Ask The Governor
A Special Edition of Direct Connection
Monday November 24, 2008
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Interview with Governor O’Malley
Jeff Salkin.
“Good evening and welcome to a special edition of Direct Connection I’m Jeff Salkin. Tonight your chance to ask the governor. Governor Martin O’Malley is with us here in the studio. Governor thank you for being here”
Martin O’Malley
[00.49:10] Jeff thanks for doing this and thank you to MPT for being willing to do this. I know you all have a state wide audience and it’s a great opportunity so I appreciate it.” [00.57:05]
Jeff Salkin
“Well you know we’ve done these programs before but maybe more sporadically than what we’re going to do it going forward so we appreciate you’re time” [01.03:27]
Martin O’Malley
Glad to.
Jeff Salkin
“Let’s start with the economy. Obviously we have a major economic crisis going on. We know that Maryland’s unemployment rate has increased now to I think 5 percent but compared to a national rate that’s higher than that still the trend hasn’t been good. What do you know about the local revenue figures for the state and what you think the overall impact is going to be?” [01.26:23]
Martin O’Malley
Sure. Our unemployment rate now is 5 percent which is the highest its been in 14 years so that’s the bad news. The good news is relative to other states we’re doing better than other states. We’re one of only 7 states that actually had positive job growth over this last really difficult year. But we’re in for some rough sledding. Our country’s economy; the ripple effect that, that has through out the whole global economy. We’re certainly not immune from that. And as we look at our revenues, which of course are dependant on economic activity and people spending, we see those revenues continue to be adjusted downward in the forecast. [02.06:15] So, we’re anticipating another revenue forecast in December and it will probably be some more bad news reflecting the downward trend in the economy. A few months ago we had to cut about 400 million dollars out of the current year budget and in the next forecast its probably going to force us to go back in this current year and find another 200 million some how. And none of it will be pleasant; all of it will be painful. None of it will be easy; but there’s a lot of hope in the air with the election and the new president. I know the market tends to bounce up and down in this transition time but as we tape tonight, as we go live tonight, today was a good day. Other days have not been as good. But I’m hopeful and optimistic that with new presidential leadership that we’ll be able to come out of this. And Maryland will come out of this sooner than other economies in our country. [03.04:19]
“In Washington they have the big printing press and they used it effectively. This morning on city group, at the state level you don’t have that, you have to balance the budget. We’ve had some tax increases a year ago in a special session. Is there anything left other than severe cuts if this trend continues?”
[03.28:26] I think we’re in for a lot more cuts. I also believe from conversations I’ve had with the president elect that he’s very cognizant of the fact that when the economy goes down, that more and more people are in need of the unemployment benefits. More and more need of the Medicaid applicants goes up and all of those sorts of things. So, I’m hopeful and optimistic that as part of the second stimulus that there will be some dollars that go to states to sure up and to reinforce those sorts of safety net things that we have. But you’re right we can not print money at the state level. Every year we have to balance the budget. I’m proud of the fact that over that last 2 years our budget has only grown by about 3 or 4 percent which is substantially down in terms of its rate of growth of what our state budget was doing in the years prior. The two ways that I’ kind of look at this is that Jeff is that on one hand one you have the structural deficit, this new O’Malley Brown administration now heading into the midterm if you will, the mid point in a 4 year term. We had to wrestle with some bad decisions that we made as a state that created a structural imbalance. [04.46:14] That is our rate of investing in things. Important things like public education. Was great layout stripping, the rate that our revenues were yielding for us. So we had to address that structural problem. We did it three ways: 2 billion dollars in cuts and spending reductions; 1.3 billion in new revenues; and then the third piece the voters approved and that is the limited number of slot locations in our state. Unfortunately, those dollars don’t come into the equation for another couple of years. But that was the structural fix. The fix now is simply unfortunately more cuts and more postponing of good things we would like to be able to do that we can not because of the national economic outlook. But as that improves we’re going to be in a much stronger position to be able to capitalize on that quickly. [05.34:04]
Jeff Salkin
“We have a bunch of phone calls. We’ll get to those in a second. Let me first take a look at an email question. This came in from Walter who is a State employee. He writes…”
[05.43:10] In the past state employees have been the target of budget balancing strategies…what do you plan to do differently to protect the integrity of state services…if you do anticipate using similar past strategies, what sacrifices do you plan to make personally and professionally to be a good public role model. Lastly, will you be asking state legislatures and other elected or appointed persons paid by state funds to make sacrifices similar to those imposed upon State workers?
