Opening Statement
of
Richard Falknor
for the
MTA Press Conference
November 8, 2002
The Engineers Club
Baltimore, Maryland

First Steps to Transforming How Annapolis,
the Counties, and the Cities Do Business in Maryland

Good morning. My name is Richard Falknor, and I am vice president of the Maryland Taxpayers Association. We are a volunteer, non-partisan, statewide, grass-roots voice for Maryland citizens. MTA asks Maryland elected officials for their pledge not to raise taxes, and acts to make Maryland government more efficient and effective. Our website is http://www.mdtaxes.org/.

Ladies and gentlemen, the Ehrlich victory this week signals the reopening of the political mind of Maryland.

There is a new atmosphere encouraging citizens of all the three Maryland parties with candidates in the gubernatorial contest to work with the incoming Administration in behalf of freer markets and right-sized government.

There is now hope that citizens will have a voice working together to bring a Maryland government, refocussed on its core roles, into the twenty-first century.

Perhaps most important there is a rare opportunity for that government to lighten, not increase the tax burden on its citizens, and to begin a top-to-bottom review of the Annapolis and local regulatory burden.

We say all this in the face of a Maryland budget shortfall of at least $300 million between now and the end of June, and another $1.3 billion shortfall expected for the fiscal year beginning July 1. Experts MTA trusts tell us that by 2007 Maryland will be $3 billion in the red if its spending problems are not fixed timely.

As you will hear this morning, the monetary burden of Maryland regulation is enormous. Moreover, the social distortions foolish or worse regulations impose on Maryland men, women, and children are cruel. They typically harm the most vulnerable as we will see from the many ways the competition-free Maryland public school monopoly harms the poor of Maryland.

Today's press conference will the only the first in a series as MTA and allied free-market citizen groups visit various aspects of tax and regulatory reform in Maryland. These citizens associations will look for ways for Maryland state and local governments to do more of the things they are rightly supposed to do, and to do them for less. They will recommend changes allowing public employees to have workplaces where they can advance, be rewarded, and be free of antique civil service rules that mock the productive and ambitious by protecting those who do consistently less.

And, as an early companion starting our long journey of reform, MTA is delighted to have Citizens Against Government Waste at our side today.

After I highlight what some other states are doing in transformational change or what innovations Maryland could embrace, MTA's president Dee Hodges will talk about the interaction between lower taxes and more jobs (and state revenue), and the importance of turning around the culture of "government does it better," a notion uncritically accepted by too many Marylanders.

She will also have suggestions for filling the short-term budget gap because many of the structural reforms you will hear discussed this morning will take time to be refined sufficiently for implementation; thus their fiscal payoff will be similarly delayed.

Mortgage-banker Hodges has her masters in finance, spent a year in Vietnam during the war with the American National Red Cross, and was a tax-policy adviser to Ellen Sauerbrey during her first campaign for governor.

Long-time MTA Board member Edward Hudgins is the Washington Director of the Objectivist Center, formerly regulatory-studies chief at the Cato Institute and editor of Regulation magazine, and a nationally recognized expert on Federal and state regulation. Ed will give us his first take on the crushing weight of regulation on Maryland's economy together with some practical steps our new governor can take right away to deal with this burden.

MTA's goals are fundmental but not complicated: streamline Maryland government so it can be accountable day in and day out; stop new taxes -- all to help speed a prosperity benefitting everyone. This is what we at MTA mean when we talk about an "opportunity society."

Streamlining State Government. Other states under the leadership of governors from both national parties have made real strides in both efficiency and accountability, a key component of modernization.

Here is what MTA testified to a House panel in the last General Assembly:

"Here are just two (of many) urgent challenges MTA sees - - - "

"(1) How best to size and manage the state workforce. "The size of the State work force has reached new heights," a General Assembly budget expert declared at last fall's spending affordability briefings. We invite committee members' attention to the fact that governor Zell Miller put hiring and firing in the Georgia civil service on a standard business basis in 1996, and that Florida put 16,000 senior state positions on a standard business basis in 2001."

"(2) How best to build public facilities. Public-private partnerships in school construction, for example, could offer substantial savings."

