O'Guvnah is no businessman. Not at all. He is used to making the numbers up as he goes along. If state government were under the same reporting requirements as public companies are -- thanks to Sarbanes-Oxley -- O'Guvnah would be doing a perp-walk down Calvert Street right now. His current budget is a perfect example of that.
O'Guvnah's budget proposal that was unveiled last week, is a superb work of leftist fiction, probably the best since Upton Sinclair's The Jungle.
It's based on a number of assumptions that might not turn out to be true, with little or no backup plan in place.
Assumption #1: The Maryland Economy Will Not Worsen
I think this is the worst of the assumptions. The Maryland economy is certain to get worse over the next several months, strained by the 72.6% increase in electricity costs for the vast majority of Central Maryland that O'Guvnah promised to overturn, but hasn't. On top of that, O'Guvnah has allowed his PSC appointees to drop trou for major electricity utilities in the state to charge a surchage to help fund the sale of compact flourescent lights through local retailers.
Furthermore, since O'Guvnah's big financial supporters at places like 1st Mariner Bank, Harbor Bank, and other venerable financial institutions were so irresponsible in their lending of money to high-risk borrowers, the foreclosure crisis will only get worse in Maryland. It is estimated by some analysts that over 70% of the foreclosures on subprime loans in the United States occured because of outright fraud on the part of borrowers, and lax stupidity on the part of lenders in combatting it. The increasing rate of foreclosure activity will strain local government property tax collections, forcing them to dramatically curtail essential government services. The slowdown in housing sales will put a pinch on fees associated with the sales. Expect to hear how realtors are suffering -- and not paying as much in taxes -- as their activity starts to chill.
The cost of gasoline -- driven largely by the increasing costs of ethanol mandates, competition from developing nations for petroleum, and the increased cost of ethanol transporation -- will put a bigger strain on Marylander's pocketbooks. But it will also affect state and local government, too. I remember in the last big "price spike" of 92-93, Baltimore County essentially grounded their patrol fleet and ordered their officers to stop driving so much. Expect such orders to come down the pike this spring. Also expect the typical moaning and crying to come out of the state's resort areas, as people start to take "staycations" as opposed to "vacations".
Meanwhile, the double-whammy of increased cigarette taxes AND the absolute ban on workplace smoking (which takes effect in 11 days) will lower over sales tax collections. People won't drink as much alcohol in bars, lowering income tax collections too. The decrease in tobacoo sales will also slow down collections of payments from the tobacco companies from the settlement decree. This will strain the state's Medicaid/Medicare budget, which gets a big chunk of change from that settlement. Luckily for O'Guvnah, Peter Angelos will still keep collectiong his exorbitant fees for the fifteen minutes of involvement in the case.
And, the increase in the sales tax will pinch too, as residents close enough to Virginia, Pennsylvania, and Delaware begin to take advantage of the discounts available there -- especially on clothing.
Assumption #2: Voters Will Pass the Slots "Referendum" in November.
It's a bad idea to count on what voters will and will not do. It's been five years since voters elected Bobby Ehrlich largely on the slots issue. And your Dark Servants in the General Assembly have been attacking the idea all along. You have a lot of ground to make up on the issue. And once my fellow members of the "Vast Right Wing Conspiracy" get working, you are going to need to spend a LOT of political capital to get this Constitutional Amendment passed. I would not count on a lot of support from Conservatives on the Eastern Shore, Western Maryland, and Northern Maryland. We do not like your abuse of the Constitution's amendment process, and we see large incongruities in endorsing slots to "save horseracing", but not allowing slots at the state's largest and most visible racetracks.
We also don't like some of the doors opened in the legislation that seem to pave the way for outright gambling casinos in the state that would only benefit your financial backers, like John Paterakis (owner of the Harborfront Marriott).
If that bill doesn't pass, expect the 2009 session of the General Assembly to be a battleground.
Assumption #3: Growth from BRAC will Help Offset Economic Difficulties.
That is a big if. The best thing that can be said is that the BRAC transfer of jobs and missions to Maryland bases will help the unions and the construction companies. I am still not convinced that the overall growth -- which is sure to put a dramatic strain on municipal water and sewer systems -- will pay for itself. Despite all the claims of Smart Growth, growth rarely pays for growth. And there will be no substantial funding for transportation expansion in the state, which will be a must to support all those new residents.
Assumption #4: The Federal Government will come up some useful "stimulus package".
I've blogged about this before, but I'll summarize: it won't stimulate the economy. Period. At best, people will use any tax rebates to pay off bills, not to incur new spending.
If O'Guvnah were a businessman, he would realize several things:
1) You don't increase your planned spending in time of economic trouble and budget difficulty.
2) You don't raise your prices on customers when they have other options available.
3) You don't play shell game number with your budget.
4) You don't bet the farm on some wild-assed assumptions.
But he isn't a businessman. He's a lawyer. And a politician. And a liar. And a thief. And he can always steal more from taxpayers if need be.