From The Washington Post:
Maryland Gov. Larry Hogan’s pocketbook-themed pitch in 2014 rested on three central promises: Roll back tax and fee increases, create new jobs, and cut wasteful government spending.
Four years later, Hogan has delivered some of what he pledged, and he is touting those accomplishments as he seeks to become only the second Republican governor in state history to win a second term.
On the campaign trail, however, the governor often inflates his achievements. And, thanks in part to opposition from a Democratic-dominated General Assembly, in some ways he has fallen far short of his goals.
Hogan’s signature pocketbook accomplishment was to reduce tolls by about $2 a trip, benefiting some 150,000 travelers a year. He rolled back a handful of fees he campaigned against and pushed through tax relief that mostly helps businesses but also eases the burden for some low-income people and certain retirees.
The governor ordered “open for business” signs posted on highways his first day in office, and the state has added about 103,000 jobs since then.
But economists say Maryland’s job market has grown more slowly than those in the District, Virginia or the nation as a whole. Its unemployment rate has declined less quickly as well.
Maryland “underperformed the U.S. every year with the exception of one year, and Hogan happened to be governor then,” said economist Stephen Fuller, director of the Stephen S. Fuller Institute at George Mason University. The state’s gains, he said, “had nothing to do with” Hogan, instead resulting from general economic prosperity.
On the campaign trail, Hogan tells voters the state “went from losing 100,000 jobs to gaining 100,000,” a statistic that compares his term with the losses from the depths of the 2008 economic recession. Job growth, economists say, has come in sectors such as education, health services and hospitality, which don’t pay as well as the industries that lost jobs.
Hogan cut government costs and reduced the state’s workforce, but his claim of widespread fraud has evaporated, and overall the budget is growing, thanks to increases in Medicaid and other mandated costs, and costly new programs — several of which Hogan supports.
Hogan has kept his promises to avoid divisive social issues and refrain from loosening gun laws, governing as a moderate. His list of accomplishments includes requiring school to start after Labor Day; working with the legislature to ban hydraulic fracturing, or fracking; lowering some health-care premiums; and suing the federal government over its alleged failure to enforce air pollution rules.
Along the way, he amassed job approval ratings above 60 percent, and he leads Democratic challenger Ben Jealous by double digits.
Campaign spokesman Doug Mayer said Hogan would have made more progress were he not dealing with a Democratic supermajority in the General Assembly, which resisted more far-reaching tax-cut proposals and has authority to require governors to spend money in the future.
“This doesn’t happen in a vacuum,” Mayer said.
Hogan asserts that his record is impeccable.
“Every single promise, we kept,” he said.
Rolling back tax hikes
Two years before he ran for governor, Hogan launched a Facebook group called “Change Maryland,” with the main purpose of railing against the tax, toll and fee hikes pushed by then-Gov. Martin O’Malley (D) and Lt. Gov. Anthony G. Brown (D) to help close budget holes after the recession.
As a candidate, Hogan hammered Brown, then the Democratic gubernatorial nominee, for what he estimated were 40 increases costing taxpayers $19.7 billion over eight years. If elected, Hogan promised, he would “restore a responsible, realistic budget so that we can roll back as many taxes as possible.”
By the administration’s count, Hogan attempted to reduce 15 of those 40 increases.
He was successful in altering four.
In cutting tolls statewide, Hogan saved motorists $54 million a year, and because more people now take toll roads, projected revenue is actually on the rise. He saved taxpayers just over $3.6 million by persuading lawmakers to reduce fees for birth and death certificates from $24 to $10 and to trim the price of licenses for certain subcontractors.
The financial impact of the fourth rollback is a matter of debate.
It was perhaps Hogan’s most memorable campaign tirade: the so-called “rain tax,” which required Maryland’s 10 largest jurisdictions to impose a fee to pay for ways to mitigate stormwater pollution. No matter that the anti-stormwater measures were mandated by the federal government; Hogan mocked Maryland as the only state to “tax the rain.”
The General Assembly, pressured by Hogan, voted to take the fee requirement off the books. But the “repeal” said local governments still must collect money to pay for stormwater mitigation. Most people who were subject to the fee still pay it, though by a different name.
Hogan’s biggest failed tax effort involved rolling back automatic increases to the gas tax, which are tied to inflation. The legislature rejected his proposal because it would have eliminated $1.56 billion in transportation funding over five years.
Now, that revenue is helping to fund some 1,000 projects under construction across the state, a $9 billion investment Hogan counts as a top accomplishment.
In all, Hogan tells voters he has provided $1.2 billion in tax, toll and fee relief. That tally relies on some dubious math, however, including $240 million the Supreme Court ordered returned to taxpayers after ruling local governments had collected it illegally.
A Washington Post analysis of “major” tax changes identified by the state’s Department of Legislative Services found that over the past four years, the legislature passed — and Hogan signed — measures that heavily favor business and industry.
Companies got at least $75 million a year in new or enhanced tax breaks, while changes that directly benefit average taxpayers amount to roughly $30 million. The tax relief for residents is targeted to relatively small groups: single low-income people ages 18 to 24, law enforcement personnel, retired public safety workers and military veterans, people with student loans, and parents saving for college.
