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Governor Larry Hogan Announces Spending Reforms, Fiscal Responsibility Legislation

Limits Growth of Forced Spending Mandates, Restores Responsible Budgeting, Addresses Revenue Volatility

ANNAPOLIS, MD – While unveiling the administration’s Fiscal Year 2018 budget priorities, Governor Larry Hogan today announced plans to introduce legislation to provide relief from forced legislative spending increases and address longstanding budget volatility. These proposals will promote and build on the responsible budgeting practices demonstrated by the Hogan Administration and continue to improve Maryland’s long-term fiscal stability.

“The legislature’s own top financial analyst warned them recently that now is the time to ‘get real’ about not spending more than we take in,” said Governor Hogan. “We are hopeful that this year, members of the legislature will finally put aside the tax-and-spend politics, and instead work together with us in a bipartisan way to enact meaningful, common sense budget reforms.”

The governor’s proposed reforms include:

Common Sense Spending Act of 2017 – This proposal follows a bill introduced by the administration in 2016 that was not acted upon by the General Assembly. This legislation would put into law the most common sense of budgeting realities: that the state cannot spend money that it does not have.

The bill establishes that, starting in FY 2019, the state would not be required to fund any program or item by more than one percent under revenue growth. This will ensure that spending growth is always less than revenue growth. The bill makes exceptions for state aid to public K-12 education, debt service payments, and several other critical areas.

Additionally, the General Assembly would not be able to enact legislation that creates a new or increased required level of funding in the annual budget for a specific program or item unless it also enacts legislation during the same session that reduces or repeals an equivalent amount of required funding for the same fiscal year.

Fiscal Responsibility Act of 2017 – This legislation recognizes that state revenues have been volatile and unpredictable for years and can rise or fall based on any number of factors such as changes in the national economy and the stock market. To ensure the state is always prepared, the governor’s proposal will save excess revenue in strong economic times to prepare for times when more flexibility is needed.

The legislation places a cap on the estimate of non-withholding (e.g. capital gains) revenues assumed in the budget process. This cap is designed to reduce revenue volatility by ending the practice of using temporary revenue spikes to fund known recurring future expenses. It will also create a process whereby excess state income during years with a revenue surplus will be automatically moved into the Rainy Day Fund to make that excess revenue available for use in years where revenues are less than projected.

This bipartisan legislation is based on recommendations from a joint report by the Department of Budget and Management, the Department of Legislative Services, and the Office of the Comptroller.

 

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