- The Washington Times - Thursday, March 8, 2012

ANNAPOLIS — A Senate committee agreed Thursday to rework Gov. Martin O’Malley’s proposed budget, installing an alternative set of tax hikes and a more gradual shift in teacher-pension costs while avoiding any additional spending cuts.

The spending plan by the Senate Budget and Taxation Committee would rely on an across-the-board income-tax increase rather than the Democratic governor’s targeted hikes on the top 20 percent of earners to help balance the budget and trim more than half of the state’s $1.1-billion structural deficit.

Committee members also rejected Mr. O’Malley’s plan to immediately push $239 million in pension costs onto counties, instead phasing in a shift over four years. They also are requiring more education funding from counties but allowing them to foot the bill by raising local income-tax rates above their current caps.

The full Senate is expected to debate the plan next week.

“We spent a lot of time working on this, trying to come up with the fairest and most equitable plan possible,” said Sen. Roger Manno, Montgomery Democrat. “With the work product of the committee, we were able to do that.”

The 13-member committee debated the budget largely along party lines and passed its recommended plan by an 11-2 vote with support from all Democrats and one of three Republicans.

The lawmakers approved an alternate, virtually equal set of revenues to the governor’s while sidestepping all of the nearly $800 million in cuts announced earlier this week as part of a so-called “doomsday budget” proposal, which would reduce local aid, education and health costs and eliminate 500 state jobs without raising revenues.

The doomsday cuts could still take effect if lawmakers reject all or some of the committee’s revenue increases.

Mr. Manno said cuts to Medicaid would be among the first to be considered.

Senate President Thomas V. Mike Miller Jr., Prince George’s Democrat, has said the full Senate is likely to push for additional cuts with some Democrats joining minority Republicans.

“A lot of the provisions that were put forward were just to raise revenues, which I think are unnecessary,” said Sen. David R. Brinkley, Frederick Republican. “We can’t keep going back into the purses of Maryland families.”

The committee rejected the governor’s proposal to effectively raise income taxes on residents making more than $100,000 a year by lowering the value of their itemized deductions by 10 to 20 percent and reducing the value of their personal exemptions.

Instead, members endorsed a plan by Mr. Manno that would implement a modest income-tax increase on all residents who make more than $3,000 a year.

Tax rates within each bracket would increase by as much as 0.25 percent.

The state’s current tax brackets range from 2 percent for those making less than $1,000 a year to 5.5 percent for those making more than $500,000.

Mr. Manno said a family making $40,000 a year would likely to pay an additional $30 in taxes.

Committee members also improved a four-year pension shift and a maintenance-of-effort bill that would require counties to continue increasing local education funding.

The pension phase-in is less harsh than the governor’s immediate shift, requiring counties to pay an additional $68 million next year rather than the governor’s proposed $239 million.

To help pay the additional costs, counties would receive some additional funding and the authority to raise local income taxes above currently allowable levels, with any extra revenue going to education.

Sen. Nancy J. King said local school boards support the decision.

“The leadership of those groups has agreed to this shift with us and it makes me feel a lot more comfortable about doing this,” said Ms. King, Montgomery Democrat.

The committee also approved a modified version of the governor’s tax increase on non-cigarette tobacco products and rejected his proposals to tax digital downloads and end a tax credit for Maryland-mined coal.

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