutional amendment.”
While Question 1 would help restore a healthier institutional balance, we know that Maryland’s budget process could be much better in other respects. Drawing on many years of study and engagement with budgeting in our state, we have a number of additional observations and ideas for making the system more responsive and resilient. We plan on sharing our thoughts in a series of subsequent articles over the coming weeks in which we will describe how that process can be improved. Among the topics we will discuss are:
· The current budget crisis from the pandemic, which will cause damaging spending cuts if the federal government fails to provide sufficient fiscal relief for state and local governments;
· How Maryland can better prepare for future budget crises;
· The damaging ways by which the state has developed and then dealt with chronic structural deficits, and a preferable alternative to this approach;
· The obsolete elements of the state’s revenue structure, which can be modernized; and
· Increasing the use of multiyear plans for meeting state goals, and the use of data for measuring program performance, so that the budget better allocates funds towards priorities.
— ROY T. MEYERS AND WARREN G. DESCHENEAUX
Deschenaux ([email protected]) is a former executive director of the General Assembly’s Department of Legislative Services, and served as the legislature’s chief fiscal analyst. Meyers ([email protected]) is professor of Political Science and affiliate professor of Public Policy at UMBC; he is a Fellow of the National Academy of Public Administration and has won awards for his research on government budgeting. They plan to write additional commentaries on the budgeting process in the weeks ahead.