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In his final budget plan, Hogan takes a different approach

Governor seeks major tax cut and more money for schools, infrastructure, safety net

‘We’re starting with people who have the lowest income who need (a tax cut) the most and working our way up,’ says Gov. Larry Hogan, shown holding one volume of his budget plan. (The Daily Record/Bryan P. Sears)

ANNAPOLIS — Seven years ago, Gov. Larry Hogan took office after a campaign in which he criticized state spending and tax policies.

The cover of his first budget was emblematic of that campaign, its no-frills black-and-white appearance designed to symbolize austerity and prudence. And for the next six years, his budgets retained the same look.

That ended Wednesday when Hogan and State Budget Secretary David Brinkley entered a briefing with reporters, purple budget books in hand.

“Now the state is in even better shape than ever before,” said Hogan. “With struggling families and retirees getting squeezed by inflation and higher costs across the board, there is no reason why we cannot, once again, put the politics aside, to get this done for the people of Maryland.”

Hogan’s final budget — weighing in at a total of $58.2 billion — will need cooperation from Democrats to pass some of its key proposals, including a $4.6 billion tax cut.

The governor faces an uphill battle as the General Assembly Democrats, who have a super majority of the lawmakers, have ideas of their own on how to spend an historic budget surplus that exceeds $5 billion over two years.

“We just thought this was such a historic budget, we wanted to symbolically show it was different,” said Hogan. “It really is a bipartisan effort, and purple is red and blue coming together. It’s really what my whole administration has been about.”

The governor has rolled out budget priorities in dribs and drabs over the last several weeks.

Included in those are hundreds of millions for public safety.

The governor also plans to spend nearly $1 billion on capital improvements around the state. The use of surplus cash allows the state to fast-track projects and forgo borrowing money on which interest must be paid.

And the governor, as he and others have for two decades, proclaimed his support for education by not only meeting required spending levels for education but asserting that he was funding schools in excess of those requirements.

The governor’s plan also includes increased aid to low-income families hardest hit by the pandemic in the form of utility assistance, temporary disability aid to more than 11,000 people, and enhanced food benefits for 27,000 seniors and 50,000 children.

“Taken together, these efforts will bring much-needed relief to families and help to ensure that children in our state have more of the nourishment they need to grow up healthy, educated, and strong,” said Ayesha Holmes, director of No Kid Hungry Maryland.

But the largest priority for Hogan is a $4.6 billion package of tax cuts.

The largest of those proposed cuts, $4 billion phased in over six years, would eliminate income taxes for retirees 65 and older who also claim Social Security. Currently, only Social Security payments are excluded from state taxes.

In the first year of Hogan’s plan, the state would eliminate income taxes on the first $10,000 of retirement income. The change would reduce revenues by about $188 million in the first year.

“It’s the fiscally responsible thing to do,” said Hogan. “We’re starting with people who have the lowest income who need (a tax cut) the most and working our way up.”

Other years would be phased in at higher amounts. Budget Secretary David Brinkley said those details would come as part of legislation the governor will submit in coming days.

The governor is also proposing to make permanent a portion of the increases in the Earned Income Tax Credit passed a year ago. Those increases came as part of a compromise deal between Hogan, House Speaker Adrienne Jones and Senate President Ferguson.

But that deal also included payments to undocumented immigrants who would otherwise qualify for the tax credit, so called ITIN filers.

Hogan said his $600 million proposal to make those credits permanent does not include those low-income immigrant workers.

Hogan said historic surpluses — a combination of increased income tax revenue and a flood of federal pandemic relief — means the state can afford tax cuts.

“We’re able to make these commitments while continuing to fund all of Maryland’s top priorities,” he said.

Jones, in a statement, said the spending plan falls short.

Missing from Hogan’s plan is $125 million in funding for portions of the Kirwan education plan, mostly in Baltimore city and Prince George’s County. There is also worry that the tax cuts for retirees, once fully phased in, would hinder the state’s ability to pay for the education plan without a tax increase under a new governor.

“Our responsible fiscal policies and federal relief funds created an opportunity for the governor to present a budget that funds many of our priorities like child care, higher education, victim assistance and infrastructure upgrades,” said Jones. “However, I am disappointed this budget continues to undermine the (Kirwan) Blueprint’s commitment to providing a world class K-12 education for children in every ZIP code. I am skeptical this budget does enough to address historic state staffing shortages that put Marylanders at risk every day.”

Both Jones and Ferguson have expressed a reluctance to spend potentially one-time surplus money on ongoing expenses. Instead, they appear intent on one-time capital expenses, including building, parks, transportation, school construction and renovation and information technology.

Jones said she will judge the budget and other issues this session by the standard of “is this helping the families who’ve been left behind in the post-pandemic recovery?”