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$1.1B deficit, gas tax, gambling to dominate General Assembly

With many long-simmering issues likely to come to a boil this year, lawmakers face a legislative session that will be dominated by Maryland’s lingering fiscal woes and an agenda full of unfinished business from years past.

The budget deficit stands at $1.1 billion, the governor and powerful legislators are advocating for an increase to the state’s gasoline tax, a showdown looms over expanded gambling, and the economy is still limping out of a crippling recession.

Looming in the background is the promise of budget cuts and more uncertainty from Congress as the General Assembly enters the second regular session of its four-year term on Wednesday.

“This is usually a prime year to do some tough things, and on top of that we’ve just deferred action on big issues for so long that we can no longer wait,” said Donald C. Fry, president and CEO of the Greater Baltimore Committee and a former state lawmaker.

“I think it’s going to be a very challenging year to balance all those different issues,” Fry predicted.

The legislature will have a host of other challenging items on its plate for its annual 90-day session. Gov. Martin O’Malley, a Democrat, is backing a push to legalize same-sex marriage and establish a market for offshore wind power.

The wind bill failed last year with O’Malley’s support and the marriage bill failed without it.

O’Malley has also hinted at raising the state’s $30 annual “flush tax” to fund Chesapeake Bay cleanup efforts, and he has proposed new state legislative districts based on the 2010 Census that have riled Republicans and some minority lawmakers.

“There’s a lot on our plate and a lot of uncertainty,” said House of Delegates Majority Leader Kumar P. Barve, D-Montgomery. “It’s going to be a challenging session to be sure.”

Transportation tops the agenda

Transportation advocates hope lawmakers can be goaded into doing something they haven’t done in 20 years — raising the state’s gasoline tax.

The tax has held steady at 23.5 cents per gallon since 1992, but support has grown in recent years for a substantial increase.

“We’re woefully underfunded to the point of not being able to maintain what we have, much less improve transit, or build new roads and bridges,” said Kathleen T. Snyder, president and CEO of the Maryland Chamber of Commerce.

The chamber and GBC both back a gas tax hike and have been joined by top Democrats in the state Senate as well as business and political leaders of Baltimore City and Howard, Montgomery and Prince George’s counties.

A bill sponsored by Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s, and Majority Leader Robert J. Garagiola, D-Montgomery, failed last year, but the issue has since picked up more supporters.

The governor put transportation at the top of the agenda after the 2011 session and has said he will push for higher transportation spending this year to ease congestion on the state’s roads, boost mass transportation ridership and spark hiring by construction firms.

“A modern economy needs modern investments to create jobs,” O’Malley said. “That’s not a Democratic or Republican idea. That’s a truth that we’ve proven out as a people time and time again.”

Republicans beg to differ.

“Look, to raise taxes in this economy is shortsighted and just the wrong, wrong prescription for what ails us,” said House Minority Leader Anthony J. O’Donnell, R-Calvert and St. Mary’s.

Sen. Allan H. Kittleman, R-Carroll and Howard, called a gas tax hike “a job killer.”

The price of “everything goes up when the gas tax goes up,” he said.

O’Malley has not said how he will attempt to raise money to spend on transportation, but he is considering recommendations made by the Blue Ribbon Commission on Maryland Transportation Funding.

The commission’s plan would raise the gas tax by 5 cents per year for three years and then index it to inflation to bring in an additional $491 million per year.

A 50 percent hike in registration fees would bring in $165 million more, and bumping the titling tax to 6.5 percent or eliminating an allowance for vehicle trade-ins would yield another $70 million. Maryland Transit Administration fare increases would bring in $28 million and higher Motor Vehicle Administration fees, $34 million. Doubling the cost of emissions inspections to $28 would bring in $22 million for a grand total of $810 million a year in new transportation money.

The debate also will hinge on how to protect transportation dollars. Local leaders want state transportation aid restored after years of cuts, and other advocates, including business leaders, want protection from future budgetary raids.

