Donald Fry: Budget challenges will test government’s capacity for strategic planning

By Donald C. Fry

State and local governments will have to face the fiscal music in putting together stimulus-free budgets next year. Signals that elected officials around the state are sending these days about their fiscal situations range from cautionary to grim.

In Annapolis, the governor and state lawmakers face a baseline general fund structural deficit that is projected to widen from $1.6 billion in FY 2012 to $1.9 billion in FY 2013, according to the state’s Department of Legislative Services.

That could serve as the backdrop for some very difficult General Assembly sessions in the next two years, when the governor and lawmakers will not have the benefit of billions in federal stimulus funding that came the state’s way for FY 2010 and FY 2011.

Last week, Governor Martin O’Malley unilaterally offered state workers a $15,000 buyout and $200 for each year of service if they agree to quit their jobs by the end of January. As composer Andrew Lloyd Webber once famously quoted, “That’s not a good sign.”

Signs of fiscal distress are also surfacing in Maryland’s counties and towns.

Montgomery County faces a more than $300 million budget deficit for fiscal 2012. County leaders have been prompted to consider an array of budget cutting options that, among other things, could include decreasing pay for county employees and increasing employee contributions to medical plan premiums.

In Baltimore County, newly-elected County Executive Kevin Kamenetz began his term by announcing plans to cut 143 county government positions and to consolidate four departments to realize a combined savings of $8 million.

In Frederick, city officials are mulling how to deal with more than $120 million in planned projects and debt, including $80 million in state-mandated upgrades to the city’s water, without raising fees in a recession.

On the Eastern Shore, Wicomico County faces a crumbling road infrastructure at a time when the state has reduced its local aid for the county’s roads from $7 million to $200,000. “These are challenging times for Wicomico,” County Executive Rick Pollitt said as he was sworn in for his second term last week. “The time has come to grasp the reins of government with vigor,” he said. “The hand-wringing and moaning and groaning about how bad things are must come to an end.”

Pollitt makes a good point worth dwelling on.

For the last two years, many elected leaders have instinctively adopted an “if we can only just get to the end of the recession” approach to fiscal management. They’ve deployed billions in federal stimulus dollars and transferred millions from a variety of state and local funds to close operating budget gaps while watching hopefully for signs that the recession is waning.

The assumption appeared to be that once the recession is over, revenue to Maryland governments will return to something approaching pre-recession levels. It may happen eventually, but it’s becoming more evident that it won’t be anytime soon.

It seems clear that this recession will ultimately test the capacity among state and local elected leaders for strategic planning.

More than anything else, what’s needed at both the state and county levels at this point in our history is strategy – not a continuing milieu of short-term tactics. A strategic approach must focus on outcomes, not process. And job creation and economic growth must be the top-priority outcomes. The recession has taught us a tough lesson that all else – from quality of life to generating sustainable government revenues – derives from job creation and economic growth.

Without private-sector business growth, the government’s ability to deliver the initiatives and services that many citizens have come to rely on is severely hampered.

How would a strategic approach translate into state and local budgets? Two significant things come to mind. First, it would require government leaders to meticulously assess the value of all government activities and to assign priorities directly relating to a well-conceived strategic plan. Also, it would force lawmakers to fully distinguish the difference between funding operational programs and investing government resources in ways that directly nurture economic growth over the long-term.

In short, strategic planning requires tough long-term prioritizing, and matching limited, valuable resources to the priorities.

Let’s hope that this is the year that elected leaders in Annapolis and elsewhere begin to resist their instinctual tendencies to skip over strategy and go directly to tactics.

Wicomico County Executive Rick Pollitt has it right. In Maryland, it really is the time to “grasp the reins of government with vigor.” I respectfully suggest that it be strategic – not tactical – vigor.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Previous Center Maryland columns by Donald C. Fry:

Facing the disconnect over the concept of ‘business climate’

Tax commission delivers refreshing change of pace

‘Reform’ commission to mull tax increase for Maryland corporations

No tsunami in Maryland, but voters deliver ripple of transition

Why isn’t transportation infrastructure crisis on lawmakers’ radar?

Market expert tells a pre-Halloween scary story

Entrepreneurs provide inspiration in a recession

Military is driving Maryland’s anticipated biggest economic spurt in 60 years

MedImmune CEO frames bright future for bioscience

Making transportation a top-tier priority

Primary voters in a mood for transition

Reading Maryland’s fiscal tea leaves

Getting beyond sound bites and bumper stickers

Biotech tax credit more popular than ever, but the ‘rock-concert’ lines are gone

Bad timing for upcoming business tax report

For economic indicators, the ‘whipsaw’ effect continues

Do census data foretell a Baltimore city population rebound?

Remember the value of business after the election

New report ranks Baltimore among stronger regions to weather the recession

New living wage proposal: wrong idea, wrong time for Baltimore

Northeast needs more attention from federal rail planners

New national report has familiar ring for Maryland bioscience advocates

New report underscores Maryland’s work force development challenges

State’s health initiative: a ‘win-win’ for employers and their workforces

As Baltimore hikes taxes, are state’s counties next?

After the ‘fiber from heaven’ scramble, what’s next?

BRAC growth no longer a future event – it’s happening now

Economic development is a contact sport

Despite the recession, bioscience growth still percolates in Baltimore

State stumbles in enacting new education collective bargaining process

Wind power has potential in Maryland, but solar emerges as early renewable option

It’s not good to be clueless in cyberspace

Amid fiscal shuffle, Maryland lawmakers pass measures to spur business growth

Thankfully, Baltimore leads with substance over style in luring Google

Leave damaging transportation provisions out of the budget

Amended budget continues recession-induced fund shifts and stimulus rescue

General Assembly setting stage for combined reporting push in 2011

Wrong timing for proposal to change Baltimore City school board

Baltimore City isn’t alone in facing pension funding challenges

A government investment program that delivers

Proposed transportation fund raid — a bad habit continues

Where’s the outrage over crime?

Small business is where innovation lives