Lawmakers approved a real estate transfer tax. A half of one percent of any real-estate transaction is directed into a special fund that, by law, must be spent buying land to create parks and nature sanctuaries. The fund also protects family farms through conservation easements, and pays for urban playgrounds and recreation.
Program Open Space, as it is called, makes logical sense. Environmental harm from real estate development helps pay for environmental protection. About 6,100 parks and wilderness areas across Maryland exist today because of the real estate transfer tax, according to the Maryland Department of Natural Resources. About 19 percent of the state’s land has been protected, while about 20 percent has been developed.
But over the last three decades, governors and lawmakers have diverted money from this so-called “dedicated fund,” often just to pay for the general operations of government during budget crises. So far, state officials have diverted more than a billion dollars that should have been used for parks and land preservation, according to Partners for Open Space, an advocacy organization.
During a February 11 Environmental Summit meeting of conservation organizations in Annapolis, state Delegate Maggie McIntosh, Chair of the House Environmental Matters Committee, raised an alarm about Governor O’Malley’s proposed budget for the year starting July 1.
“The governor’s budget has absolutely not one dime for new projects in Program Open Space,” McIntosh said. “It’s all debt payment. And that is stepping over a line that I don’t want to step over. And I don’t think any of you should.”
O’Malley’s spending plan for next fiscal year would divert 98 percent of the real estate transfer tax from its intended purpose, land preservation, and instead use the cash to help balance the state budget, according to numbers from the state Office of Budget and Management.
During his campaign for governor in 2006, O’Malley pledged to fully fund Program Open Space.
Some of Maryland’s governors have been better than others about honoring the intended purpose of the real estate transfer tax. Back in the 1970s, for example, Governor Marvin Mandel used 100 percent of the transfer tax for parks and open space, as did Governor Parris Glendening during the 1990s, according to state figures.
But during a recession in 1981, Governor Harry Hughes started the practice of governors occasionally diverting money from the program to help balance the budget. Governor William Donald Schaefer followed suit during a budget crisis in 1993. Governor Robert Ehrlich diverted more than 90 percent of the real estate transfer taxes during the development boom of 2004 and 2005, according to state figures.
When O’Malley took office in 2007, he kept his word to fully fund Program Open Space, for his first two years. Then the recession of 2008 hit. O'Malley -– like Schaefer and Hughes -- dipped into the open space fund to help solve a state fiscal crisis.
“When you get in really tough times, you have to begin to make choices to get you through those times,” said Joseph Gill, Maryland’s Secretary of Natural Resources, who was appointed by O’Malley. “In this past year, when the governor put the budget together, he was facing a nearly $600 million budget deficit. … There were not a lot of places to go.”
Gill noted that the state government is still trying to recover from worst economic downturn since the Great Depression. “We had furloughs,” Gill said in a public radio interview. “There were 5,000 positions that have been eliminated in state government to help to balance the budget. It was just tough. It was tough across the country.”
Since the recession of 2008, O'Malley has redirected 92 percent of the state's real estate transfer tax money (or $693 million) that was intended for land preservation, according to numbers from the state Office of Budget and Management. The O’Malley administration has replaced some of those missing funds by borrowing $494 million, and the legislature has promised to replace more in future years.
To O’Malley’s credit, the state continued to purchase and preserve land during the depths of the recession. For example, his administration took advantage of low real estate prices in 2010 to buy and protect more than 4,000 acres of land along the Potomac River in St. Mary’s County.
And the governor has borrowed money to replace some of the funds taken from Program Open Space -– a step that past governors often did not take when they dipped into the fund.
However, the paucity of real estate transfer tax money being used for land preservation in the governor’s proposed budget for next year creates a risk that a bad precedent could carry over into the term of the next governor.
A lack of dedication to the state’s dedicated open space fund undermines the most successful land conservation program in the state’s history -– and one of the premier programs of its kind in the nation.
By Tom Pelton
Chesapeake Bay Foundation
(Photo by Roberta Zapf)