Gov. Harry Hughes is considering two major options for funding Maryland's share of Metro operating costs. One would increase the tax on gasoline in future years, while the other would assign a portion of the state sales tax to the mass transit system.
The two proposals, disclosed by administration sources yesterday, are viewed quite differently by state legislators from suburban Washington. Most of them are strongly opposed to any gasoline tax increase but would support using tax revenues to fund the transportation needs.
Hughes, according to sources, will attempt to make the tax increase -- which would be assessed on the wholesale price of gasoline -- more palatable by tying it to a reduction in the current 5 percent sales tax and by not putting it into effect until a year from now.
The governor has not yet decided which option to push, but he has promised legislators that he will present his proposals to deal with the state's most pressing financial concern -- transportation funding -- by the middle of next week.
Suburban Washington senators met with him Thursday to stress their opposition to any increase in the gasoline tax.
Sen. Victor Crawford (D-Montgomery) said after the meeting that tying state funding for the regional subway system to a gasoline tax would be "holding Metro hostage." Sen. Peter A. Bozick (D-Prince George's) said he could not return to his constituents and tell them the state was increasing taxes, in light of a huge surplus this year in the state's general revenue fund.
But Hughes has expressed concern that such surpluses -- this year's will be at least $229 million -- will not reoccur, and he has said the state must find a long-range solution to its transportation funding dilemma.
A special transportation task force reported this month that the state may face huge deficits in its separate transportation fund -- the source of money for roads and mass transit -- in part because of reduced gasoline consumption.
The current retail tax of 9 cents a gallon remains stable no matter how high the price of gasoline climbs, and with less consumption, the revenues from the tax are expected to fall. The task force recommended that the tax be changed to a percentage of the price, so revenues would rise with gasoline prices.
Hughes is looking at various percentage changes in the gasoline tax, and his staff is providing him with forecasts of how much revenue each option would provide. The situation is "fluid," one source said, adding that Hughes final transportation proposal could involve any combination of the various options.
Last week, Hughes first revealed that he was considering designating one-quarter of 1 percent of the current sales tax to the Metro system.That would generate about $38 million annually, local officials estimate, enough to cover three-quarters of the annual operating payments of Prince George's and Montgomery counties. That possibility was enough to make local politicians inordinately happy.
As one Prince George's senator said: "we would all roll over for any of (Hughes') other legislation if we got this."
The governor is expected to discuss these various options with General Assembly leaders and legislators from suburban Washington before making any final decision, staff aides said. Several of Hughes top aides -- including staff director Ejner J. Johnson -- are said to favor the proposal that combines a change in the gasoline tax with a reduction in the sales tax.
However, a few staff members are trying to persuade the governor to go with the approach of moving a portion of the current sales tax to transit funding.
The state is facing a deadline this year to provide a "stable and reliable" source of funds for mass transit operating costs if it is to get federal money for Metro construction.
Hughes must also decide just how much of the operating deficits will be picked up by the state and how much the local subdivisions will have to pay. The transportation task force recommended that the state pick up 75 percent of Metro's operating deficit, leaving a 25 percent share for Montgomery and Prince George's counties.