Outlook for Maryland Economy

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Gov. Larry Hogan
Governor-elect Larry Hogan

The biggest surprise in the mid-term elections on November 3rd was the election of a Republican governor, real estate developer Larry Hogan. Daraius Irani, chief economist of Towson University’s Regional Economic Studies Institute, pointed out that the economy in Maryland is struggling. “Traditionally the state has relied on the public sector to fuel the economy, but belt-tightening by the federal government makes that a dubious proposition, Irani said. Instead the state has to find ways to improve the business climate.”

The first priority of the new governor is getting Maryland’s financial house in order. The state will face a $400 million deficit this year and the next two years, totaling $1.2 billion. The debt service will “… triple from two years ago — to $268 million. By 2019-2020, debt service will hit $559 million per year.” Raising property taxes is not an option. “Other big spending-growth areas also will be difficult, if not impossible, to cut.

“Education aid to the counties is set to rise by $304 million next year, higher education by $225 million and public safety by $175 million. Most of this is due to mandated increases.

Unexpected expenses, related to the expansion of Medical Assistance under Obamacare, add a whopping $410 million next year.

Clearly, the state is spending more than it takes in. It is going to take a radical departure from normal to rein in spending, but it’s not going to be easy

The MarylandReporter.com writes, “For starters, 58% of the growth in Maryland’s budget next year is required by law or by legislative mandates enacted in 2014. This is untouchable without assent from the liberal General Assembly.

Local aid will be hard to cut, too. Eight-six percent of that money goes to schools. Touching this ever-growing pot could be next to impossible given the popularity of education among voters.

Why not slash the bureaucracy? Amazingly, the size of the state’s work force is virtually the same as it was in 2002. There might not be as much “fat” on the bone as Hogan indicated during the campaign.

Those who have relied on increasing state spending each year will be affected adversely by a slow growth economy. It’s just something we all will have to face at the state and eventually the federal level. Every family knows that you can’t keep spending more each year than you take in. That course leads either to bankruptcy or drastic changes in style of living.

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