HOUSE REPUBLICAN CAUCUSFiscal Vision for Maryland

March 1, 2011

1

HOUSE REPUBLICAN CAUCUSFiscal 2012 Budget

Review of Governor’s

Budget Plan

2

HOUSE REPUBLICAN CAUCUSAnalysis of Governor’s FY 2012 Budget Actions (a)

Estimated Baseline Cash Deficit (Dec.) $(1,582)

Cuts in Baseline Spending $670

Special Fund Raids (b) 325

Tax & Fee Increases 245

Wishful Thinking (Lower Deficiencies) 243

Federal Stimulus 124

Other 70

Total Actions $1,677

Fund Balance Projected for FY 2012 $95

3

(a) Recategorized from official categories. (b) Includes raid on TTF and $191 million in “bonding” to replace diverted Special Funds (POS and BRF).

4

HOUSE REPUBLICAN CAUCUSGovernor’s Budget Actions

Cuts from Baseline

$670

(40%)

Diversions and Transfers

$325

(19%)

Tax & Fee Increases

$245

(15%)Wishful Thinking

$243

Federal Stimulus

$124

(7%)

Other$70

(4%)

(14%)

5

HOUSE REPUBLICAN CAUCUSTotal Operating Budget – Governor’s Plan

$24.0

$26.0

$28.0

$30.0

$32.0

$34.0

$36.0

2007 2008 2009 2010 2011 2012

$28.8$29.6

$30.9

$32.0

$33.1

$34.1*

*Governor’s Proposal

The Governor has proposed a $1 billion spending increase

in the Total Operating Budget.

Actual Working

Proposed

by

Governor

Change 2012 vs.

2011

2007 2008 2009 2010 2011 2012 Dollars Percent

General Fund $14.2 $14.5 $14.4 $13.4 $13.2 $14.6 $1.4 10.6%

State Funds $22.4 $23.0 $23.1 $22.2 $22.8 $24.8 $2.0 8.6%

Total Operating $28.8 $29.6 $30.9 $32.0 $33.1 $34.1 $1.0(a) 3.1%

Budget (All Funds)

6

HOUSE REPUBLICAN CAUCUSGovernor’s Budget Spending Summary

(a) Major increases include Medicaid (up $828 million or 13.6%), Health (up $115 million or 4.3%), and Higher Ed (up $96 million or 2.0%).

7

HOUSE REPUBLICAN CAUCUSTotal Operating Budget: 1979-Present

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

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79

19

80

19

81

19

82

19

83

19

84

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85

19

86

19

87

19

88

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89

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90

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91

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92

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93

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94

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95

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96

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97

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98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

($ in billions)

*Governor’s Proposal

The Governor’s Budget Plan continues a long-term pattern of unsustainable increases in

spending.

8

HOUSE REPUBLICAN CAUCUSGF Cash Balance Deficits Under Governor’s Plan

$680

$95

-$1,100 -$1,148 -$1,175-$1,500

-$1,000

-$500

$0

$500

$1,000

The Governor’s Plan does not solve the deficit and will lead

to future tax increases.

($ in millions)

2011 2012 2013 2014 2015

HOUSE REPUBLICAN CAUCUSFiscal 2012 Budget

GOP

Budget Plan

9

10

HOUSE REPUBLICAN CAUCUSVision for Maryland

We envision…

• A smaller, less-intrusive State government.

• A State government that operates consistently within its means.

• A reduced tax burden on Maryland citizens.

11

HOUSE REPUBLICAN CAUCUSMissed Opportunities 2003-2010

Session Proposal CumulativeImpact to Today

2003 Enact slots legislation. $4.5-5.0 billion

2004 Retain 5% “trigger” provision for education. $4.5 billion

2007 Constrain budget growth to 1.5% (up $200 million) and cap GF spending to $13.8 billion in FY ‘08.

$2.8 billion

2007 (special) Adopt slow-growth budget in FY 2009 (3.5% growth) and free-market slots plan.