"But even the old-fashioned way, through direct public financing, could be liberated from prevailing-wage costs in Maryland. Let me refresh committee members' memories with Comptroller Schaefer's letter of February 17, 2000 on this vexing matter:"

"'However, a Maryland State Department of Legislative Services study done in 1995 shows that the Maryland state prevailing wage law's administrative application of the union wage-and-benefits scale to state construction projects (other than school facilities) adds between 5% and 15% to the cost of these projects. There also is information reflecting that prevailing wage laws may add as much as 20% to 30%. Because the amount of tax dollars to be spent on school construction in any given year is defined by budget allocations, if the cost of school construction is arbitrarily increased by 15% or more, the only result can be a reduction in the number of classrooms to be built or rehabilitation work to be performed by that same percentage.'" [Emphasis MTA's]

MTA explained to the House of Delegates panel that - - -

"MTA has a particular interest in steps . . . that can midwife 'transformational change' in the ways state government does its business. By this, we mean ways --- made possible in part by the information revolution --- that are radically more productive, ways leading to lower costs, ways done by fewer employees working smarter with more compensation choices, and ways that intrude less on the lives of citizens. In our view, such changes mean a smaller burden on that part of the economy that produces the goods and services undergirding our prosperity."

Increasing Accountability. Colorado's Taxpayers' Bill of Rights (TABOR) protects taxpayers. Voters must approve any state tax increase or new tax. TABOR allows gains in state spending according to an index based on inflation and population growth. A surplus must be refunded the next fiscal year, unless voters agree to let the state keep it. But let Governor Bill Owens tell the story in his own words:

"In 1992, we passed the Taxpayers' Bill of Rights, a citizen initiative that constitutionally limits the growth of all Colorado governments. State, counties, cities, school districts, special districts, all of our governments are limited by the Taxpayers' Bill of Rights. And under this Bill of Rights, government spending cannot grow faster than the sum of inflation and population growth. Government at any level can only grow the combination of those wo, and that is the maximum. If revenues exceed that maximum, we have to refund those revenues to the taxpayers. And the only way that taxes can be increased in Colorado is through a direct statewide vote of the people."

"I added two provisions to the Taxpayers' Bill of Rights."

"First, that no government funds can be expended to support or oppose any initiated or referred measure. Many of you live in school districts where when the school district goes to the ballot, the school district funds that ballot campaign. You ought to try to put a stop to that, because it's unfair. It is not right. It is not fair to put government dollars in these elections."

"Second, I added a provision to the Taxpayers' Bill of Rights that says that we can raise taxes on only one election day a year, and that's the general election day. This way, everybody knows about the election, not just those few who might benefit from that tax increase."

These are only samples of the efficiency-enhancing, money-saving measures that other states have put into action. Here are just two more: "pension liberation" giving employees pension portability and getting state government out of the business of managing and supplementing pension funds and "mandate-lite" or mandate-free health insurance on which MTA testified alongside Maryland health expert Robert Moffit just last March 5 to a House of Delegates panel:

"MTA strongly supports this initial step in reforming Maryland health regulation. The enactment of HB 939 would give Maryland small businesses and individuals access to an affordable package of health insurance."

As MTA's colleague Moffit explained to the panel - - -

"According to a 2002 analysis by the Blue Cross/ Blue Shield Association, Maryland leads the nation with at least 52 mandates on private health insurance. Only California, which has 43 mandates, comes close to Maryland."
. . . . . . . . . . . .
"For example, in 1999, [two researchers] concluded that as many as one in four of Americans who are uninsured are uninsured as the result of state benefit mandates."

We believe these improvements are all worthy steps that can be adapted to the Maryland public context.

Fixing Maryland government soon. Consequently we suggest the Governor set up a policy-and-program-review staff reporting to him directly. The staff would review significant innovations that are going concerns in other states as well as long-standing but hitherto ignored Maryland reforms, and would shepherd those approved by the Governor through to implementation.

Voters in our region expect sensible state and local action - - - not knee-jerk calls for higher taxes for spending crises developed by governments out of control. That was last Tuesday's civic lesson for our entire region, not just northern Virginia across the river. Anyone who read the Washington Post's interviews of northern Virginia voters yesterday can only conclude that voters there, just across the river from Montgomery County, said a resounding "no" to more taxes because they had lost confidence in their state government's ability to manage.

Remember, today's press conference is just our first round. We'll be back with more proposals in specific areas soon!