Hogan takes combative stance over use of state’s revenue windfall

ANNAPOLIS — Gov. Larry Hogan has plans of his own when it comes to spending a revenue windfall totaling $5 billion. 

The second-term Republican governor also said he plans on avoiding the profligate spending and debt he said has driven annual budget deficits for more than two decades. Hogan laid out the broad strokes that will likely underpin his budget, which is due in January.  

“Already some politicians see this as a chance to go on a big spending spree with pet projects and big payouts to special interests and new mandated increases in spending,” said Hogan. “That is not going to happen on my watch.” 

The governor did not offer any specifics about which pet projects nor name those special interest groups. 

“With this budget framework, my message is pretty simple,” said Hogan. “As long as I am governor, I will continue to fight for fiscal discipline and continue working hard every single day for Maryland families, small businesses and retirees to stay in our state and I will continue to fight for Marylanders to be able to keep more of their hard-earned money in their own pockets.” 

The governor won’t have the only say on the budget. The Democratic-controlled legislature will likely reshape his spending plan. Democrats control super majorities in both chambers and have shown a willingness to override Hogan’s vetoes at will.  

Hogan previewed an outline of his coming budget. That spending plan goes to legislators when they begin the 90-day regular session in January.  

His five-point framework includes: 

• Bolstering the state’s rainy day fund to 7.5%, an amount 50% higher than mandated by law.  
• A tax cut for retirees.   
• Direct tax relief for working families.  
• Aid for what the governor called “underserved Marylanders.” 
• Enhancements for state employees. 

The total cost of Hogan’s proposals is unknown. The governor said the amount that would go to the state’s rainy day fund would be about $1.7 billion.  

“Everything I talked about has a price tag,” said Hogan. “These are the broad outlines. We plan the next couple of months addressing how we continue to keep the state moving forward on good financial footing.”  

Hogan said he might also consider using some of the money to lower the state’s liability for employee pensions.  

“As our members begin to bargain with Governor Hogan’s administration today, we expect more than platitudes about COVID heroes and essential employees,” said Patrick Moran, president of AFSCME Council 3, the state’s largest employees union.  

“Stagnant wages harm vital state services,” he said. “Front-line employees are critical to minimizing the spread of COVID-19 and helping all Marylanders recover from the pandemic. Now is the time to invest in front-line staff by ensuring they are fairly compensated with clear health and safety protocols in place to prevent outbreaks in state facilities. With the rise of the delta variant and the continued threat of COVID-19, it is critical that the governor reinstate health and safety measures as well as take immediate action to fill thousands of vacancies negatively impacting the quality of state services.” 

Hogan declined to offer specifics for employee enhancements, saying that the state couldn’t comment on ongoing negotiations with unions.  

The governor’s announcement is the first look at how he might spend a nearly $5 billion surplus made public in a series of back-to-back announcements last week.  

Of that, $2.5 billion comes from some higher-than-expected personal income tax revenues, including capital gains, a volatile and unreliable revenue source. 

The state also expects to see higher-than-projected revenues for the current and coming fiscal years. 

“We’re not going to squander this hard-earned surplus on special interests,” Hogan said. “We’re going to invest it in the hard-working people of Maryland and we’re going to leave our state in better shape for future generations.” 

Hogan proclaimed the surpluses the result of his fiscal stewardship and opposition to mandated spending and tax increases.  

Analysts at the comptroller’s office said much of the extra revenue has been the result of billions of dollars in federal pandemic aid flowing into the state.  

The large amount of cash on hand is already sparking conversations about spending. 

In a meeting of the Capital Debt Affordability Committee, Treasurer Nancy Kopp called on the state to consider increasing the amount of money it will borrow.  

“I don’t know about the logic of trying to go backwards and take us back to the kinds of over-borrowing and overspending that we’ve done in the past,” said Hogan.