$1.8 billion

2008 Reduce growth in GF spending to 2.6% for FY ‘09. $1.2 billion

2009 Reduce total budget growth to 0% for FY ‘10. $1.2 billion

2010 Reduce GF spending by 2.7% for FY ‘11. $725 million

12

HOUSE REPUBLICAN CAUCUSGOP Fiscal Goals

(i) Achieve a positive General Fund balance in each of the next five years without raising taxes.

(ii) Achieve a structurally balanced General Fund budget by 2013.

(iii) Reduce the tax burden on Maryland citizens: Reverse the 2007 sales tax increase.

Reverse the 2007 corporate tax increase.

(iv) Reject the Governor’s proposal to raid the Bay Restoration Fund and Project Open Space and to replace the funds with new debt.

(v) Replenish the Transportation Trust Fund without an increase in the gas tax.

(vi) Maintain the Rainy Day Fund and strong general fund balances.

13

HOUSE REPUBLICAN CAUCUSGOP Fiscal Goals (Continued)

• Implement an additional $621 million of spending reductions in FY ‘12.

– $518 million decrease (3.5%) from FY 2011.

• Cancel proposed raids on Bay Restoration Fund and Project Open Space.

• Cancel raid on TTF.

14

HOUSE REPUBLICAN CAUCUSAction Steps for FY 2012

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HOUSE REPUBLICAN CAUCUSAction Steps in Future Years (FY 2013-2016)

• Constrain growth in the General Fund:– 2013: 2%

– 2014: 2%

– 2015: 2%

– 2016: 4%

• Restore $500 million to the TTF (FY 2012-2016)

• Repeal the Special Session tax increases:– Reduce sales tax rate from 6% currently to 5.5% in FY 2014 and

5% in FY 2015.

– Reduce corporate income tax from 8.25% to 7.0% beginning in FY 2014.

16

$14.8 $14.9

$15.6

$16.3

$17.0

$13.0

$14.0

$15.0

$16.0

$17.0

$18.0

Governor’s Proposal2011-2015 Increase: $2.2 Billion

2011 2012 2013 2014 2015

HOUSE REPUBLICAN CAUCUSGeneral Fund Program Spending Comparison

$14.8

$14.2 $14.5

$14.8 $15.1

$13.0

$14.0

$15.0

$16.0

$17.0

$18.0

GOP House Proposal2011-2015 Increase: $354 Million

2011 2012 2013 2014 2015

($ in Billions)

17

$680

$95

($1,100)($1,148)

($1,175)($1,500)

($1,000)

($500)

$0

$500

$1,000

Governor’s Proposal*

* DLS estimates

$680 $609 $527 $434 $375

($2,500)

($2,000)

($1,500)

($1,000)

($500)

$0

$500

$1,000

GOP House Proposal*

*DLS estimates adjusted for GOP actions

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

HOUSE REPUBLICAN CAUCUSGeneral Fund Budget Surplus/(Deficit) Comparison

($ in Millions)

(Cash-Basis Standard)

18

HOUSE REPUBLICAN CAUCUSGeneral Fund Budget Surplus/(Deficit) Comparison

(“Structural Balance” Standard)

($1,562)

($1,170)($1,188)

($1,155)

($1,185)

($2,400)

($2,000)

($1,600)

($1,200)

($800)

($400)

$0

Governor’s Proposal

2011 2012 2013 2014 2015

($1,562)

($426)

$25 $1 $30

($2,400)

($2,000)

($1,600)

($1,200)

($800)

($400)

$0

GOP House Proposal

2011 2012 2013 2014 2015

($ in Millions)

• The Governor’s Plan: – Relies too heavily on transfers, taxes & fees and wishful

thinking

– Continues a pattern of unsustainable growth in spending

– Does not eliminate the deficit

• The GOP Plan:– Represents new vision for Maryland

– Reduces unsustainable levels of spending

– Balances the State budget structurally

– Reduces the tax burden on Maryland citizens

– Cancels raids on the TTF, BRF and POS

– Increases funding to the TTF without a gas tax hike19

HOUSE REPUBLICAN CAUCUSSummary