Budget Frustrates Residents & Local Officials

ANNAPOLIS, Md. (AP) -- Local Maryland officials and state residents on Wednesday expressed strong disapproval with provisions of a difficult budget-balancing measure, which includes a controversial shift of teacher pension costs to counties as well as increases in taxes and fees.

County officials also took the time at a Senate Budget and Taxation hearing on the budget legislation to criticize a separate measure that aims to crack down on counties that haven't been maintaining local education funding as required under state law.

"Those two things alone could end up hitting Montgomery County to well over $150 million in one year. That's simply unacceptable," said Montgomery County Executive Isiah Leggett, referring to the teacher pension shift and maintenance of effort legislation.

Local officials have been wailing against the pension shift since O'Malley released the plan to transfer some of the cost, which is now paid entirely by the state, as part of his budget proposal in January. It would cost counties about $239 million.

Legislation to put teeth in the state's maintenance of effort law for school funding was only introduced this week.

Current law requires a county to spend at least the same amount on a per pupil basis as the year before, so counties don't go backward in education funding. But the law isn't very enforceable. Seven counties ignored seeking waivers in the current fiscal year, even though they are funding schools below the amount required by the law.

A bill in the House of Delegates would allow the state to take money local governments generate by a "piggyback" tax on the state income tax and send it directly to school funding. The measure also would allow counties to set a higher property tax rate than currently authorized.

Some local officials are viewing the teacher pension shift and the maintenance of effort measure as a double-barreled blast at county governments.

"Senators, House Bill 1412 has the potential to create huge schisms in every local community, pitting schools against every other need and constituency that we serve from public safety to transportation to safety net programs," said Montgomery County Council President Roger Berliner. "We have seen the beginning of that already in the dynamic surrounding the proposed pension shift."

The governor has included money in the budget to help offset the local impact in the first year the pension split is implemented. However, some of those proposals, which include capping income tax deductions for Maryland residents who make more than $100,000, have angered Maryland residents.

"We hear rumblings that many of them won't pass," said Ingrid Turner, the president of the Maryland Association of Counties and a Prince George's County councilwoman, who noted the pension shift would cost her county about $30 million when it already is facing a $126 million deficit.

Hundreds of residents came early to Annapolis Wednesday morning to rally in the rain against O'Malley's proposal to cap income tax deductions. It would cap income tax deductions at 90 percent for taxpayers with incomes above $100,000 and 80 percent for taxpayers who make more than $200,000. The proposal would affect mortgage interest deductions.

"It's just stealing from the taxpayers," said Karen Winterling of Ellicott City, who rallied with her husband David in Annapolis. "This is something -- a benefit -- that we bought into 10 years ago when we bought our home. I mean, how can you change the rules right now?"

Mortgage interest accounts for the largest amount of Maryland itemized deductions, comprising about 51 percent of them.

Charitable contributions make up the second highest amount, or about 17 percent. Property taxes come next at about 14 percent. Senate President Thomas V. Mike Miller, D-Calvert, said he did not think the proposal would survive modifications by lawmakers to the governor's budget proposal.

The governor's budget and reconciliation act measure aims to balance the budget by transferring money, increasing taxes and fees and eliminating several tax credits and exemptions.

It includes a requirement for online vendors to begin collecting sales tax. The measure also imposes sales tax on digital downloads. There is also a tobacco tax increase on cigars and smokeless tobacco from 15 percent of wholesale cost to 66 percent.

The measure would repeal Maryland's mined coal tax credit, and eliminate a corporate tax credit for property taxes paid by telecommunications companies, said T. Eloise Foster, the governor's budget secretary.

Lawmakers are wrestling with balancing the state's books this year and halving the state's $1.1 billion ongoing budget deficit.

"It's needed to ensure that we make some long-term progress toward resolving our structural gap in the upcoming years," Foster said.

(Copyright 2012 by The Associated Press. All Rights Reserved.)