House Set to Begin Debate on Budget

Counties Could Lose a Lot of State Aid

The Maryland House of Delegates begins debate today on a state budget proposal that would allow for a tuition freeze at state universities and avoid layoffs of state workers but hit strained local government budgets hard.

The $14 billion spending plan for fiscal 2010 cuts $825 million from the budget proposed by Gov. Martin O'Malley (D). Of those cuts, close to $300 million would come from counties -- including $60 million in local income tax revenue that delegates have proposed diverting for state use.

House leaders said they worked to craft a fair spending plan in a tough environment of plummeting tax revenues. They said that local governments could have fared far worse and that budget writers avoided cutting some programs at the request of county leaders.

Even so, county officials say the proposed state reductions could worsen their shortfalls. Leaders in Prince George's and Montgomery counties, who last week proposed laying off 700 workers, said the House proposal might mean forcing out more.

"We knew the counties would be asked to pay some part of it, but this is on the higher end of what we had anticipated," said Montgomery Executive Isiah Leggett (D).

Michael D. Herman, chief of staff to Prince George's County Executive Jack B. Johnson (D), said the House recommendations would make local budgeting "extremely difficult."

The fiscal 2010 budget remains in flux. After House approval this week, the Senate will review the plan.

Local leaders said they have been bracing for a sizable hit. Many signed off on a $102 million reduction in state funding for county and city road projects. But they said they were frustrated by a proposal to divert $60 million in local income tax revenue to the state treasury, a decision handed down by the House Appropriations Committee just before completing its work late Friday night.

Maryland is one of the few states that allow local governments to adopt an income tax, up to 3.2 percent, on top of the state tax. Delegates have proposed tapping that local funding for the first time since 1992. The result would be a cut to Montgomery of $12.1 million, to Prince George's of $5.6 million and to Anne Arundel of $9.1 million.

"The state is saying, essentially, what's ours is ours and what's yours is negotiable," said Montgomery Council President Phil Andrews (D-Gaithersburg-Rockville).

Delegates said cuts to counties account for 20 percent of their proposed reductions and would be temporary. They declined to ask localities to fund a portion of property tax assessment offices and/or clerks for the court system, both now paid by the state, and preserved state aid for local police departments and grants that primarily benefit less affluent counties.

"We've put forward what we think is a very fair and effective budget, without raising taxes or any fees during these very tough economic times," said House Speaker Michael E. Busch (D-Anne Arundel).

House Appropriations Chairman Norman H. Conway (D-Wicomico) said his committee looked to the counties only as news arrived last week that state tax revenues were plummeting more quickly than anticipated.

"When last Wednesday came, it was very, very clear we had no other route to follow," he said. "We were at the door of local government."

Legislative leaders have for years questioned whether jurisdictions lean too heavily on state dollars to fund local programs. Almost 40 percent of the state's general fund goes directly to counties, towns and cities, and the state pays hundreds of millions each year in retirement costs for local teachers.

The conversation has taken on new urgency as tax revenue has dried up at every level of government. State leaders have said a legislative panel will convene this summer to examine the balance.

Senate President Thomas V. Mike Miller Jr. (D-Calvert) said yesterday that he would favor using this year's budget to make more long-lasting changes in the relationship.

"I think the Senate cuts are going to be more permanent," he said.