Wednesday, Nov. 14, 1 p.m.

Maryland Special Session

John Wagner
Washington Post Staff Writer
Wednesday, November 14, 2007; 1:00 PM

Post writer John Wagner takes your questions Wednesday, Nov. 14 at 1 p.m. ET about Maryland Gov. Martin O'Malley's efforts to close a $1.7 billion budget gap during a special session of the state General Assembly.

A transcript follows

Maryland Special Session: Full Coverage


John Wagner: Thanks for joining me today for a chat about a special session of the Maryland legislature, called by Gov. Martin O'Malley, to close a looming budget shortfall. I'm happy to take your questions on anything related to the session, which is now in its third week. Following a breakfast meeting with the governor this morning, legislative leaders suggested deliberations could wrap up by this weekend.


Baltimore: How did this budget shortfall happen in the first place? Why is it so hard for Maryland to figure this out?

John Wagner: The budget shortfall is widely blamed on the legislature's passage in 2002 of the Thornton education plan without a long-term funding source in place. The law was projected to pump an additional $1.3 billion into Maryland public schools. The actual figure now is closer to $1.5 billion. Gov. O'Malley has also cited an income tax cut initiated a decade ago as a contributing source. The state has balanced its budget on a cash basis in recent years by tapping reserve funds and moving money into its general fund from accounts earmarked for transportation and land preservation. But the state has what is called a "structural deficit" -- for every $1 it receives in revenue, it is now projected to spend $1.10.


Naples, Fla.: What is the likelihood of passage of the proposed change in residency from six to three months for Maryland tax paying purposes?

John Wagner: The provision to which you are referring relates to income taxes. Under current law, the residency requirement in Maryland is six months, as is the case in most states. An amendment on the Senate floor altered the requirement to three months, a move that could generate as much as $58 million a year for the state, according to one estimate. The House did not include a similar amendment in either of the tax bills it passed, however. So the fate of the provision will be one of many that will have to be resolved by a conference committee.


Potomac, Md.: Has the legislature considered table games and casinos as a revenue enhancement? It seems table games could give the state the biggest competitive advantage with neighboring states.

John Wagner: There has been no serious discussion of table games, though some lawmakers clearly agree with your assessment regarding competitive advantage. Right now, House leaders are struggling to round up the votes just to legalize slot-machine gambling.


Washington, D.C.: If Maryland is going to take the plunge and allow gambling, why not put them closer to D.C. and the Virginia line--where there are currently no slot machines. Many of the sites seem closer to West Virginia and Delaware which already have slots.

John Wagner: From a revenue perspective, there are strong arguments for placing slots at Rosecroft Raceway or National Harbor in Prince George's for reasons you cite. But the House delegation from Prince George's is strongly opposed to doing that, so it has been a non-starter this session.


Bethesda, Md.: Thanks for hosting this discussion.

What is the view on the ground at this point about whether calling a special session and its outcome thus far are a political plus or minus for the Governor? Assembly (Leaders)? Senate (Leaders?)

John Wagner: The next few days will go a long way toward determining that. If lawmakers are able to adjourn with a budget solution in hand, Gov. O'Malley will be able to claim that he tackled a tough problem that others avoided for years. He may take at least a short-term political hit for raising taxes, but his advisers believe he has plenty of time to recover before the 2010 election. There will be three more regular sessions of the General Assembly between now and then. Republican strategists, meanwhile, are eager to portray him as a tax-and-spender.

If the session ends with most bills passed, legislative leaders will at least be able to claim they were able to work together in a way many thought they could not. While some individual members may face fallout from tax votes, there is little doubt that both chambers of the General Assembly will remain in Democratic hands, given the large margins the party enjoys in both chambers.


Rockville, Md.: What is the status of the proposals to apply the sales tax to services in MD?

John Wagner: The House has deleted all services from its tax plan, after initially including auto repairs and several other repair services.

The Senate tax plan still includes computer services and video arcades. A provision applying the sales tax to landscaping was dropped from the bill almost as soon as it was added.


Silver Spring, Md.: If the House rejects a slot machine bill, does the session fall apart? What happens then?

John Wagner: That's a good question. Senate President Mike Miller, among the most ardent supporters of slots, indicated some flexibility this morning on the issue if the House cannot garner the votes. If that happens, Miller said he would push for passage of a stand-alone slots bill -- with no public referendum -- in the regular session, which starts in mid-January. That would require 71 votes in the House instead of the 85 needed for a referendum.

There is speculation that bills with taxes increases and spending cuts might still pass if slots fails. But it seems unlikely the Senate would move a health care bill or an environmental bill that are also in play in the special session.


Silver Spring, Md.: The governor said 4 out of 5 Marylanders would pay less when he called the special session but now it looks like the Senate has taken most of the tax breaks for working stiffs our of the package. What are the chances that working Marylanders will get the little bit of tax relief they need during conference?

John Wagner: O'Malley's claim was largely contingent on a proposal to roll back the property tax rate by 3 cents per $100 in assessed value. Neither the House or Senate adopted that proposal.

Some pieces of the tax proposals are still considered progressive. Under the House's income tax plan, for example, only about 7 percent of filers would pay more. The House proposes raising the personal exemption for most filers, which will provide some relief.

But everyone will pay more under a plan passed by both chambers to raise the sales tax from 5 cents to 6 cents per dollar.

