As a federal government shutdown drew nearer Tuesday after no breakthrough in budget talks, a very different ending to this year’s fiscal debate in Maryland played out 45 minutes from the U.S. Capitol.
Budget negotiators in Annapolis, where Democrats control both chambers of the General Assembly, agreed to spend a year studying the merger of the state’s two top public universities to save money, and left it up to leaders of the House of Delegates to decide whether they would follow suite with the Senate and increase Maryland’s sales tax on alcohol. The money would mostly restore modest funding cuts to classrooms in Prince George’s County and Baltimore.
The final decisions amounted to ending Maryland’s budget battle with a whimper, despite the state’s fourth straight year with a projected double-digit shortfall. The solutions on school funding and the move to keep the proposed alcohol tax increase separate from the main budget bills were among a couple dozen stragglers remaining for lawmakers to finalize after they closed the biggest divide between the two chambers over pension and retiree health-care costs Monday.
Under that compromise, state retirees will see their maximum out-of-pocket costs for prescription drugs more than double, as well as other health-care costs rise, but not as much as they would have under a plan proposed by Gov. Martin O’Malley (D) and largely endorsed by the state Senate. In 2020, the costs will more than double again when retirees are shifted to federal Medicare coverage.
The course-correction on the state’s underfunded pension, meanwhile, will result in state workers paying a combined $200 million more annually through higher payroll deductions, and the state kicking in an extra $300 million.
If the state realizes its projected annual rate of return of 7.75 percent, Maryland’s pension system will return to a federally recommended 80 percent solvency rate in 12 years, or 2023. Next year, Maryland’s state retirement system is projected to be funded at 59 percent.
The bill for a 3 percent increase in the state’s alcohol tax is under review in the House Ways and Means committee. The committee chairwoman, Del. Sheila Hixson (D-Montgomery), said there are enough votes in favor of the measure to pass it to the House floor, but that the House leadership will decide whether the bill moves forward.
The House and Senate are expected to pass the revised budget plan by Friday. The General Assembly is scheduled to adjourn at midnight Monday.
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