March 12, 1997
by Prof. M. V. Lee Badgett, Ph.D.

Good afternoon. My name is Lee Badgett. I am a labor economist and a faculty member in the School of Public Affairs at the University of Maryland at College Park. I have been asked to speak before you today to offer some insight into the economic issues surrounding HB398 and the possible economic effects produced by recognizing same-sex marriages in the state of Maryland.

It is my understanding that some supporters of HB398 oppose recognition of marriages by same-sex couples out of concern that such marriages will hurt the state and federal budgets as well as local businesses. However, I would suggest that recognition of same-sex marriages would be economically prudent for the state of Maryland. According to available data and cost analysis, which I will summarize, recognition of same-sex marriages would create a net benefit for the state and federal economies. This suggests that HB398 may, in fact, undermine rather than ensure the economic health of the state.

This conclusion is based on an evaluation of the possible positive and negative economic and budgetary effects of recognizing same-sex marriages. This evaluation includes three major points. First, recognition of same-sex marriages may alleviate the costs of maintaining social service programs, such as AFDC, SSI, and Medicaid, to the state of Maryland and the federal government. Second, contrary to popular belief, recognition of same-sex marriages would not result in large increases in health care and employment costs to the state or to local businesses. Most likely a shift in costs would occur, with minimal cost increases to any single employer and cost decreases for some employers. Finally, recognition of same-sex marriages makes general economic sense, since it allows couples to combine household resources efficiently, eliminates the cost of lawyers, and frees up income for savings and investment into the economy.

Let's look first at the budgetary impact of refusing to allow same-sex couples to marry.

Recognizing same gender marriages may give a boost to both federal and state budgets. Our governments have constructed means-tested financial safety net programs that catch people whose families cannot adequately provide life's basic necessities: adequate housing, health care, food, or income. These programs all factor in a married spouse's financial resources when determining eligibility and require financially able spouses to contribute to their family's maintenance before any government assistance is granted. However, if a marriage is not legally recognized, spousal support cannot be expected, increasing the state's financial burden.

Single parent families are more economically vulnerable than married couples. In 1990, 48% of Maryland's single parent family households received Aid to Families with Dependent Children (AFDC), while less than 1% of its two parent families received AFDC. For those already enrolled in AFDC, research has demonstrated that marriage is the most common route off welfare. In the case of someone who would marry a same-sex partner, the total cost to the state and the Federal governments of not recognizing that marriage would easily be $7,944 for a small family eligible for AFDC and Medicaid (1993 figures for Maryland). In other words, recognizing same-sex marriages would save the state and federal government almost $800,000 for every 100 small families taken off AFDC and Medicaid as a result of marriage. Half of those savings would go to the state of Maryland. Although we do not know how many gays and lesbians are currently enrolled in those programs, allowing even a tiny percentage to marry could represent millions of dollars in savings--millions that must be paid as long as marriages of same-sex couples are not recognized by the state.

The second concern I want to address is the cost to businesses of recognizing marriages of same-sex couples.

Some worry that recognizing same-sex marriages will add greatly to workplace health benefit costs. The most likely impact of recognizing a new set of marriages would be a shift by new spouses from one employer health plan to another, or from Medicaid to a private plan. Some employers would see an increase in enrollment; others would see a decrease. Even those facing an increase are likely to see only a small one, since employers currently offering domestic partner health benefits have typically found that fewer than 1% of their employees enroll a same gender domestic partner. It is also likely that some currently uninsured people might enroll in a spouse's plan, which would help reduce the growing financial burden of uncompensated health care.

Another possible business consequence of allowing new marriages is that businesses offering "family discounts" will see more families qualifying for them. Since businesses offer such discounts to entice more consumers to buy the product at a discounted price, expanding the pool of families should increase business profits rather than hurt them. Taken overall, the change in costs resulting from recognized same-sex marriages to businesses would be small to nonexistent. Enacting HB398, therefore, does not constitute a preventative measure to protect the private sector

Finally, allowing more marriages would be good for the economy as a whole. Couples marry for many reasons -- often to express love and commitment or to gain social approval. But a marriage license can also buy what thousands of dollars in legal fees can never completely reproduce for unmarried couples: a legally and socially recognized family relationship. Marriage creates a legal framework through which couples can combine their financial resources to better provide for themselves and set aside greater sums for the savings, investment, and discretionary spending that fuel our economy. Money now diverted by couples to legal fees or to the maintenance of separate insurance and pension programs could go instead to investing in a home, paying for children's educational expenses, or into savings, for instance. All of those uses come with benefits for all of us in Maryland as well as for the couple who makes those investments.

Marriage always has been as much of an economic institution as a social one. The benefits afforded to recognized married couples are matched by the benefits which this recognition affords to the state. History has shown that the government's refusal to allow same gender couples to marry does not discourage gays and lesbians from forming long-lasting, committed relationships. Assuming those relationships will continue to exist, it is only prudent that state governments recognize these unions and realize the attendant economic benefits.

In my professional opinion, HB398's refusal to recognize same-sex couples will not save the state government any money. Recognizing same-sex marriage is not likely to cause any negative effects to the state and federal budgets or to local businesses. In fact, HB 398 could have the opposite effect, since the state's budget and economy, as a whole, would benefit from the recognition of same-sex marriage. By enacting HB398, we ignore the best economic interests of the state and national economies.