Three months after Maryland lawmakers raised taxes on the wealthy, saying the money was urgently needed for classrooms, surging revenue from other areas has left the state with a surplus, prompting a fight about whether the tax increase was needed at all.
Maryland ended its budget year with over a half-billion dollars in the bank — or more than twice as much as expected, Comptroller Peter Franchot (D) announced late last week.
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Money from the income-tax hike — Maryland’s first in five years — accounted for nearly half of that. State lawmakers had planned to carry most of the new tax revenue forward to help with future shortfalls. But with higher-than-expected revenue doubling the state’s financial cushion, some officials charged Friday that Gov. Martin O’Malley (D) and Democratic legislative leaders hypedtalk of budget cuts to get the General Assembly to approve the tax increase.
“It’s clear the ‘doomsday’ budget was always a gimmick to stampede legislators into voting for tax increases and a gambling expansion. They were contrived crises,” Franchot said of the legislature’s two special sessions.
The first, in May, resulted in the tax increase. The second, in August, produced a ballot measure to allow a casino in Prince George’s County.
“The balance shows, absolutely, the tax increases were not needed,” said state Sen. C. Anthony Muse (D-Prince George’s). Muse was one of a handful of Democrats who voted in May against the quarter-percentage-point tax increase on six-figure earners. He alsoopposed the casino.
“What happens now? I can guarantee we won’t go back and say, ‘Gee, Marylanders, we were wrong, we’re going to rescind the tax,’ ” Muse said. “No, it’ll be spent.”
Democratic leaders in the General Assembly and a spokeswoman for O’Malley pushed back strongly against the criticism. They said that ending the year further in the black than expected only showed that the state had been conservative in its budgeting and that the additional tax money would be put to good use next year to help close an ongoing structural shortfall.
In the budget year beginning next summer, the state faces an expected gap of $712 million between revenue and formula-driven spending increases for education, health care and other costs. The projected gap remains about $500 million annually thereafter.
O’Malley and Democrats who control the General Assembly have closed larger budget holes, usually in excess of $1 billion annually since the start of the recession, by holding spending in some departments at or near levels from previous years while letting overall spending rise, mostly with increased borrowing.
With the surplus, O’Malley could face a budget gap significantly smaller than at any time since his first year in office.
“We cannot look several months into the future when we put together our budget and predict outcomes. Would be great if we could but reality is that we can’t,” O’Malley spokeswoman Raquel Guillory said in an e-mail. “These numbers represent sound fiscal policies and a balanced approach to cuts and investments.”
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