“And what I remember from the last big go round in the state with budget cuts was the public officials are essentially protected by the constitution. You can’t reduce their salary during their term in office.” [06.38:22]
Martin O’Malley
In the past, in response to the email, we have had to not had to do furloughs. In the past we have been able to focus most of our personnel decisions on vacant positions, not all. There had been some people that unfortunately have lost their jobs especially in the last go round of these cuts. We have not had to do furloughs, in order to do that because of the agreements we’ve signed we’d have to have some greater conversations with labor leaders of our public employees. We plan to do that in the time ahead. I certainly plan to take those furlough days assuming that that is the direction in which we go. You know the other alternative is more layoffs, and I really do not want to do layoffs in these tough times. We have a lot of dedicated and really hard working state employees. I think that a better accommodation would be those furlough days especially as we find ourselves in the middle of this fiscal year having to make these cuts. I do not want to do layoffs and we will continue to look for other options too short of that. As indeed we have, the measures that legislatures voted for on taxes, whether that was the corporate or the whether that was the sales tax, or those other things were very painful and politically unpalatable and unpopular things. We did those however because we are mindful of the fact that Maryland actually has, if you look at the number of public employees we have, we’re actually fairly lean as a state. I think we rank 33rd or 34th on a per capita basis even when you combine the local public employees. So we’re very mindful of how hard people are working and we know that state employees are hit by these times as well. We’re going to do everything in our power to avoid the massive layoffs that you’ve seen in other states, some very near to us. [08.42:16]
“Just to follow up on the furlough question, so you’re saying that meetings have been scheduled with union leaders and its not you personally, it’s the administration, or how does that work?”
[08.53:04] No it’ll be me personally and it’ll also be the follow up meetings and talking to labor leaders as the partners that they are in an effective and working state government. And figuring out ways that we might be able to meet the latest round of cuts or rather the revenue gap we’ll say probably a 200million dollar short fall we need to find a way to make that. And furlough days could well be part of that as I said in the last cuts we did when we had to cut 400 million dollars without going to the unsavory option of the furlough days. We need to talk to our leaders, also do it in a way that’s fair all around but mindful of the fact that there are a lot of state employees, approximately 9 or 10thousand of whom make less than 40thousand a year so asking them to give up a number of days whether its 5 or 6 or 7 is a much greater impact on someone at that income level than asking people who make 70, 80, 90 thousand dollars to give up 5 days. [10.03:03]
Jeff Salkin
“Let’s take a phone call, Donna in Baltimore county. Donna thanks for the call go ahead”
Caller: Donna
[10.08.26] Hello Governor How are you? Fine, just a question from some of my fellow employees and myself, years ago they offered an early out for employees that had almost 30 years of service in. If they had 27 years or more they let them go like they had 30 years of service. Would that be happening again maybe to balance to balance the budget. [10.32.00]
Jeff Salkin
“Donna thank you so much.” [10.33.00]
Martin O’Malley
Yea Donna that’s certainly something we can look at. Here’s my fear about that. We did that once when I was mayor of the city of Baltimore and we ended up losing a lot of really experienced and good public employees who had the years of experience and we found ourselves really reeling from that lost of experience as we tried to rebuild in the years ahead. I readily admit to you I was one of the people that were pushing it as a councilman at the time that we did it. Any sort of an early out thing would not be something that we can do in this current fiscal year as we approach the middle of the fiscal year. I suppose we could consider it as we start to formulate next years budget. But again we’re talking about a state government that is fairly lean. You probably know, sounds like you’re a state employee, a lot of state employees are doing the job that a couple of people were doing 5, 10 years ago. We can look at that, it has not been an option that at first glance was something we were inclined to do. [11.42:03]