And a few other O'Malley proposals were deleted, including a sales tax rebate of $50 to low-income families.


Queen Anne's County: Any chance we can rename Maryland to the People's Republic of Maryland? Better yet, can the Eastern Shore just secede from Maryland without the Maryland National Guard cracking down on us?

John Wagner: I think prospects for both are unlikely. But the legislature will be here for at least a few more days. So I would encourage you to contact your representatives.


Annapolis, Md.: Given this recent article, and rumors that have been heard around town, what do you think the chances are of a Clinton/O'Malley or Clinton/Brown ticket?

John Wagner: Remote.


Confused, Md.: Hi Mr. Wagner -- I hear conflicting opinions about the cause of the budget deficit -- I hear from some the same information you gave earlier in this chat -- that 2002 changes left programs unfunded. I hear in other places that most of the deficit involves the cost of new programs (expanded health care, etc). Could you straighten this out for me? Would the deficit be as large as advertised if there were no new programs on the table?

John Wagner: By definition, a budget shortfall results from projected spending outpacing projected revenue. So, yes, spending is certainly a part of the equation.

The new initiatives that O'Malley and lawmakers are proposing would be paid for by the new revenue they are seeking to raise. The programs would only add to the size of the shortfall if they were enacted without the revenue to pay for them.


Annapolis, Md.: How do you see this getting resolved?

John Wagner: If the House passes a slots bill tomorrow, the differences in that bill, as well as in those calling for new revenue and spending cuts, will be resolved by conference committees (with a great deal of guidance from the leaders of the two chambers). Informal talks on how to do that are already taking place. Though there are significant differences in several bills, the will to get out of town seems to be strong enough that the process could be relatively quick.


Kensington, Md.: During the early days of the special assembly, it was said that Montgomery County would take the brunt of the tax increases. Could you explain? Is this still the case?

John Wagner: Montgomery County residents are certainly shouldering the majority of the increase in income taxes -- in part because of their relatively high incomes and in part because of the number of residents of the county. There are now competing income tax plans in the House and the Senate, but both impose higher tax rates on high-income earners.


Annpolis, Md.: Can the Thornton bill be rescinded? How is the fact that this -- a program passed under Erlich -- is the cause of the deficit not being more widely publicized? It seems like O'Malley is being blames for something he had little control over.

John Wagner: There is no political will to rescind the Thornton bill, but Gov. O'Malley proposed -- and both chambers have agreed -- to slow the rate of new spending on education that is called for by the Thornton law.


Wheaton, Md.: I like that Maryland's sales tax is a nice round 5 percent. It makes it very easy to calculate. Do you think the increase in the sales tax is an integral part of the plan or may get dropped? If it's increased, I may go to Virginia for those larger purchases. Thanks for your help.

John Wagner: The sales tax is the largest revenue generator on the table, so it is highly unlikley to be dropped unless the entire session falls apart. A 1-cent increase is projected to yield roughly $730 million a year in new revenue for the state.


Silver Spring, Md.: In light of the projected deficit, why are there plans to expand or add new services (e.g., health care)?

John Wagner: The health care bill is in play for a couple of reasons. Its passage, for one, would give lawmakers something from the session to tout to their constituents besides tax increases.

Though it is projected to eventually cost the state $250 million a year, some lawmakers have argued that providing health coverage will actually save money in the long run, given the cost of uncompensated care.


Annapolis, MD: Wasn't Thornton passed under Governor Glendening and not Governor Ehrlich?

John Wagner: It was.


Glen Burnie, Md.: Sen. Hooper, who has been battling colon cancer for a few years, will resign for health reasons at the end of the year. Is there any word on his likely successor? How will his resignation affect committee assignments in the Senate?

John Wagner: At a news conference today, he suggested Del. Barry Glassman, chairman of the Harford House delegation, as his replacement.


Columbia, Md.: It is my understanding that the Republican Party is greatly in debt. If that is the case, how can they afford to continue to pay rent in Annapolis, which is expensive prime real estate? In addition, if the Republican party can't manage their own party? Why should we think they have the ability to manage ours?

John Wagner: Those are probably questions better put to them than me.


Frederick, Md.: The Senate Bill makes the size of the cigarette tax increase dependent on the size of any increase in the federal excise tax. Does the House Bill also have this feature, and what are your thoughts on this?

John Wagner: You are correct regarding the Senate bill. It raises the tax from $1 to $2 per pack of cigarettes. But that amount would decrease if there is an increase in the federal tobacco tax. That levy is being considered as a funding source for the federal children's health insurance program.

The House did not include a similar provision in its bill, so the issue will likely be resolved by a conference committee.


Columbia, MD: Wait, let me get this straight. You said

"The new initiatives that O'Malley and lawmakers are proposing would be paid for by the new revenue they are seeking to raise. The programs would only add to the size of the shortfall if they were enacted without the revenue to pay for them."

Aren't you saying two different things? If they do not pass these new spending bills then they will not need the new revenue, correct?

If they do pass the programs without new revenue, then is this not the deficit that they are predicting? How can it add to the size of the shortfall if the shortfall is already calculated with this new spending in it?

John Wagner: The current shortfall -- different estimates put it between $1.5 billion and $1.7 billion -- does not reflect any of the new spending that has been proposed during the special session. Revenue above and beyond what is needed to close the shortfall is being sought to fund those initiatives.


John Wagner: Thanks for all your good questions today. I've got to run.


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