Those proposed protections include a constitutional amendment to prevent raids and requiring a supermajority vote of the General Assembly to allow transportation funds to be used for other purposes.

Kittleman called the supermajority idea “ludicrous.”

“As a member of the minority party, I have to laugh,” he said. “They can get a supermajority just by the Senate president saying ‘Please.’”

Tax increases considered

As lawmakers search for more money to spend on transportation, they’ll also face yet another budget deficit.

Asked last week if he will call for tax increases to help bridge the $1.1 billion gap, O’Malley said “Yes, perhaps.”

“We are putting together a budget that is not only balanced and fiscally responsible, not only has the courage to make cuts, but also has the foresight to protect the priorities that allow our state to emerge from this recession quicker than other states,” he said. “We need to educate, we need to innovate, we need to rebuild.”

O’Malley’s fiscal 2013 budget proposal is due Jan. 18.

Dovetailing with his plan to create jobs through transportation spending, O’Malley has said he will also beef up the state’s capital budget.

The plan would require the state to borrow more in the short term — the next year or two — in hopes of stimulating job growth while settling for pared-down capital plans in following years.

Maryland’s fiscal 2012 capital budget was $1.48 billion, with about two-thirds of that consisting of state general obligation bonds.

“Our state has big needs in infrastructure, whether it’s the water infrastructure, road and transportation infrastructure, even school reconstruction and school building,” O’Malley said. “You’ll see a capital budget that addresses those investments that a modern economy requires to create jobs.”

Republicans and some business interests have pounced on the prospect of new taxes and borrowing.

“Somebody is going to have to pay for it,” said Kimberly M. Burns, president of Maryland Business for Responsive Government. “You can’t just keep putting it on the state’s credit card.”

Fry, however, said the governor and legislature do not appear to be gearing up for tax increases outside transportation.

“That would seem to be a very, very tough lift at this time, especially because there has been no groundwork laid for those initiatives,” he said.

As another piece of his job-creation push, O’Malley ordered a two-month review of state regulations to weed out duplicative and over-burdensome rules in October. The results are expected to be included in the governor’s legislative package.

While most business groups are not sold on O’Malley’s approach, they said they hope legislators will shy from tightening workplace and environmental regulations that many in the private sector complain are stricter than those in neighboring states.

“We need to polish up our image,” Snyder said.

Table games back on the table

Maryland lawmakers will also be working on the state’s gambling image.

Slow to legalize slot machines, Maryland has since fallen behind West Virginia, Delaware and Pennsylvania in adding table games such as poker, blackjack, roulette and craps.

Legislation to bring table games to Maryland failed last year but now, as the 2012 election nears, lawmakers appear more interested. Table games, and any gambling expansion, would have to be approved by voters in 2012 as a constitutional amendment.

Miller, the Senate president, has called for the General Assembly to approve gambling in Prince George’s County to support struggling Rosecroft Raceway. But other members of the county delegation and leaders in the House of Delegates oppose the idea.

“I think the House has decided they want to put table games at the five locations [where slots are authorized],” said Del. Frank S. Turner, a Howard County Democrat whose subcommittee handles gambling legislation. “We keep hearing rumors on the Senate side that they want to put it at the five locations and somewhere in Prince George’s County also.”

Fry, who also chairs the Video Lottery Facility Location Commission, said Prince George’s had the chance to join the slots program but didn’t.

“Now you have some established [casino owners] who will see that as cutting into their market area,” he said.

The Department of Legislative Services estimates 400 table games in Maryland would bring in $192 million in annual gross revenue. At Pennsylvania’s 16 percent tax rate, that would yield nearly $31 million for Maryland’s coffers and, gambling proponents hope, steer more traffic to the state’s slot machines as well.

“You’re not going to cut your way out of this thing anymore,” Turner said. “We’ve just about cleaned out every account down there that we could use for the general fund. The question is what kind of enhancements we could have.”