This is not what we call Responsible Budgeting
Catching up from Friday, take a look as to how the Democrats may try and cover the deficit:
State officials are considering a $366 million budget fix that could spare difficult spending cuts by transferring money in an unused reserve fund kept by the Maryland comptroller’s office.
The fund is maintained for accounting purposes and could go a long way to reducing a $1.9 billion shortfall that Gov. Martin O’Malley and state lawmakers must close to balance the next annual budget….
….The so-called local income tax reserve fund has been eyed during previous budget crises but has never been tapped. The money is set aside every year to show that the state can cover what it owes taxpayers for refunds. But the refunds are paid out of incoming tax receipts, and the reserve fund has never been used.
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That’s right, Maryland Democrats are perfectly willing and able to sacrifice your tax dollars, money that rightfully belongs to you the taxpayer, in order to not take any political heat from needed and necessary reductions in discretionary spending.
Of course, the real gold standard for Maryland Fiscal Policy is the maintenance of the AAA bond rating, something Democrats loved to rail on Bob Ehrlich about when he, in their minds, risked the integrity of our bond rating. Martin O’Malley even talked about the importance of the bond rating during one of the gubernatorial debates in 2006. But now this move may throw that idea right out the window:
The hangup: A simple transfer might not be so easy. State officials say they would have to weigh how bond-rating agencies would view the budgeting maneuver. Maryland is one of a few states that holds a coveted AAA bond rating, which enables the state to obtain lower interest rates and therefore save taxpayers money. The top rating is based in part on the state’s ability to cover its liabilities.
Shapiro said that the comptroller’s office had an “internal debate” over the implications of the fund transfer and concluded that it was unlikely it would affect the state’s bond rating.
I find it highly doubtful that the state spending money out of a reserve fund used to cover its liabilities would be “unlikely” to affect the bond rating. Of course it will affect the bond rating. It may not necessarily downgrade the bond rating from that of a AAA bond, but when you start shifting money around to cover costs instead of responsibly cutting spending, I highly doubt that will give a warm and fuzzy feeling to the Bond Houses in New York. Especially when the Gazette points out that shifting the money in this manner does nothing in the long term but….create a new shortfall:
Using the money would mean the state’s financial records would show a $367 million unfunded liability, but one that would be replenished with the start of the next calendar year.
The reserve acts something like an escrow account. Tax receipts are deposited into the account, and a portion is saved to cover state income tax refunds that would be paid out as part of the local income tax.
But taxes are collected over a calendar year, and the state budgets on a fiscal year, so taxes collected from Jan. 1 to June 30 get refunds starting July 1, which marks the start of the next fiscal year. The refunds end up being paid through different funds, leaving the refund reserve alone.
So in essence, we’re not really talking about a “reserve fund” per se. We’re not talking about a rainy day fund. We’re not talking about the $1.2 billion budget surplus Governor Ehrlich left office with. We’re talking about a fund designed to make sure that you the taxpayer gets a refund instead of an IOU like they are getting in California. This isn’t responsible spending: it’s a shell game.
What the General Assembly really needs to do is to not play games with the money and really start shutting down unnecessary program. The work of Governor O’Malley and Legislative Leadership in trying to be cute instead of be leaders may in fact help our chances at the ballot box in 2010, but realistically no conservative wants to see these Democrats continue to screw working and middle class Maryland families like this with their continue irresponsibility and fiscal recklessness.