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O’Malley discusses shift of pension costs

ANNAPOLIS — Gov. Martin O’Malley discussed plans Tuesday with legislative leaders to shift teacher pension costs to Maryland counties and reduce tax exemptions for high-end earners, participants in the meeting said.

Maryland is one of the few states in the nation that picks up the entire teacher pension cost, which is projected to be about $900 million in the next fiscal year. O’Malley, a Democrat, is talking about a 50-50 split with counties. In return, the state would share half of the $450 million in social security costs currently paid entirely by counties. Overall, the state would save about $225 million.

“I think it was a balanced proposal by the governor — some revenue enhancements, as well as a discussion about shared responsibility and liability for teachers’ pensions that we’ve talked about in the past,” House Speaker Michael Busch, D-Anne Arundel, said after the meeting.

The idea of sharing teacher-pension costs has been bubbling for years, as the state has faced budget constraints from the recession and its aftermath. The teacher pension cost also has risen rapidly in recent years.

Maryland is facing a $1.1 billion budget deficit, and lawmakers have called on O’Malley to take steps to reduce half of the state’s deficit this year. The governor is scheduled to make his budget proposal public on Wednesday.

Busch also said the O’Malley administration talked about doubling the state’s “flush tax,” a $30 annual charge on sewer bills to upgrade wastewater treatment facilities to reduce pollution in the Chesapeake Bay.

O’Malley aides were not talkative with reporters after the meeting.

“The governor will announce the budget [Wednesday],” said Rick Abbruzzese, O’Malley’s director of public affairs.

During the meeting, Busch said O’Malley did not mention reviving a tax on people who earn $1 million a year, which was instituted in 2008 and expired in 2010. O’Malley instead talked about proposals to reduce certain tax exemptions for high-end earners.

“I think you’re looking for a possibility of over $100 million in some of the issues we’re talking about in exemption reductions,” said Busch, who did not specify what exemptions are under consideration.

That would help counties offset some of the expense of sharing some teacher pension costs.

“The counties would get some of the money from the exemptions if they were reduced,” Busch said. “They would be a windfall to the counties as well — not a huge windfall, but there would be money that would go back to the counties.”

Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s, described the governor’s plan to shift teacher pension costs as a compromise, after O’Malley proposed more than $370 million to help counties with school construction. That is the second-highest amount ever set aside by the state.

“It’s a compromise, and compromise is not a dirty word in politics,” Miller said. “You know, the governor gives some to the counties, he takes some away. He makes the counties happy; he makes them sad. Not everybody can be happy in these very difficult times.”

Busch said there was no discussion about a gas tax increase during Tuesday’s meeting with the administration. That could come later in legislation separate from the budget.

“Stay tuned,” said Raquel Guillory, an O’Malley spokeswoman, who added that gas tax details would not be included in the governor’s public presentation of the budget on Wednesday.

Miller, who has long advocated shifting some teacher costs to the counties, said the amount the governor is proposing is not as much as he would like. Still, Miller described it as important progress illustrating leadership by the governor, a former Baltimore mayor.

“I would have preferred more,” Miller said. “I would have preferred, you know, having more money for the state’s resources, but the counties are an important part of the whole and the governor, being a former chief executive of a major political subdivision, is still of the counties, and he wants to make certain that they’re well taken care of.”

O’Malley was to also meet with local officials to talk about the proposal.