Use surplus for schools, health, advocates say

Friday, Dec. 23, 2005

ANNAPOLIS — Maryland’s projected revenue growth over the next year is large enough to support increasing social service spending by nearly $775 million and still have enough left over to handle the costly expenses that darken the state’s fiscal horizon, an advocacy group said Thursday.

Advocates for Children and Youth issued a report detailing how its laundry list of spending could be absorbed by $3.3 billion in budget surpluses and increases in outlays supported by the state’s Spending Affordability Committee.

‘‘This amount leaves more than enough to handle structural deficits, rises in Medicaid, pension requirements and the teacher pension request,” said Jann K. Jackson, executive director of the group.

Jackson’s group would spend $400 million on school construction, $50 million for the Thornton school funding law’s Geographic Cost of Education Index, $55.5 million to restore previous budget cuts and $40 million on substance abuse programs, among other programs.

How the state should spend its unexpected fortunes is likely to become a central issue of the General Assembly session that begins Jan. 11.

Big-ticket expenses have landed into lawmakers’ laps, including the need to begin funding $20 billion of health care costs for future retirees and a $480 million proposal to improve teacher pensions.

Gov. Robert L. Ehrlich Jr. (R) is scheduled to unveil his fiscal 2007 spending plan in mid-January. Although he has offered scant details of his budget blueprint, Ehrlich has said he wants to reduce the state property tax.

After two years of dismal revenues, the state treasury is swelling. The state’s Spending Affordability Committee has recommended a $1.5 billion increase in the state budget and $690 million in new borrowing for major state projects. And the fiscal 2005 budget closed out with more than $1 billion in surplus revenue.

Fiscal forecasters predict the rising tide to last a year, with tougher economic times to follow.

‘‘Everybody has their Christmas wish list,” Ehrlich spokesman Henry P. Fawell said. ‘‘Whether we’re in times of surpluses or deficits, the governor is going to be fiscally responsible with the budget.”

The ACY report comes out as a poll, conducted for the liberal group Progressive Maryland, showed 34 percent of respondents want to use the surplus to build and repair schools vs. 21 percent who want the money used for a tax cut.

‘‘It’s not just the right thing to do, it’s the politically smart thing to do,” said Tom Hucker, Progressive Maryland’s executive director.

House Speaker Michael E. Busch (D-Dist. 30) of Annapolis said lawmakers will shoot for a $250 million target in school construction funding, a level recommended two years ago by a commission headed up by Maryland Treasurer Nancy K. Kopp (D) of Bethesda.

The Maryland Association of Counties and the Maryland Association of Boards of Education support pushing the figure to $400 million.

Fawell said Ehrlich will make a ‘‘significant investment,” but declined to elaborate.

Progressive Maryland faulted Ehrlich’s budgets. In 2005 he proposed $155 million for school construction, and in 2004 he proposed $101 million.

‘‘For past two years, Maryland children have awoken to find Governor Grinch has taken their school construction money,” Hucker said.

‘‘If Progressive Maryland had their way, we would go back to the era of credit card government that plunged the state into a fiscal crisis three years ago,” Fawell said.

In October, Ehrlich said he wanted to decrease the state property tax by ‘‘more than a penny.” In early 2003, a recession forced the governor to support a nickel increase to the tax — which is levied at 13.4 cents per $100 assessed value — to cover the costs of the bonds Maryland issues to pay for long-term projects.

For a home assessed at $300,000, a penny change in the tax would change a property tax bill by $30. The state will collect about $550 million in fiscal 2006, which started July 1.

The state’s general fund, which includes income and sales tax receipts, would have to supplement bond payments if Ehrlich succeeds in cutting the property tax by 2 cents, according to legislative analysts.

In the past year, Maryland has enjoyed a fiscal rebound, and state analysts forecast the treasury to swell with $600 million in surplus revenues.