Maryland homeowners will not see a reduction in their state property taxes next year, but spending on public school construction will jump to $250 million under a tentative agreement announced last night by lawmakers negotiating the state budget.
Leaders of the House of Delegates had sought a cut in the property tax rate of nearly 5 cents per $100 of assessed value, a move that would save the owner of a $400,000 home about $200. But Senate leaders resisted, arguing that the move would not be prudent when concerns continue about the state's long-term fiscal outlook.
Del. Norman H. Conway (D-Wicomico), chairman of the House Appropriations Committee, said he still believes a tax break is warranted, given recent jumps in home assessments that have driven up tax bills in the Washington area and across the state. But Conway said House negotiators had tentatively agreed to accept "intent language" in the budget bill that will set a goal of cutting taxes in the future.
The tax cut is "off the table now, as long as we can get that," Conway said during a break in negotiations on the state's nearly $26 billion budget.
In exchange for backing off, Senate leaders agreed to the House's request to spend $250 million on school construction in fiscal 2006, which starts in July. That is $50 million more than was included in the Senate's budget and nearly $100 million more than Gov. Robert L. Ehrlich Jr. (R) proposed.
Conway said the higher spending on school construction was "one of our big items," given a backlog of needs for construction and renovations in schools across the state.
The understanding on tax cuts and school construction spending broke a stalemate on the budget, which lawmakers must adopt before they adjourn Monday. Negotiators spent several hours last night working through dozens of other differences in the two chambers' spending plans and scheduled additional meetings for today.
The House's proposed tax cut was in part an attempt to outflank Ehrlich on a politically potent issue. Under the proposal, homeowners' tax rates would have dropped from 13.2 cents per $100 of assessed value to 8.4 cents, the rate before Ehrlich's election in 2002. Ehrlich proposed the tax increase in 2003 as part of a series of measures to close a gaping budget hole that he inherited.
Ehrlich's budget secretary, Chip DiPaula Jr., said last night that the governor is considering support for a 1-cent reduction in the rate this spring. That move would be initiated by the Board of Public Works, a three-member panel on which Ehrlich sits that can act without legislative approval.
Sen. Ulysses Currie (D-Prince George's), chairman of the Budget and Taxation Committee, said the Senate would be happy to consider reducing the rate in coming years if the state can afford it. The House plan would have cost the state about $200 million in lost revenue.
Among the many budget differences that must be resolved is a dispute over a House provision that would prohibit the State Lottery Agency from spending money to develop "Class II gaming machines."
Del. Peter Franchot (D-Montgomery) said House leaders are concerned that development of the electronic casino machines could be a back-door way for the Ehrlich administration to introduce slot machines into Maryland. Bills to legalize slots have failed in the past two legislative sessions and appear doomed this year as well.
Sen. P.J. Hogan (D-Montgomery) said the Senate, which opposes the provision, wants to give the lottery agency flexibility to do its job.