Gov. Harry Hughes today proposed increasing Maryland's gasoline tax by two cents a gallon and imposing new fees on trucks that use state highways to fund a $500 across-the-board pay raise for state employes and $12 million in state education aid.
In advocating the gasoline tax increase, Hughes returned to an alternative he dropped last fall because of perceived legislative opposition. The governor said he had changed his mind because the state's continually sagging tax collections meant "we have to do something to bolster the general fund situation of the state . . . not just for this year, but for next year and the future."
The proposal came after 10 days of sometimes erratic deliberations by Hughes that were climaxed by a frantic final day of meetings with advisers and legislative leaders. It is likely to face stiff opposition with only three weeks remaining in the General Assembly session, even though the governor said legislative leaders had supported the package "in concept."
"The governor's got a lot to deliver," said Senate Budget and Taxation Committee Chairman Laurence Levitan (D-Montgomery), who proposed the variable fuel tax earlier this year. "I give him a lot of credit if he can pull it all off in three weeks, with the opposition we've been hearing."
Hughs' political difficulties arise in part from differences between the House and Senate over how to increase state revenues. Although Senate leaders have expressed some support for both of Hughes' tax proposals, the House Ways and Means Committee, which considers all tax measures, has favored only a truck fee increase, while firmly resisting a gasoline tax.
Ways and Means chairman Tyras Athey (D-Anne Arundel) said tonight he was "holding an open mind" on the governor's package. After briefing his committee on its contents, Athey said: "Some of them looked like they were thinking about it, some of them didn't seem to change in the least. I can't predict what we will do."
House Speaker Benjamin L. Cardin, who sat in on the committee's briefing, said he believes the package could pass if the legislature can control how the additional transportation monies generated by it will be spent. c"We need some time," he said. "And we only have three weeks."
The governor's package will be a complex one, linking the two major tax increases with two other smaller revenue-raising measures, a transfer of revenue sources within state budget accounts, and three different new programs for the budget, which now is being debated in the legislature.
Before the session began, Hughes cited an employes' pay raise and the education aid program as priorities, although he was unable to find money for them in his initial budget proposal.
He began considering the new taxes in earnest after the state board of revenue estimates reported that state tax collections were continuing a year-long decline. That drop, which followed two years of huge state surpluses, had already caused Hughes to slash this year's budget and submit the tightest budget of two decades for next year.
"I've obviously been a long time coming to this conclusion," Hughes said tonight. "It has been my hope that the revenue picture would improve significantly. This has not happened."
The gasoline tax would be applied at the wholesale level, and would vary upward and downward with gasoline prices. The increase next year would be limited to two cents a gallon -- raising $40 million for the state's transportation fund -- and would be limited to a one-cent per gallon rise in succeeding years.
The truck tax, which has been developed by the House Ways and Means Committee, would apply an "equity surcharge" to taxes already paid by trucks, and is designed to compensate for damage that heavy trucks cause to roads and bridges. Hughes said he would support this new surcharge at a level that would raise $18 million for the state next year, but did not specify the truck fees, which under the House plan would vary by the weight of the vehicle and the number of axles.
With a total of $58 million added by the new taxes to the state's transportation fund, Hughes proposed to transfer a portion of the state's corporate income tax dedicated to the fund last year back to the general program fund. This transfer would free up $30 million in general funds.
Of this $30 million, Hughes said that he would use $25 million to give each of the state's 65,000 employes a $500 raise, regardless of position or salary scale. In addition, Hughes would use two other small revenue-raising measures, including one that would require banks to turn over abandoned bank accounts to the state, to pay for a $7 million education aid program and $4.9 million in assistance to the state's community colleges.
The pay raise issue posed a major dilemma for Hughes, who vacillated for more than a week between proposing a raise or putting the issue off until next year, according to aides.
As late as 9:30 this morning, he was planning to propose a supplemental budget at tonight's session that included no pay raise and no new revenue measures. Then, he scrapped that budget, which had been on his desk since last week, and spent the rest of the day with fiscal advisors and legislatures, until emerging at 6 p.m. to unveil his package.
The education aid program, which is targeted to benefit the state's neediest subdivisions would send about $4 million to Baltimore City, a grant that was a high priority of the city's legislators and House Speaker Cardin and that should improve the political prospects of the overall package.
Asked if he was concerned about the political costs of backing a tax increase, even one that is limited to gasoline, hughes answered: "Nobody likes to pay more for gasoline. But I'd hope the reaction would be: One, it is needed and two, we thank you for having avoided it up until this year."