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Maryland fairs poorly in university solvency evaluation

Maryland ranks among the worst states when it comes to short-, medium- and long-term fiscal solvency, according to a review released by the Mercatus Center at George Mason University.

Gov. Martin O'Malley

Gov. Martin J. O’Malley during a Jan. 15, 2014 news conference explains what he called “the bad math of the past’ that resulted in structural budget deficitis for much of the last decade.

Maryland ranked no higher than 41 of 50 states in three categories meant to rate the liquidity of each state government, the ability to meet current expenses without running a deficit and the ability to meet all long-term costs, based on 2012 budget numbers.

Sarah Arnett, author of the study, acknowledges that the fiscal condition of a state “is multifaceted and difficult to measure.”

The top and bottom performers do have some similarities, according to Arnett’s paper.

“The top five states all had a surplus in fiscal year 2012 as measured by an increase in net assets, but there are differences in their underlying strength,” Arnett writes. “I find that the states with the worst fiscal condition have had years of poor financial management across the different dimensions of fiscal condition.”

Maryland has been dealing with a structural budget deficit for roughly a decade. That deficit ballooned to nearly $2 billion at one point.

Gov. Martin J. O’Malley had hoped to erase that structural deficit by the time his eighth and final year in office ended. Last week, O’Malley said his fiscal 2015 budget is balanced and is projected to cover the expected deficit in fiscal 2016.

T. Eloise Foster, his state budget director, said the spending plan puts Maryland “on a glide path” to erase the structural deficit by 2017, according to current projections.

The governor last week blamed the ongoing structural deficit on policy and spending decisions made by Govs. Parris N. Glendening and Robert L. Ehrlich, a Democrat and Republican respectively, and the recession.

“It happened because of the bad math we engaged in as a people in years gone by,” O’Malley said.

Included in that “bad math” was a phased-in 10 percent across-the-board tax cut that O’Malley said cost the state $1 billion under Glendening.

“That was a bad math decision,” the governor said at the time.

At the same time, the state implemented the $1.3 billion school funding formula known as Thornton without “putting in any new revenue to support it,” O’Malley said.

O’malley then said four years of “insufficient action” under Ehrlich and the recession put the state into a deep budgetary hole he had hoped he would work out of by the time he left office.

Overall, Maryland ranked 44th, according to the Mercatus survey, just above New York, California, Massachusettes, Illinois, Connecticut and New Jersey.

The five states with the overall best rankings [from five to one] were: Wyoming, Nebraska, North Dakota, South Dakota and Alaska.