ANNAPOLIS – The Senate Budget and Taxation Committee put its stamp on Gov. Martin O’Malley’s proposed budget Thursday, voting to phase in the shift of teacher pension costs to local governments over four years and to repeal a 1997 income tax reduction.
About $600 million in cuts are proposed in the committee’s spending plan, which deviates slightly from O’Malley’s budget proposal but arrives at the same dollar amount in total cuts. The full Senate will begin debating the budget next week.
The four bills that make up the committee’s budget package — the budget itself; the Budget Reconciliation and Financing Act, which alters appropriations; and bills that increase some taxes and modify the maintenance-of-effort law — are co-dependent, said state Sen. Roger Manno, D-Montgomery.
“All four are contingent upon each other,” Manno explained. “All four must pass the Senate” or elements of the so-called ‘Doomsday Budget’ proposal become a “very, very real possibility.”
“This is the year we balance the third leg of the three-legged stool,” said Manno, referring to increasing state revenues in conjunction with making “strategic cuts” and finding “efficiencies” in government.
All new taxes and tax increases were moved from the budget bill to a separate bill — SB 523 — in an effort to separate revenue-raising measures from spending cuts, leaving open the option to make more cuts in the Budget Reconciliation and Financing Act.
As part of the package, the Senate panel decided to spread the cost of shifting teacher retirement pension costs to local jurisdictions over four years.
The plan differs from O’Malley’s proposal to shift 100 percent of the costs to jurisdictions in Fiscal Year 2013.
The committee plan calls for the teacher pension costs to be completely shifted to the counties by Fiscal Year 2016.
To account for the shift, Baltimore City and the counties would see their maintenance of effort cost — the amount of money each jurisdiction contributes to education funding — increase to offset the costs to school boards. The school boards would pay their normal pension costs during those four years.
In the first year of the phase-in, costs would increase for counties by $68 million. The costs would continue to rise each year until the cost rises to nearly $255 million in 2016. Under O’Malley’s plan, the cost to local jurisdictions would have jumped to $240 million immediately, in 2013.
Sen. Nancy J. King, D-Montgomery, said that while the shift would be painful for local jurisdictions, “we don’t have a choice. We’re in some pretty tough times right now.”
Income tax would also be raised for the top four tax brackets in Maryland under a repeal of 1997 tax cuts signed into law by former Gov. Parris N. Glendening.
At the lowest level, a taxpayer making $40,000 a year would see an increase in taxes of about $30 to $40 a year, Manno said. Maryland’s highest earners would see their income tax increase by 0.25 percent, he said.
“It’s the fairest, most equitable plan,” Manno said. “Folks that could afford to pay a little more probably should.”
Also included in the tax bill are tax increases on tobacco products other than cigarettes. The plan calls for taxes to increase from 15 percent to 70 percent of the wholesale price of cigars and other tobacco products.
Sen. Nathaniel J. McFadden, D-Baltimore City, said that four bills were moved out of committee to make it easier for senators to understand all of the moving parts of cobbling together a balanced budget.
And there’s still plenty of work to be done, he said.
“There’s a couple of issues,” McFadden said. “You have a contingent of Republicans” and conservative Democrats who will undoubtedly oppose much of what the committee has proposed in its four bills, he said.
Sen. David R. Brinkley, R-Carroll and Frederick, and Sen. Richard F. Colburn, R-Eastern Shore, were the only two members of the 13-member committee who voted against the budget bills, which still amount to an increase in state spending from 2012.
McFadden said the budget package will be sent to the Senate floor Monday night. Debate should begin Wednesday.
“The big fight’s next week,” said Sen. Edward J. Kasemeyer, D-Baltimore and Howard.