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General Assembly’s special session likely means higher taxes

A special legislative session where income taxes will likely to be raised means bad news for Maryland business, according to the Republican leader of the House of Delegates.

But the state’s Democratic leadership, which holds a supermajority in the legislature, clearly feels differently.

Gov. Martin O’Malley announced Friday that a special session of the General Assembly will be convened May 14 to avoid more than $500 million in spending cuts to education, programs and services that were enacted when the legislature did not pass a pair of revenue bills in its regular session.

Lawmakers did not agree on a plan to raise the income tax on Marylanders making more than $100,000 annually or a plan to shift the cost of teacher pensions to local jurisdictions before the session’s adjournment on April 9.

Without those revenue measures, a series of contingency cuts — nicknamed the “doomsday” cuts — were activated in order to balance the state’s $36 billion operating budget. Maryland’s constitution requires that the budget be balanced.

But fiscal analysts who drafted the contingency cuts never expected lawmakers to fail to pass both revenue bills, so the state’s budget is actually $70 million in the red.

Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s, said Wednesday that a special session to address the cuts and out-of-balance budget could last from May 14 to May 16. House Speaker Michael E. Busch, D-Anne Arundel, agreed to that time frame Friday, after House leaders agreed Thursday night to return for a special session.

A gambling expansion bill pushed by Miller, which is believed to have interfered with budget negotiations during the final week of the regular session, is unlikely to resurface during the special session. O’Malley has floated the idea of holding a third legislative session in August to discuss gambling.

O’Malley, Miller and Busch are slated to discuss details this week.

But House Minority Leader Anthony J. O’Donnell, R-Calvert and St. Mary’s, said not all lawmakers are thrilled to be called back into session. Even with more than $500 million cut from O’Malley’s proposed fiscal 2013 budget, state spending is $700 million more than it was in fiscal 2012, O’Donnell said.

“I think it’s ill advised,” he said. “There’s only two purposes for them to call us back into session: to raise taxes on Maryland’s families and businesses and to shift pension burdens to local [jurisdictions]. Both of those actions will equate to job reductions in Maryland’s economy.”

Kimberly M. Burns, president of Maryland Business for Responsive Government, said the state would be better off living with some of the “doomsday” cuts.

“It’s a very sad day when the question is not whether or not we’re going to be taxed, but how much,” Burns said. “The best-case scenario is they look seriously at spending cuts. But the legislature seems to be more interested in sustaining their spending habit.

“It doesn’t send a positive message for anybody in Maryland or anyone who is or looking to come into Maryland.”

O’Malley and the presiding officers of the assembly disagree, noting that 500 state positions would be eliminated if the current budget is allowed to go into effect on July 1. Many of those positions would be vacant, but Warren G. Deschenaux, director of the state Office of Policy Analysis, said that some people would lose their jobs in a cut of that size.

O’Malley’s office said the special session was being called in order to prevent the cuts and maintain Maryland’s triple A bond rating.

In a statement, state Treasurer Nancy K. Kopp praised the governor and legislative leaders for agreeing to reconvene the General Assembly.

“I am pleased to advise the rating agencies that, in line with Maryland’s historical tradition of strong fiscal management, lawmakers have come together and will return to Annapolis to complete their work on the fiscal 2013 budget,” Kopp said. “The cooperation between the governor and the legislative leadership reflects their recognition that such action is necessary to ensure that Maryland remains a fiscally prudent and socially responsible state. I am confident that lawmakers will take the necessary actions to craft a fiscal package that moves Maryland forward.”

Among the spending cuts, education faces some of the steepest deductions, with about $200 million in cuts to elementary, secondary and higher education.

The “doomsday” budget also enacts large cuts in state appropriations to local jurisdictions. Counties and Baltimore City would have to adjust their spending based on the sudden elimination of that funding, potentially leading to the elimination of some jobs.

“There is too much at stake not to move forward,” O’Malley said in a statement. “I’m confident that we can come together with the Senate President and House Speaker to complete this most important work for the people of our state.”

But O’Donnell said a special session would do more harm than good.

“In the worst economy in 75 years, we shouldn’t be killing jobs by raising taxes,” O’Donnell said. “Special session equals killing jobs. And that’s what’s going to happen in Maryland’s economy if they continue to raise taxes.”