AAA Bond Rating Not a Sign of Fiscal Responsibility

Once again Maryland’s public rulers are crowing how state maintaining is AAA bond rating is a sign of their fiscal responsibility. 

 “Fiscal responsibility, and taking a balanced approach to investments and cuts, are essential to strengthening our economy. 

“Since 2007, we have made $9.5 billion worth of cuts — more than any administration in modern Maryland history — and our executive branch is the smallest it’s been on a per capita basis since the early 1970s. But we’ve also invested in key priorities like education, innovation, and infrastructure so that we can build an economy that works.

O’Malley’s hand picked-by-the-machine successor Lt. Governor Anthony Brown issued a statement, which said in part.  “With today’s announcement that Maryland has retained our AAA bond rating, we’re continuing to build a strong economy on the foundation of fiscal responsibility.”
It’s all an un-clever façade masking Maryland’s real fiscal problems.
Maryland, under O’Malley-Brown Administration has rung up a massive amount of debt—a great deal of which was used to cover general fund spending fueled by fund raids i.e., swapping cash from other funds and replacing it with bond debt.
According to November 2013 Department of Legislative Services, the O’Malley-Brown administration, since 2010, has issued $1.4 billion in bond debt to cover general fund spending.  Another $103 million is estimated to be used for general fund relief in fiscal year 2016.
State debt under the O’Malley-Brown administration has increased nearly $5 billion (23 percent) between 2007-2012 according to State Data Lab.

The same report also noted, that along with a 6 percent increase in pension costs over the next six years, “debt service costs are projected to increase 6.1 percent annually over the next five years while State property tax revenues are projected to increase 0.5 percent annually.” 
Both pension and debt service will rise and eventually reach 11 percent of general fund revenues by 2019, up from 7.9 percent in 2013.
Debt service payments are paid from revenue from the state property tax. 
Again, from the DLS report:

Unless pension payments are reduced (they are now $300 million above the actuarially required level), the remaining lever to provide relief from this ongoing fiscal squeeze is through moderation of the burden of debt service. This can be accomplished by constraining, rather than increasing, the level of debt to be incurred, or through the Board of Public Works by increasing the property tax.

The legislature cut $200 million from the state’s payment to the pension fund this fiscal year and fiscal year 2015, while phasing in an increase back to the $300 million level by 2019.
However, debt service payments will increase annually, reaching $557 million in 2019.  The next governor will face a $387 million debt payment their first year in office. 

Ratings agency, Moody’s even noted that challenges for Maryland include continued budget pressure, low levels of funding for the state retirement system, and above average debt burden.
If Anthony Brown is the next governor, expect a property tax increase, because if past behavior is a predictor future performance, Anthony Brown is incapable of putting down the state credit card.
For all of the O’Malley-Brown bluster about a “balanced approach” and historic budget cuts, they can’t escape the real fact that they haven’t cut a dime from the budget.  Since they took office, the budget is $10 billion larger, and they’ve passed 40 tax hikes taking $9.5 billion out of the economy.   Taxes that still haven’t fixed the state’s chronic structural deficit.
Speaking of the economy Maryland posted ZERO percent GDP growth in 2013 and a meager 2.9 percent between 2010-2013.
Look at this graph of Maryland’s shrinking middle class over during the O’Malley-Brown era, does it look like they’ve built an “economy that works?”

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