Hard Times, Hard Choices The bleak economic news du jour is that in December, for the first time since 1976 when the Bureau of Labor Statistics first started tracking the information, the unemployment rate went up in all 50 states. The national unemployment rate for the month was 7.2%. Michigan and Rhode Island (Rhode Island?) had the worst unemployment rates at over 10%.

Maryland continues to lose jobs; so it is small consolation that amidst all the gloomy news, our state’s unemployment rate of 5.8% was still one of the lowest in the nation. Last week, a grim Governor O’Malley outlined the budget cuts the state would be forced to make to cover the $2 billion deficit that Maryland’s government is facing, including cuts to schools (which I feel should be avoided). The cuts the Governor outlined were based on Maryland’s receiving $350 million from the $825 billion stimulus plan put forth by the Obama Administration.

Now the news is that Maryland could get up to $3.5 billion over two years from the stimulus package. About half the money is to pay for Medicaid, education and unemployment insurance. The other is more generally designated for “balancing the state’s budget”.

As a result, the Governor has postponed any action on budget cuts. President Obama warned that we would all have to make hard choices, but that may not apply to Maryland government if we get all this money.

In previous recessions, budget cuts have been finessed by various means to minimize their impact on state services in the hopes that the economy would improve, revenues would rise, and further cuts could be avoided.

This recession has already been severe; and the economy is getting worse as companies continue to announce layoffs. No one knows how long it will continue. More concerning is that no one knows if the stimulus package will turn the economy around. If it doesn’t and the recession continues, Maryland is likely to face continued deficits.

Even though Maryland’s economy is cushioned by the employment that is tied to federal government, our state’s overall economic health is still tied to the national economy. If the economy continues to go down hill, we are going to face further problems.

These clearly are not normal times. The $3.5 billion will be used to avoid making budget cuts to necessary services and education, but aside from those, Maryland should avoid the temptation to postpone tough decisions by using remaining amounts to balance the budget. Maryland government officials should be cautious and plan for continued hard times. We shouldn’t count on the stimulus to avoid cuts that are needed to address the budget imbalance the state is likely to continue to face.

Budget cuts aren’t the only option. I was glad to see Senate President Mike Miller call for a gas tax increase as a way of generating new revenue. A modest $.10 increase in the state’s gas tax could produce $300 million in revenue annually that can be used for much needed transportation projects that can also create jobs.

Making budget cuts and increasing the gasoline tax are not going to be popular as it requires more pain to be borne by the citizens of Maryland. But it is up to our leaders to explain why they are necessary in these extraordinary times.

There are tough choices to be made – but responsible leadership requires making them.  9:43 AM •