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THE CHAIRMAN: Be delighted to have
them in the record. (Applause.)
While Delegate Stern returns to his
desk, the Chair wants to express to him
and to Delegate Sherbow, thanks for re-
ducing the amount of time allowed for
controlled debate and to say to the com-
mittee that in view of that the Chair
would hope to reach a vote on this amend-
ment before recessing for dinner. Will the
pages please distribute Amendment A. This
will be Amendment No. 1.
The Clerk will read the amendment.
READING CLERK: Amendment No. 1
to accompany Minority Report SF-4(A), to
Committee Recommendation SF-4, by Dele-
gates Stern, Mentzer and Dukes: On page
2 section 6.01, State Indebtedness, in lines
12 through 17, inclusive, strike out be-
ginning with the word ", except" in line 12
down to and including the word "house" in
line 17.
THE CHAIRMAN: The amendment hav-
ing been made and seconded the Chair
recognizes Delegate Stern who has 15
minutes of controlled debate.
Delegate Stern.
DELEGATE STERN: I yield five min-
utes to Delegate Mentzer.
THE CHAIRMAN: Delegate Mentzer.
DELEGATE MENTZER: Mr. Chair-
man, ladies and gentlemen, I do not speak
at all as a sophisticated fiscal expert but
one who believes principles and issues in-
volved in state finance should be as easily
understood by the average citizen and tax-
payer as those in any other section of the
constitution.
I would speak briefly on some aspects of
state debt including- practice of other states
and our present debt level. The 50 states
can be divided into three groups in regard
to their constitutional provisions for han-
dling of the debt. In 21 states the pay-as-
you-go states, borrowing can only be au-
thorized by constitutional amendment. In
another 21 states the legislature can enact
borrowing legislation but the act must be
confirmed by the voters in the state in a
referendum. Most recently adopted state
constitutions have this referendum require-
ment, New York, Alaska, and Michigan.
This leaves eight states of which Mary-
land is one. without substantial constitu-
tional limitation on creation of debt.
Studies have shown there is an increase
in debt between each class of state. The
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borrowing in unrestricted states is more
than double that of states which prohibit
borrowing in the referendum states. I call
your attention to the figures presented to
us last week by a professional group which
has just completed a study of Maryland's
fiscal practices. National per capita aver-
age of state indebtedness in 1956 was 146.
For Maryland the figure was $225. General
obligation state debt as a national average
per capita was $65. For Maryland the fig-
ure is $104.
Not only is our debt heavy but it also is
increasing. It was somewhat disturbing to
me to note the increase in the amounts of
state receipts which comes to us from bond
issues. Last year it was nearly 12 percent.
The year before it was only eight percent.
The year before that seven percent. The
year before that only six percent. Although
our debt is heavy and increasing, I do not
advocate that Maryland join the pay-as-
you-go states or have referendum require-
ments. We did have, however, in the past
in Maryland three protections which the
Majority Report would change. A prohibi-
tion against loan of state assets or credit
to private individuals or enterprises, two,
the requirement of an annual dedicated tax
for debt service, the state property tax,
and, three, the maturing limit of 15 years.
To lose these three protections is a disserv-
ice to future citizens and taxpayers of this
State. We are all proud of our triple A
rating which only ten other states have.
This is a great savings of interest cost to
our taxpayers. Maryland has borrowed with
discretion in the past and has retired her
debt in shorter time than most states. This
good fiscal management has resulted in
the high rating by the bond houses. In our
committee files is a statement by the vice
president of Moocly's, "the level of debt
is very important for credit rating and an
aggressive debt retirement program is es-
sential".
I would like to explain why the level of
debt would rise with an extension of the
length of bonds. Taxes and bonds are
alternative and complementary sources for
financing the activities and expenditures of
the State. Since future taxpayers are not
present voters, there is a political incentive
to shift the cost of these activities to the
future. That is to borrow rather than to
tax. Borrowing can be used as an expedient
to avoid taxation or avoid a reduction in
level of services.
All expenditures must be borne by reve-
nues of the State. We are told we are now
spending 34 cents interest for each bor-
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