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Thursday, January 19, 2012

Gov. O'Malley unveils $35.8B state budget

ANNAPOLIS The governor officially presented Wednesday his budget proposal for the next fiscal year and included is a measure of great concern to local jurisdictions shifting teacher pension costs to the counties.
O'Malley submitted a $35.8 billion state budget for fiscal year 2013, an increase of a little more than $1 billion over the current budget. Meanwhile, the state continues to try to reduce its structural deficit of about $1 billion.
According to an overview from the governor's office, O'Malley's proposal calls for $800 million in reductions and limits budget growth to 1.9 percent, excluding $673 million set aside in the state Rainy Day Fund. The governor also proposes putting another $164 million in an unallocated fund balance.
The administration touted its progress in promoting job creation and its investments in education, and O'Malley's budget proposal includes a $3.6 billion capital program supporting construction job creation, full funding for direct education aid and $373 million for new public school construction and renovation.
"To create jobs, a modern economy requires modern investments, and that's why our proposed budgetfor FY 2013 invests in job creation and its key ingredients: education, innovation and rebuilding our State's infrastructure," said O'Malley in a statement. "Our budget is a pro-jobs, pro-opportunity, pro-growth budget that takes a balanced approach of cuts, revenue and investment."
To help close the "budget gap," the O'Malley administration proposes shifting 50 percent of the cost burden for teachers' pensions from the state to local governments. Specifically, the counties would pay half of the combined costs of Social Security and teachers' retirement contributions.
The debate over who should pay teacher pensions has been going on for a couple of years now in the State House and counties in the Mid-Shore region have already felt the stinging effects of drastically reduced state highway funding and passed down costs.
"I don't think anybody can honestly express shock or surprise over this. Its been bubbling for years," state Sen. Richard Colburn, R-37-Mid-Shore, said of the pension proposal.
Caroline County Administrator Ken Decker said a shift in teacher pensions is a game changer for counties in their own budget preparations, which in Caroline's case have already begun. Decker said Caroline has hunkered down spending-wise for several years because of additional state costs already passed down to the county.
"This comes at a time when our budget is in terrible shape from previous pass-downs," he said of the teacher pensions.
Colburn said the pension costs for teachers continue to rise both on Maryland's Eastern Shore and in the state's more populous central counties. He said the state budget for teacher pensions is getting very close to being a $1 billion problem.
Colburn said the counties cannot afford to have the burden shifted at the level O'Malley proposes, and he thought there would be a phased-in approach for the 50-50 split. He said disparity grants will be available next year for only some counties.
Caroline and Dorchester will not feel the pinch at all of teacher pensions for the first year, while Kent County will have to pay $8,705 into teacher pensions; Queen Anne's County will pay $153,408 and Talbot will pay $440,282.
Also outlined in O'Malley's tax proposal are plans to cap deductions and phase out exemptions on the state income tax for "high income earners," chasing after sales tax revenues from online merchants and increasing the sales tax on other tobacco products to bring them in line with the cigarette tax.
"For all of the Administration's grandstanding about job creation, this budget takes aim at Maryland's small businesses, the driving force behind our economy", said House of Delegates Minority Whip Jeannie Haddaway-Riccio, R-37B-Talbot, in a statement.
Colburn said the high earners slated for tax increases are those making between $100,000 a year and $200,000, depending on whether they file separately or jointly. He said raising taxes on those in a position to create new employment opportunities will stifle job growth.
"The income tax changes alone are going to undermine any chances Maryland has of a full economic recovery," Colburn said.
The potential for a flush tax increase and a proposal to eliminate the income tax mortgage deduction for the higher earners were two sources of great concern for Del. Stephen S. Hershey Jr., R-36-Queen Anne's.
"Once again the Governor has targeted Maryland's working class families with the regressive taxes levied in his FY2013 Budget," wrote Hershey in an e-mail. "His favorite target appears to be homeowners with the elimination of itemized deductions for mortgage interest and increasing the flush tax."

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