Jeff Salkin
“Here’s another email question, this is from Bob, and here’s a revenue idea. Maryland could not only get more revenue from a raise in the alcohol tax, but possibly save lives at the same time. The tax has been the same since 1955, that is over 50 years. A 20-30 percent increase would help save lives and help the state revenue. Is the lobby that strong, or has every Governor been afraid to raise the tax because he would not get re-elected” [12.11:27]
Martin O’Malley
Sure I think its safe to say that we’ve look at every revenue stream that upon which the state budget depends. When we went through the special session that was a product of trying to come up with a consensus of majority in the house and in the senate in order to accomplish the difficult things we needed to do. If memory serves me correctly a 20 to 30 percent increase in the alcohol tax which as the writer points out, has not been raised in some time. A 20-30 percent increase would yield somewhere in the neighborhood of 6 to 9million dollars depending on sales in the like. [12.55:27]
Jeff Salkin
“Sounds like a lot of money”
Martin O’Malley
[12.58:08] Right. Then you compare that to a 1 percent increase in the sales tax yields roughly about 750million dollars. [13.08.09]
Jeff Salkin
“What about the gas tax. It’s always been talked about and the issue in the recent pass its been gas costs 3dollars or 4dollars a gallon and nobody politically would want to increase taxes in the face of that. Now that we’re back under 2 does it make sense to look at it again?” [13.24:09]
Martin O’Malley
Yea. It’s an interesting question. We talk about that extensively and coming up to the special session and as its come to be known as the especially hard and horrible session as those of us who are in the middle of it remember it. [13.41:12]
Jeff Salkin
“Precisely a year ago I think. Right before thanksgiving” [13.42:13]
Martin O’Malley
I think it was. I met with every delegate and every senator in that time. Well I probably met with at least three quarters of them. There were some whose opinions who were so cast in stone that it would’ve been a waste of their time. I don’t think I could count even 3 or 4 votes for putting any sort of increase on the gas tax. Even some sort of inflationary indexing if you will that would allow it to keep paste with inflation. The gas tax is a flat tax in our state. It’s a flat tax in most states and then there’s a federal aspect to it as well. The other interesting phenomenon we’ve seen is even without raising that gas tax, we were able to find ways to create other revenue for the transportation trust fund for important transportation projects that we need to do whether it’s mass transit or whether its some expansions of roads. Much of that work diversifying it with a portion of the corporate income tax diversifying it with transportation funding, with a portion of the sales tax, the titling tax. Many of those things have been hit by the national economy, and hit by one other thing which is that people are changing their driving habits. And part of the assumption in the past had always been people will always drive as many miles or probably more as the population increases. Well we’re seeing some really phenomenal changes happening now and I’m sure this is something being discussed on a national level. It is not something where there is much political will at all in the legislature especially in these really tough times. So theoretically there are those who argue that it would make sense and that if you had some sort of a blinker tax if you will where if gasoline fell below a certain amount per barrel or oil fell beneath a certain amount per barrel that there is a certain tax that goes in that would keep the long term pricing stability in place. So that people who invest in renewable would know that there’s a certain return that’s coming from that Rand D investment. These things are all better done Jeff, I think anyway, at a national level with a true energy policy where this makes sense. To do it on a state by state basis has been really difficult as Governor Kane can tell you in Virginia and virtually every governor. I mean, the gas tax is a very very difficult thing to do on a state by state basis and I would hope that with a new energy policy, there might be some better guidance coming out of Washington on that score.[16:31:24]
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