Maryland Gov. Larry Hogan (R) on Wednesday made his first attempt to deliver some of the tax relief he promised during his upstart political campaign — but immediately met stiff resistance from the Democratic leaders whose cooperation he needs to move forward.
In his maiden State of the State address, Hogan called for halting automatic increases in the state’s gas tax, creating a tax exemption for small businesses, providing tax relief for military, police and fire retirees, and repealing a stormwater mitigation fee he has long derided as the “rain tax.”
The new governor also proposed expanding charter schools and creating a tax incentive that would help parochial schools, and he pledged to take aggressive steps to combat escalating heroin deaths.
“It is time for a new direction in Maryland,” Hogan told a joint session of the General Assembly in a speech that was televised statewide. “Our administration will chart a new course, one guided by simple, common-sense principles. Our focus will be on jobs, struggling Maryland families and restoring our economy.”
The speech was frequently interrupted by applause from Republican lawmakers but panned by leaders of the majority party, who said it sounded more like campaign rhetoric than a serious attempt at outlining an agenda for a legislature still dominated by Democrats.
Senate President Thomas V. Mike Miller Jr. (D-Calvert) said lawmakers are unlikely to approve tax cuts with the state facing a $700 million budget shortfall, which Hogan wants to bridge by curbing planned increases in education spending, revoking a recent pay raise for state employees and cutting agency spending by 2 percent. Miller criticized Hogan for trying to steer more money to charter and parochial schools at the same time he wants to slow the growth in funding for traditional public schools.
“He’s ginning up the hopes of hundreds of thousand of people, knowing he’s not going to be able to do it,” Miller said. “It’s not reality. His speech is a fiction. This is the real world. People want to hear the truth.”
House Speaker Michael E. Busch (D-Anne Arundel) said Hogan’s proposal to cancel automatic increases in the gas tax would probably be the “death knell” for planned light-rail lines in the Washington suburbs and Baltimore. He predicted strong opposition from lawmakers from those heavily Democratic areas, who supported the automatic increases as part of a sweeping transportation bill two years ago.
Hogan’s 29-minute speech — and the angry reaction it drew — seemed a serious wound to prospects for bipartisan cooperation, which had become all the buzz in Annapolis in the aftermath of Hogan’s upset win against Lt. Gov. Anthony G. Brown (D) in November.
Several Democrats said they were taken aback by Hogan’s pessimistic description of the state. He declared that “high taxes, over-regulation and an anti-business attitude are clearly the cause of our economic problems” and said “our economy is floundering, and too many Marylanders have been struggling, just to get by.”
By contrast, speaking for Democrats in a televised response to Hogan, House Majority Leader Anne R. Kaiser (Montgomery) portrayed Maryland as “a growing and thriving state” that had benefited from spending on education and other Democratic priorities in recent years.
“We thought he was going to extend a hand of friendship,” Del. C. William Frick (D-Montgomery) said of Hogan. “Instead, he extended a hand and slapped us across the face.”
Hogan’s speech drew plaudits from fellow Republicans, who have been energized by his arrival in Annapolis following eight years of Democratic dominance under Gov. Martin O’Malley.
Senate Minority Leader J.B. Jennings (R-Baltimore County) said Hogan’s agenda was “exactly what the people of Maryland have been demanding for the last eight years.” He acknowledged that it would be a “tough battle” to get some of Hogan’s bills through the legislature, but said: “For the sake of our constituents, it’s a battle we’ve got to win.”
Fissures between Hogan and Democrats had already started to emerge over a budget proposal he submitted Jan. 23, two days after being sworn in. Hogan has stressed that his proposal includes record funding for K-12 education, even though it would provide counties with $144 million less than expected under existing education formulas.
“Budget choices are never easy, and you may have different ideas and solutions,” Hogan said Wednesday. He said he would welcome hearing alternatives “as long as those solutions don’t include increasing taxes, spending more than we take in or going further into debt.”
Aides said the tax relief Hogan is proposing would cost the state treasury about $27 million in the coming fiscal year and could be covered by surplus funds that would be available if his budget is approved. By 2020, aides said, the cost of the tax breaks would grow to about $69 million. Hogan did not release detailed plans, however, and some Democrats suggested the cost could be higher.
Hogan said he wants to repeal part of a 2013 transportation bill championed by O’Malley that is generating funds for road and transit projects and is considered crucial for construction of the planned Purple Line in the Washington suburbs and the Red Line in Baltimore.
That bill imposed a new sales tax on gas and established automatic annual increases in the existing gas tax based on inflation — which Hogan wants to repeal. “Marylanders deserve the transparency to know how their elected leaders vote every time the state takes a bigger share of their hard-earned dollars,” he said.
As promised during his campaign, Hogan is also seeking to repeal a 2012 requirement that Maryland’s 10 most populous jurisdictions collect a stormwater mitigation fee to help fund programs to curb pollution in the Chesapeake Bay. Hogan aides said counties would still be allowed to impose a fee if they want, or they could address a federal cleanup mandate in other ways. “A state law that has forced certain counties to raise taxes on their citizens, against their will, and that usurps their authority, is just plain wrong,” Hogan said.
He is proposing a $10,000 personal property tax exemption for small businesses. Hogan aides said the state would reimburse counties that collect the tax for the lost revenue.
Hogan wants to eliminate income tax on military retirement income, a plan that would be phased in over four years. Aides said the measure would affect more than 50,000 veterans. Separate legislation would exempt retirement income of law enforcement, fire and emergency medical personnel.
Calling education “our top priority,” Hogan said his administration would submit legislation later this month to make it easier for more public charter schools to operate in the state. The state’s charter program was launched in 2003 at the urging of Maryland’s last Republican governor, Robert L. Ehrlich Jr., and now includes 47 schools, mostly in Baltimore and Prince George’s County.
Hogan also voiced support for legislation that would provide tax credits to those who make donations to private or parochial schools. Similar measures have passed the Senate in the past but stalled in House of Delegates.
The governor told the legislature that he wants to replenish a fund that allows for public financing of campaigns by reinstating a voluntary check-off box on tax forms. Hogan used the system in last year’s election and said he was proof that it can work. He also said the state must tackle redistricting reform.
“We have some of the most gerrymandered districts in this country — this is not a distinction that we should be proud of,” Hogan said. “Gerrymandering is a form of political gamesmanship that stifles real political debate and deprives citizens of meaningful choices.”
Hogan said he wants to consult with farmers and Eastern Shore businesses, as well as other stakeholders, to “find fair and balanced solutions for limiting phosphorous” in the bay. He recently rejected an O’Malley effort to limit the amount of chicken manure farmers can spread on their fields, which he called too onerous.
Instead, Hogan promised a “comprehensive approach” on protecting the Bay that would include addressing the issue of sediment spilling over the Conowingo Dam.