Maryland's Fiscal Slide

Abstract

Maryland’s budget rules were designed with the intent of restraining spending growth. They have instead produced sustained and growing deficits. The rapid growth in Maryland’s budget, as well as the increase in mandated spending are products of the state’s fiscal institutions—the legislative and constitutional rules under which the state budgets. These include the Executive Budget process, the Spending Affordability Commission, and the Debt Affordability Commission.

The evolution and interaction of these rules forms the state’s political-fiscal environment. This environment also includes the state’s fiscal relationship to the federal government. The effect of this relationship is seen clearly with the American Recovery and Reinvestment Act of 2009, the intent of which is to stabilize state budgets with bailout funds and stimulate economic growth through infrastructure spending.

The combined effect of these has been the subsidization of spending path that cannot be sustained absent significant increases in state taxation, or spending reduction and reform. This paper examines each of these institutions and their role in creating the present fiscal crisis.

Keywords: Maryland, state budget, fiscal, tax policy, government debt