Maryland’s Spending Limit: Appearances Can Be Deceiving

For three decades, Maryland’s Spending Affordability Committee (SAC) has failed to get state spending under control. On average, state spending has increased five percent a year since 1983.  After 10 years of running structural deficits, it’s time Maryland change its approach for limiting spending. 

The SAC functions more like a spending target rather than a cap. The SAC should be abolished and replaced with a clear, transparent, and easy to evaluate spending rule. A strict mathematical rule that limits spending based on the sum of the increase in population and inflation is what Maryland needs to fix its problems.

Problems with the SAC

The SAC is inefficient in design:

·         Its spending recommendation excludes federal funds and spending on capital projects. So, the SAC could only consider about 66 percent of the budget when recommending a spending limit.

·         These exclusions are subjective and vary from year to year. Determining what constitutes a capital project involves a “judgment decision.”

The SAC is inefficient in implementation:

·         The SAC ignores its own spending restriction guidelines like tying spending growth to growth in state personal income.

·         It operates more like a spending target than a spending cap, because it has never recommended a spending cut—whether in good or bad economic times.

·         The SAC is painfully inconsistent. For the budget in the short-term, it would recommend increasing budget spending, while warning about structural deficits in the long-term.