More Details on the Hogan Budget
Earlier, we shared a video of Governor Hogan introducing his budget. In this piece, we share some more detail on the Governor’s budget.
Let’s start with the highlights from the Governor’s Office itself:
Governor Larry Hogan today announced his FY 2016 Budget. The overall theme of the FY 2016 budget is “Balance Today, Balance Tomorrow” and it achieves a goal Maryland has not seen in a decade – aligning general fund spending with general fund revenues to create a structurally balanced budget. Governor Hogan’s FY 2016 operating budget expends $16.4 billion on revenues of $16.4 billion.
The governor’s budget puts Maryland on sound financial footing without raising taxes or fees and without eliminating agencies or introducing furloughs or layoffs. Additionally, the budget commits record funding to spending K-12 education, fully funds school construction and grows higher education spending by 1.3%.
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The budget achieves structural balance ahead of the goals set by the General Assembly’s Spending Affordability Committee. The recommendation from the committee included a reduction to the state’s structural deficit over several years, moving from approximately $700 million to $350 million in FY 2016. Governor Hogan’s budget eliminates the structural deficit now.
Excluding appropriation to the reserve fund, PAYGO capital and debt service, Governor Hogan’s FY 2016 budget keeps general fund spending growth to one-half of one percent (0.5%), significantly below the projected 3.5% growth in revenues. The budget includes a 2% reduction in funding to state agencies.
“I am extremely proud to introduce a structurally balanced budget that puts our state on sound financial footing,” said Governor Hogan. “But this is just a start. We have much more to do in the days and weeks ahead to further strengthen our state’s fiscal course. My administration will continue to work to put Maryland’s economy back on track, attract new businesses, and create jobs for the long-term stability of our budget.”
The governor’s budget reverses Maryland unsustainable fiscal path and breaks the cycle of overspending and over borrowing. Most importantly, it will begin the rehabilitation of the capital debt program within affordable limits and is the first step in an essential turnaround and a multi-year effort that will bring the budget into a long-term balance.
By reducing the amount of new debt authorization, Maryland will be able to meet the majority of its capital needs and reduce the projected growth of state debt, which is approaching the limits established by the state’s capital debt affordability process.
While rebasing spending and solving the budget gap, the governor’s budget does include important spending in a number of areas:
- The budget includes a $45.3 million increase in state aid to public schools, after contingent reductions, bringing the FY 2016 total to $6.1 billion.
- The FY 2016 capital budget provides over $290 million for K-12 education projects including $280 million for the Public School Construction Program, including $6.5 million for a new academic building and dormitory at the Maryland School for the Blind.
- The University System of Maryland (USM) receives $1.2 billion in State funding, a $15.4 million, or 1.3%, increase from last year. USM’s total FY 2016 budget is $5.10 billion.
Safety & Correctional Services:
The FY 2016 budget for the Department of Public Safety and Correctional Services (DPSCS) totals $1.36 billion, funding the state’s correctional facilities, parole and probation programs, and a number of drug treatment and rehabilitation programs both in and outside of facility walls.
- In FY 2016, $390 million in capital funding is allocated for environmental programs and land preservation, including:
$279 million for water quality improvement projects.
$84 million for land preservation under Program Open Space, Rural Legacy, and Agricultural Land Preservation.
Health & Safety Net:
- The FY 2016 capital budget allocates $48 million for improvements to Maryland’s health infrastructure, including $30 million toward development of a new regional medical center in Prince George’s County.
The FY 2016 budget provides $1.02 billion for the Developmental Disabilities Administration, an increase of 8% from the prior year.
Expanding Opportunities for Businesses:
- The FY 2016 allowance includes $12 million in biotechnology tax credits to leverage investment for life science companies, $9.4 million to further develop stem cell technology, and $2.5 million in investments and tax credits to promote cyber security research.
- The budget includes $16.9 million for job centers across the state which provide free assistance to job seekers through training referrals, career counseling, and job listings.
The proposed FY 2016 capital budget for Department of Transportation projects totals $2.9 billion.
This budget was made in the face of a $1.25B budget deficit over the next two years. This budget projects a $47 million surplus by 2016.
There are $300 million dollars in spending reduction with a third coming from the 2% across the board reduction in agency spending.
While there is nominal growth in spending the Governor’s budget more than halves the rate of spending growth bringing it significantly below projected revenue growth. This difference will not only maintain balance today, balance tomorrow but provide the ability to roll back as many of the O’Malley tax increases as possible.
Here are some charts produced by the Governor’s Office that show the benefits of the proposed budget: