SEE MOST WANTED BY FBI FOR TERRORISM


 

   
Comptroller Franchot Gives Dire Warnings about


Perfect Storm of Unintended Consequences




Comptroller Peter Franchot in a visit to Leonardtown Mayor J. Harry Norris. ST. MARY'S TODAY photo

By Kenneth C. Rossignol

ST. MARY’S TODAY

LEONARDTOWN (Oct. 30, 2007) --- Maryland Comptroller Peter Franchot said on Monday that he is fearful of what may come of the special session of the Maryland General Assembly.

“Our tax and fiscal policies are complex and a quick fix is one we might regret,” said Franchot. “The regular session has many checks and balances in formulating sound fiscal policies and the state cannot afford for us to make mistakes in how we approach solving the budget shortfall.”

“We really don’t know much about the Governor’s proposals, which so far has been proposal by press release,” Franchot told ST. MARY’S TODAY.

In a letter to the two leaders of the House and Senate, Franchot said that his experience as a member of the General Assembly for twenty years gives him an appreciation of the “Governor’s desire to approach the looming budget shortfall in an aggressive manner”.

“As Maryland’s chief fiscal officer,” said Franchot, “I must question the timing and necessity of this approach.  Mindful of the reservations each of you has expressed about a special session, I must underscore the profound and perhaps unintended consequences of this undertaking on Maryland’s economy, business climate and quality of life, and to caution against acting in haste.”

Franchot was particularly worried about the timing of the special session of the Assembly.

The Comptroller cited the serious state of the nation’s economy, the collapse of the mortgage industry and the end of the housing boom resulting in a record number of foreclosures.

“The foreclosure rate has increased by 57 percent in Maryland, from the first quarter of f2006 through the second quarter of 2007, compared to 41 percent nationally,” wrote the Comptroller in the unusually stern communication to the legislature from a Comptroller. 

“The foreclosure rate for sub prime Adjustable Rate Mortgages (ARMS) has increased 200 percent in Maryland, compared to 115 percent nationally,” said Franchot, pointing out that the housing slump has hit Maryland hard with sales in August dropping by 25 percent compared to the previous year.

“The collapse of the housing market, in turn, has inspired a ripple effect throughout the entire U.S. economy,” said Franchot.  The Comptroller pointed out that the Federal Reserve Chairman warned last week that the troubles in the housing market will continue to be a drag on the economy.

Franchot warned the leaders of the General Assembly to consider while formulating new tax policies that the economy is in an explosive state with extreme changes in the stock market, sales tax revenue becoming sluggish and unemployment beginning to soar, all conditions resulting from the collapse of the housing industry and leading to the likely result of a recession.

“In a spirit of concern over the general direction of our economy that I have recommended a more cautious and deliberative approach to addressing Maryland’s structural budget deficit,” wrote Franchot.  The Comptroller warned that December would provide more dependable snapshots of the state’s fiscal picture as well as the funding streams that the state will need to balance it’s budget.

All of these factors argue in favor of taking up the issue of revenue measures in the regular session of the Assembly in January, said Franchot.

“The politics of the day might argue in favor of a more dramatic gesture,” said the Comptroller. “From a budgetary and fiscal standpoint, however, the current state of affairs makes this special session – and its purpose – a high-risk proposition.”

Franchot shot down the need for acting now instead of waiting until January, saying that unless a sharp downward turn in revenue or the State makes any sudden unfunded spending commitments, that the state’s fiscal status won’t change by January, blowing away one of the ‘perils of Pauline’ warnings of the O’Malley Administration.

Franchot reminded the legislative leaders, that the state has a balanced budget through July 1, 2008, making it wise to take up any changes in revenue policies to coincide with the formation of the 2009 budget, making the Comptroller actually on the same side of the argument with the Republican minority.

Franchot slammed O’Malley’s proposals for slot machines as “a proven catalyst for a broad range of social and economic ills.”  Slots would affect all of the state adversely and noted that O’Malley had formulated his entire revenue plan in private, not subject to public review and had been leaking it out in press releases, rather than a comprehensive plan that the public and legislators could review.

Franchot says that the normal legislative process will be cast aside as the “current timetable allows virtually no opportunity for such stakeholder input, which could ultimately diminish public confidence in the process and result I a product that negatively impacts the Maryland economy and the taxpayers we represent.”

“In my view, the volatility of the U.S. and Maryland economies, the absence of an immediate fiscal ‘crisis’ and the lack of detail about the plan could all combine to create a perfect storm of unintended consequences,” said Franchot in his letter to Senate President Mike Miller (D. Calvert, PG) and to House Speaker Michael Busch (D. Anne Arundel).