- The Washington Times - Wednesday, August 24, 2011

Just how deep Congress slashes the federal budget will likely determine whether Maryland legislators choose to pursue tax increases during next year’s General Assembly, state officials say.

State analysts anticipate a $1 billion budget shortfall next year, and several officials, including Gov. Martin O'Malley, have warned that legislators might raise taxes to help close the gap.

Mr. O'Malley, a Democrat, said during an interview with The Washington Times that the decision by state legislators will largely come down to how hard Maryland is hit by the minimum $1.5 trillion in federal cuts that Congress‘ so-called supercommittee is expected to recommend in November.

Maryland legislators appear unlikely to raise taxes during this October’s special legislative session but could be forced to do so when the Democrat-controlled assembly reconvenes in January, Mr. O'Malley said.

“The biggest variable now is what’s going to happen in Congress,” he said, warning that aggressive federal cuts could “take the gap and double it, or even triple it.”

The state, which will receive $9.1 billion in federal aid this year toward its $34 billion budget, is also facing a growing need for road improvements and new infrastructure.

Mr. O'Malley acknowledges that the state needs to find money for such projects, telling county leaders last weekend in Ocean City that state officials could take a “balanced” budgeting approaching of cutting some spending while increasing revenues - likely in the form of tax increases.

The governor insists Maryland has consistently chosen cuts over new taxes, making $6.8 billion in cuts since the 2007 special session. During that special session, legislators approved $1.4 billion in new taxes and increased the state sales tax from 5 percent to 6 percent.

Mr. O'Malley has declined in recent months to speak on specific tax proposals, but legislators have discussed several this year, including raising the state’s 23.5-cents-a-gallon gas tax and broadening the 6-percent sales tax to apply to some service industries.

Alex Hughes, spokeswoman for House Speaker Michael E. Busch, Anne Arundel Democrat, said it is too early to speculate which taxes, if any, could increase when legislators return to Annapolis in January.

“We’re continuing to follow the revenue-estimate projections,” she said. “Right now, we’re really just taking a wait-and-see approach.”

Mr. O'Malley has remained opposed to another assembly proposal - trimming hundreds of millions in state spending by shifting a portion of teacher-pension costs onto counties.

The governor argues that forcing counties to pay as much as half of the $1 billion annual pension bill could result in cuts to local education budgets and most adversely affect poorer counties, which might have to eliminate programs and reduce benefits for teachers.

Mr. O'Malley did not specify whether he would actively oppose cost-sharing legislation next year but said he would rather see the state continue footing the entire bill.

He also said he hopes to avoid tax increases but acknowledged that will be “difficult.”

“All of our attention thus far has been in making cuts,” Mr. O'Malley said. “There are a lot of things left to be decided.”