Open mic day at Board of Public Works
Schwartz, who used to raise money for former Gov. Robert L. Ehrlich, told O’Malley that members of his Tea Party organization “were pretty unhappy” that this year’s $32 billion state budget relies on $389 million in promised federal funding. Congress is now wavering on that commitment and may not deliver the help.
“We are running a deficit right now,” Schwartz said. “When is that getting taken care of and how is getting taken care of?”
O’Malley explained that the budget contains a contingency plan for this exact possibility: Borrow another $200 million from the income tax reserve fund and use the cash balance to cover the rest.
Schwartz disliked the answer: “So we are raiding the local income tax [fund] again?” he asked. The income tax reserve fund has become the new go to account to fill budget holes. O’Malley used it last year and this year.
The governor appeared uncomfortable with the line of questioning: “No. I wouldn’t. No. That’s not. …”
Treasurer Nancy Kopp piped in with the news that state revenues are higher than expected, inflating the cash balance and making it less likely that the state would need to borrow from the income tax fund.
O’Malley reminded Schwartz that the state still has its coveted AAA bond rating, calling it a “seal of fiscal responsibility.” Kopp concurred noting that the state had, only moments earlier, sold about $500 million in bonds at very low interest rates: Evidence that Wall Street has faith in the credit rating agencies' assessment and views Maryland as a safe place to park cash.
Ehrlich, who is running to get his old job back, used many of the same maneuvers that O’Malley has employed to keep the state’s budget balanced. However, dipping into the income tax reserve fund appears to be a relatively new idea – one that was initially suggested by Comptroller Peter Franchot who oversees the fund.
The credit rating agencies have not expressed any concern over the practice, other than noting that using the fund is a one time revenue source that does not solve an ongoing budget problem.