- The Washington Times - Monday, April 13, 2009

ANALYSIS/OPINION:

The recently passed federal stimulus bill is supposed to put the nation back to work and make it more competitive in years to come. But as Maryland Gov. Martin O'Malley noted recently, it also will burden taxpayers with nearly $1 trillion in new federal debt. The question is, will the economic boost we get, if any, from the stimulus bill justify the debt?

Consider, for instance, that $329 million of the $3.8 billion the stimulus bill directs toward Maryland is slotted to pay for increases in teacher retirement benefits. Those increases were approved by the Maryland General Assembly in 2006. But, in typical Annapolis fashion, state lawmakers neglected to identify how they would pay for the new spending, which must be financed every year in perpetuity.

For the next two years, at least, the shortfall will be covered by the federal government courtesy of the stimulus package. But it's unclear how much economic stimulus is provided by retiree spending. What is clear is that boosting the pension of currently retired teachers does nothing to improve Maryland schools.

Further, it is unlikely the increased pensions will increase the quality of new teachers in Maryland. As a 2006 joint report from the Baltimore-based Abell Foundation and the Maryland Public Policy Institute found, “There is no evidence that variation in defined benefit plans affect teachers' turnover. Ironically, teachers have one of the most attractive defined benefit pension systems, yet teacher turnover remains very high, primarily due to high rates of turnover among young teachers.”

The $329 million basically provides temporary relief from the ill effects of state lawmakers neglecting to make a difficult financial decision in 2006 - and it is unlikely that the covering of fiscal irresponsibility will help get the economy moving again.

Another $176 million of the Maryland stimulus money will fully fund the Geographic Cost of Education Index (GCEI). The GCEI is an Annapolis concoction intended to redistribute state education money to its wealthiest counties and richest residents. Again, it is difficult to see how the economy will be boosted by directing state money to the well-to-do.

To assuage taxpayer concerns about Maryland's uses of the stimulus money, the O'Malley administration is launching a Web site to show how the money is spent. This is a good idea. But will such a Web site raise the legitimate issues I've raised above, or will it just comfort taxpayers with the knowledge that so much money is going “toward education”? Further, will the Web site raise the important question that state policymakers have no idea how they will fund these efforts once the federal stimulus money runs out in 2011?

After all, state budget projections show a $630 million shortfall for that year. And the state's long-term fiscal outlook is especially grim, given Annapolis' longtime failure to adequately fund its employee pension funds and the future pressure baby boomers will place on the state's Medicaid program.

Maryland's impending budget woes certainly are not the product of low state taxes. The raft of tax increases that Annapolis enacted in 2007 make the state one of the least competitive on the East Coast as far as its business environment goes. Annapolis cannot keep raising taxes without discovering that taxpayers can “vote with their feet” and go elsewhere. But at this point, it's unclear what other options state policymakers have - save to prioritize state spending and cut enough lower-priority items to restore Maryland´s long-term financial health.

Finding $630 million will take more than combing through the state budget for waste and letting go of a few state workers. Those are necessary, and President Obama has indicated he will pursue those actions on the federal level. However, the more pressing need in Annapolis is to make structural changes in programs such as the teachers retirement fund to prevent chronic budget shortfalls.

Mr. O'Malley has often said he wants to run an efficient and results-based government. If that is the case, how can he explain funding bigger teacher pensions and directing more aid to schools when those programs neither improve student learning nor make us better able to manage budget deficits? And how can he justify using economic stimulus dollars to instead paper over the state's long-running fiscal irresponsibility?

Christopher B. Summers is president of the Maryland Public Policy Institute, a public policy research organization based in Rockville.

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