The business incentives don’t include the $8.5 billion package Hogan has offered Amazon if the company decides to build its second headquarters in Montgomery County. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
Fee relief and waste
Hogan’s attempts to provide broader tax and fee relief stalled in the General Assembly, so he used his executive power to reduce or eliminate 255 fees charged by state agencies. Some — such as the $9 fee for an E-ZPass transponder — affected more than 100,000 people a year. But most applied to very narrow pockets of the population. Hogan eliminated 31 fees related to horse racing, reduced the cost of an autopsy report by $5, trimmed the price of real estate and cosmetology licenses, and made life a little cheaper for the state’s roughly 100 professional falconers, whose annual falconry fees dropped from $25 to $10.
By the administration’s tally, shaving the cost of everything from registering veterinary dental equipment to opening a frozen food manufacturing plant saved Marylanders more than $20 million a year.
Hogan said his “first priority” would be to “eradicate” waste, fraud and abuse he had identified in 52 audits from the O’Malley administration. Documents his administration provided this month show that many of the audit findings were resolved before Hogan took office. A handful of others were addressed during his term.
Hogan says he has trimmed wasteful spending elsewhere — by cutting tolls, requiring a 2 percent cut in state agency budgets and shrinking the executive branch by 1,264 jobs.
And yet spending is on the rise, according to legislative analysts, growing by $5.8 billion over the past four years, more than double the increase during O’Malley’s second term.
The governor doesn’t hold sole responsibility for crafting the state’s $44.6 billion spending plan, and Hogan has cast himself as a “goalie” fending off Democratic initiatives.
Still, the gap between Maryland’s planned spending and what the state takes in has remained over the past four years, an imbalance that forces an annual debate about whether to raise taxes — which have not gone up under Hogan — or how many spending promises to break.
One large contributor is the rising cost of Medicaid, a growing expense that any governor would face. But some of the biggest drivers are proposals that have been embraced by Hogan: free community college for some residents, a higher film tax credit, increasing pay for substance-abuse counselors and a “lockbox” on casino money for K-12 education.
Jobs, jobs, jobs
In 2014, Hogan built support by partly by tapping into dissatisfaction with the state’s sluggish economic recovery and promising “to attract and retain as many job creators in Maryland as we possibly can.”
But Maryland’s job market continues to lag behind both the region and the rest of the country, according to the Bureau of Labor Statistics.
While the state’s workforce has grown by 3.9 percent over the course of Hogan’s tenure, the nation’s workforce has grown by 6 percent. Unemployment stands at 4.2 percent in Maryland, 3 percent in Virginia, 5.6 percent in the District and 3.9 percent nationwide.
Jealous, Hogan’s Democratic challenger, has hammered the governor on what he describes as a lackluster turnaround. “If we had the job growth of Virginia, we’d have 40,000 more jobs right now,” he said during the sole debate of the campaign.
Hogan disputed Jealous’s numbers and offered, without specific evidence, that “my four-year record is clear. We’ve led the nation.”
Economist Anirban Basu of Sage Policy Group, who has volunteered on Hogan’s transition team and another state economic task force, said the governor’s job creation and retention efforts have “been operating at the margins.”
But he blamed the tax structure Hogan inherited — including a relatively high corporate tax rate of 8.25 percent and roughly 6 percent income and sales tax rates — and said Hogan’s business-friendly approach “has retained tens of thousands of jobs that would it would have otherwise lost.”
The governor supported big incentive packages to keep jobs in the state, including state-backed forgivable loans of $20 million apiece for Marriott and aerospace giant Northrop Grumman, one of the state’s largest employers, which was debating moving a division away from the Baltimore-Washington International Marshall Airport. Northrop was also the sole beneficiary of a new aerospace tax credit, proposed by the Hogan administration and worth $37.5 million.
Some Republicans who praise Hogan’s jobs record are skeptical of the big incentives. Del. Herbert H. McMillan (R-Anne Arundel) urged the legislature to reject them, calling it “corporate welfare.”
“What created the jobs was the stable climate for business that [Hogan] created. I’ll give him credit for that,” McMillan said. “But the notion that these large tax subsidies created jobs is just poppycock.”
Democrats roasted the governor in January for not doing more to keep Discovery Communications’ headquarters in Silver Spring. Hogan says there was nothing he could do to prevent the firm from consolidating operations in New York after a merger.
But when firms do stay, Hogan happily claims credit.
As a candidate, he highlighted spice company McCormick’s search for a new home as evidence of a poisonous business climate, saying it was unimaginable that the makers of the iconic Old Bay seasoning could leave Maryland after more than a century.
Two days after his upset win, Hogan approached executives and promised to do what was necessary to keep them. Earlier this month, he celebrated the opening of McCormick’s new global headquarters.
Chief executive Lawrence Kurzius said McCormick conducted “a real search” but decided to remain in Maryland because of its strong historical and emotional ties to the area, plus thousands of employees who already lived here.
“We were not going to pack up and go to some random state,” he said.
It didn’t hurt that Hogan offered what Kurzius called “quite modest” incentives — $2 million in loans — and made personal visits to the company board. His commerce secretary regularly stops by the firm’s special events.
“The difference in the attitude of state government towards business is night-and-day better in his administration than the previous one,” Kurzius said. “That’s actually a bigger factor than you might think.”