How Did The Structural Budget Deficit Happen?
Maryland’s structural deficit developed as growth in ongoing state spending increasingly outpaced revenues. Annual government spending commitments grew by $2 billion with the Bridge to Excellence school funding reforms – commonly know as the Thornton law – enacted in 2002. An income tax cut fully phased in that same year reduced state revenues by nearly $1 billion annually, leading to a significant budget gap. Either the tax cut or the increased education funding likely would have been affordable by itself. Together they created a structural budget deficit that reaches more than $1 billion annually. This structural problem has gone unaddressed in the years since 2002, with record spending increases prior to this year, including a 12% hike in FY 2007.
Related Questions
- How is a structural deficit different from an annual operating budget deficit that we would experience if we did not reduce spending to make up for state funding cuts and investment losses?
- What policies should the state enact to address the continued structural state budget deficit?
- What is a structural deficit and how does it impact our budget?
