O'Malley fleshes out budget plan on tax tour

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ANNAPOLIS — Maryland Gov. Martin O'Malley ended his statewide tax tour yesterday with a more definitive outline of how he plans to close the state's $1.7 billion budget shortfall, including plans to cut education funding.

Mr. O'Malley, a Democrat, said he would cut $207 million in mandated education spending while phasing in an optional $38 million for teachers based on where they work.

"Some of these things are going to be painful," Mr. O'Malley said as he detailed the long-awaited arithmetic behind his proposed fiscal 2009 budget before about 150 people, mostly lobbyists and government staffers inside a school gymnasium.

Though Mr. O'Malley must win support from state lawmakers for his proposal, which includes legalizing slot machine and tax increases, his first task will be to persuade them to return to Annapolis before January for a special General Assembly session.

The O'Malley administration estimates that approving the plan by the fall would result in $516 million more in taxes.

In the past two weeks, Mr. O'Malley has proposed increasing the state sales tax by a penny, increasing the personal-income tax on high-wage earners, doubling the cigarette tax and legalizing at least 9,500 slot machines.

Mr. O'Malley also has proposed increasing tax exemptions for low-wage earners and seniors, cutting the property tax by 3 cents per $100 of assessed value, and offering $50 sales tax rebates for low-income residents.

Many of the new taxes, including increasing corporate income tax and car-titling fees, will go toward increased spending, after the shortfall is erased.

The sprawling plan left some Marylanders wondering what the net effect would be for them.

"We are not going to be better off," said Peggy Ploquin, 58, a French teacher from Annapolis.

Allen James, a retired lawyer from Annapolis said, "I think we can do without slots, I really do. That's just my feeling."

Mr. James said he would be happy with the sales-tax increase, which Mr. O'Malley expects will close most of the shortfall. But he opposed the cigarette tax increase — a plan Mr. O'Malley hopes will give him $85 million for the shortfall and $85 million for expanded health care.

Mr. James also said he wants to protect education spending.

Democrats often attacked former Gov. Robert L. Ehrlich Jr., a Republican, for not completely funding the mandated education initiative known as the Thornton Plan, even giving students a day off from school to protest Mr. Ehrlich's plan.

But Mr. O'Malley's plan to do the same with education spending had a roomful of people applauding him yesterday.

Mr. O'Malley hopes to move his plan through the assembly during a special session before November. He expect the entire plan, including slots, to generate $2.2 billion by the end of July 2009.

"We don't really have a good backup plan if we don't come back for a special session," he said.