- The Washington Times - Tuesday, April 7, 2009

ANNAPOLIS | A panel of Maryland lawmakers struggled Monday in search of compromise in budget legislation approved by the House and Senate, meeting for a little more than an hour before breaking up until more progress could be made on some of the major differences.

The House and Senate conference committee discussed a budget reconciliation measure, which is a companion bill to the legislation containing the state's $13.8 billion operating budget.

Some of the major sticking points include how to cut aid to local governments, spending reductions in higher education and how to free up money for the state's operating budget through Program Open Space, which uses part of the state's real estate transfer tax to buy public land.

A major piece of the budget puzzle revolves around what lawmakers decide to do in cutting state aid for local road maintenance, snow removal and road paving. The Senate has pushed to cut that assistance by $162 million, while the House has decided to make the cut $102 million. The House also approved a $60 million cut to the local “piggyback” tax. Maryland is one of the few states that enables counties to take up to 3.2 percent in income tax from taxpayers through the state's income tax, and the House plan would take back $60 million of that money.

During the meeting, lawmakers grappled with this year's unique challenge of trying to understand how federal economic recovery assistance fits into the state's budget picture, particularly how it affects education. The committee decided to limit growth in funding for kindergarten through 12th grade by 1 percent in fiscal 2012, when federal stimulus money stops, even if the inflation rate turns out to be higher.

In a separate move, the committee decided that the state should not adopt a change in tax law being enacted by the federal government as part of its stimulus efforts. Businesses and others who get a loan forgiven will not have to pay federal taxes on the value of the loan, but Maryland officials balked at offering the same break on state taxes after state budget analysts estimated it would cost Maryland about $40 million a year.

The committee also agreed to limit the Maryland Mined Coal Tax Credit for energy companies that buy coal in Western Maryland to $4.5 million per year in fiscal 2010, 2011 and 2012. It would be $6 million a year in 2013 and 2014 and drop to $3 million a year for fiscal 2015 through 2020, when it is set to expire. Gov. Martin O'Malley, a Democrat, had pushed for a full repeal of the $9-million-a-year credit.

The committee's work also is being affected by a second supplemental budget expected from the O'Malley administration Monday night or Tuesday morning.

A separate conference committee also met Saturday to work out gaps in the state's $13.8 billion budget legislation, and there's still much work to be done on that measure.

Together, the Senate cut more than $900 million in fiscal 2009 and 2010 through the budget legislation and a companion budget reconciliation bill. The House cut about $825 million.

Maryland's budget problems have been amplified because of a $1.2 billion plunge in revenue projections last month for fiscal 2009 and 2010. As if that weren't bad enough, state budget analysts are warning that the state's budget picture looks ugly up through fiscal 2014, with a projected deficit of more than $1 billion in each year.

The General Assembly is scheduled to adjourn in a week.

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