Maryland budget fights will focus on benefits for state workers, tax increases

By Aaron C. Davis
Sunday, March 20, 2011; 11:32 AM

In a deep-blue state such as Maryland, what is the value of a campaign promise to not raise taxes? And after Republicans' rancorous battle with public employees in Wisconsin, what does a purely Democratic version of state pension reform look like?

Answers to those questions began to take shape late Friday in a series of votes that finalized the budget plan that Maryland's House of Delegates will debate this week.

Despite pleas by advocates for the poor, mentally ill and others for lawmakers to forgo pledges made during campaigns last fall, no tax increases were factored into the chamber's spending plan.

Democratic Gov. Martin O'Malley's call for the legislature to begin addressing the tens of billions of dollars in unpaid pension and retiree health-care costs, meanwhile, was met halfway. State employees would contribute 2 percent more of their pay to Maryland's pension system, but the governor's health-care plan was watered down significantly. State pensioners would pay only modestly more for prescription drugs for the next nine years.

Maryland's emerging budget plan is a case study of conflicting priorities in one of only 10 states that are a fully Democratic laboratory after the elections last fall. Although the party firmly controls both houses of the legislature and the governor's mansion, few say they are pleased with the proposed spending plan. More-liberal members say they will fight for tax increases - on alcohol, gas, the incomes of those making more than $1 million, and more - to be incorporated into the plan in order to restore funding to social services and increase investment in transportation and other job-creating projects.

Pension changes

Conservative Democrats say the state's spending plan doesn't go far enough to rein in out-of-control retiree costs, which next year would eclipse $1.5 billion, or Maryland's entire budget for the University of Maryland and higher education.

"We have a budget problem on the one hand and a pension problem on the other hand, and the governor didn't deal with either," Senate President Thomas V. Mike Miller Jr. (D-Calvert) said late last week from the dais of his chamber. O'Malley "nibbled around at the pension, and the House has sent over a budget really not dealing with either."

Miller is pushing for pension changes that would shift a greater share of teacher retirement costs, now paid entirely by the state, to the counties that set teachers' salaries.

With Miller's backing, Senate leaders are also preparing a more-liberal effort to increase the sales tax on alcohol for the first time in decades, partly as a means to raise revenue for schools that would see decreases next year in funding.

But it is the House of Delegates that will have to pass the budget first, and lawmakers on its Appropriations Committee, which passed the spending plan just before 11 p.m. Friday, said they were confident that they could persuade the House to go along with it as drafted.

"People may miss this in all the rhetoric, but this is a really good, forward-looking budget, said Del. Mary-Dulany James (D-Harford), who said she was pleased with, among other items, a provision in the spending plan that cut $35 million to Medicaid providers. "Medicaid costs are growing too quickly, and we're telling providers to get serious about cost containment."

Closing a gap

The $14.6 billion general-fund budget would close a roughly 10 percent gap with cuts, borrowing and some new fees.

The plan partially restores small education cuts contained in the governor's budget - and keeps per-pupil spending at a state-mandated $6,694 - by imposing higher fees on car and property owners.

Marylanders who purchase a car would pay twice as much for a title, $100 instead of $50. Anyone seeking a personalized license plate would pay $50, up from $25.

A third fee increase would double from $20 to $40 the charge Maryland property owners would pay to file tax records.

The budget also proposes to raise $15 million by requiring anyone with unpaid taxes to settle up with the state before they can renew a vehicle registration or driver's license. But the spending plan dropped several proposed bad-driver fees, including one that would have made those convicted of drunken driving pay a $500 fine for three consecutive years.

According to the budget, some revenue from the new fees would restore at least a sliver of the hundreds of millions of dollars in transportation funding taken from counties in recent years.

Maryland's 23 counties would split $5 million, and $8.3 million would be divvied up among its 157 municipalities. Other new costs to counties under O'Malley's budget also would be reduced.

House panel's plan

Under the House committee's plan, retired state employees would face higher prescription drug co-pays and higher insurance premiums. But a proposed annual cap on retiree drug costs of $4,550 would be reduced to $1,000, and other out-of-pocket costs also would be cut. The out-of-pocket cap is currently $700.

The plan also would eliminate an option in O'Malley's proposal to either let current employees pay more for the same pension benefits or pay the same as they do now and receive less in retirement. All state employees would be required to increase from 5 to 7 percent the amount they set aside for their pensions.

Under the House proposal, the state would begin charging counties to administer public employees' retirement systems, generating about $17 million.

Initially, the lawmakers' more lenient health-care plan would save the state about half of what O'Malley had envisioned. But in the next decade, the plans would save almost the same amount, analysts said, by shifting all retirees to Medicare Part D prescription coverage in 2020.

© 2011 The Washington Post Company