General Assembly passes $35.5 billion budget, income tax hike -- Gazette.Net


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This story was updated at 7:15 a.m. May 17.

The House of Delegates gave final approval Wednesday to a budget plan that would raise income tax rates for high-income Marylanders and undo the so-called “doomsday” cuts that were set to take effect after lawmakers failed to reach a spending plan compromise during the General Assembly’s regular session.

Both chambers adjourned shortly after the House vote, bringing the three-day special session to a close.

“I’m very proud of the work [the legislature has done],” said Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake Beach, adding that he wished lawmakers had done more to address the $500 million structural deficit it will face next year. “As far as this year, I’m very satisfied.”

Two budget bills introduced by Gov. Martin O’Malley (D) create a $35.5 billion fiscal 2013 spending plan, which represents a 2.7 percent increase over fiscal 2012 spending.

The bills contain provisions to raise taxes on income and tobacco products, apply the indemnity mortgage tax to businesses and shift a portion of the cost of teacher pensions to Maryland counties.

“I'm very appreciative of the hard work that’s been done by the members of the General Assembly and the presiding officers and what they were able to pass in this budget session," O'Malley told reporters after the vote. "This budget is good for Maryland."

During floor debate, Republicans decried the revised budget plan, arguing that lawmakers should have stayed with the default, “doomsday” budget that would have taken effect in July, rather than raise taxes.

“When we left session, the budget was balanced. There was no problem here,” said Del. Jeannie Haddaway-Riccio (R-Dist. 37) of Newcomb. “If [education and higher education] were priorities to us as a legislature, they would have been funded and dealt with in the 90 days that we had to get the people’s work done.”

The compromise income tax plan will raise $195.6 million in state revenue in fiscal 2013 through income tax increases and $51.7 million by phasing out personal exemptions. The tax changes affect single Marylanders making an adjustable gross income of more than $100,000 per year and couples claiming more than $150,000.

About 13.7 percent of Marylanders will pay more under the plan, according to a Department of Legislative Services analysis. The average increase in the state and local tax bills for those affected is $579.

County governments across the state will see an additional $31.4 million in revenue as a result of the income tax adjustments in fiscal 2013, according to a fiscal analysis.

That revenue will help to offset a provision to shift 50 percent of the “normal cost” of teacher pensions, or $136.6 million, to counties beginning in fiscal 2013. The normal cost of pensions is the amount needed to pay pension liabilities if the system hadn’t been underfunded in the past.

The shift is front-loaded and will increase to 100 percent of the total normal costs in fiscal 2016. The same shift provisions were agreed to by House and Senate budget negotiators before the end of the regular session.

Several amendments, including proposals to replace the income tax increase with a sales tax hike, restore personal exemptions and scale back the revenue measures in the bill, also failed.

Seventy-one votes were needed to pass the budget bills. Eighty-six delegates voted for the bill including the pension shift, while 77 supported the tax package.

Del. John L. Bohanan Jr. (D-Dist. 29B) of California, who was a member of the budget conference committee that crafted the income tax compromise during the regular session, is one of 18 democrats who voted against the tax bill Wednesday.

“A lot changed since the conference committee, including the stronger likelihood that we could come in and do a stronger revenue package based on gaming,” Bohanan explained.

He said it would have been better if the General Assembly could have considered multiple tax proposals including increases to the sales tax, expanded casino gaming and the conference committee agreement side-by-side during the session.

Still, “I understand why we did what we did,” in passing the budget bills Wednesday, Bohanan said.

Legislative leaders had drawn criticism for failing to pass a complete budget before the end of the regular session, and senators were accused of allowing a debate on the expansion of gaming to interfere with budget negotiations.

Miller said Monday that he will seek a change to the General Assembly’s rules to require lawmakers to pass a budget seven days before the end of future sessions; if lawmakers don’t meet that deadline, additional bills would not be considered until a budget deal is signed, Miller said.

“The last day of [the regular] session should never have happened,” Miller said.

The special session was estimated to cost about $25,000 per day, according to the Department of Legislative Services.

dleaderman@gazette.net

dgaines@gazette.net