Budget Panel Talks About Teacher Pension Sharing

ANNAPOLIS, Md. (AP) -- Stuck on how to raise income taxes, Maryland lawmakers on Thursday began wrestling with how they will split the cost of teacher pensions with local governments.

A panel of lawmakers who are trying to put finishing touches on the state spending plan met to negotiate differences in a package of budget measures passed by the two chambers. One of the biggest differences involves how much would be shifted to counties in certain years.

Maryland is one of the few states that pays the entire teacher pension cost, which has soared in recent years.

The House would phase in a pension split over three years, with half of the county portion shifting in the first year, 75 percent in the second and 100 percent in the third year. The Senate would phase it in over four years, with 25 percent of the expense in each year.

Delegate John Bohanan, D-St. Mary's, argued it would be better to do more in the first year to save money in the next fiscal year.

But Sen. Richard Madaleno questioned how the larger number in the first year could trigger unintended tax increases at the local level.

Bohanan noted that about 40 percent of the state's general fund goes directly to the counties. He said the state spends almost as much in teacher-pension costs as it does on higher education.

"I don't think there's another state in the country that is as generous to the local jurisdictions as we are, and that trend is
unsustainable," Bohanan said. "We just can't keep up."

Meanwhile, with only four days left before the Legislature is scheduled to adjourn, the budget conference committee is hung up on differences on an income tax increase -- a key component of the state's budget balancing plan.

"You're at a point now where, in the absence of a revenue package, you do need to have a spending package, and you need to start thinking about what you do if you can't agree ultimately," Warren Deschenaux, the Legislature's chief budget analyst, told the panel.

Under the House plan, the income tax would increase for single filers who make more than $100,000 and joint filers who make more than $150,000. The House plan also would restore some of Gov. Martin O'Malley's initial proposal to reduce some income tax exemptions, which was rejected by the Senate.

The Senate proposal would increase income taxes for nearly all taxpayers by a quarter of a percent. The Senate also has a 5.75 percent "super bracket" for people who make more than $500,000. That would assess the top rate from the first dollar, instead of only on income above half a million dollars.

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