Gazette Columnist Criticizes State Taking of County Income Tax Funds

In his June 18 opinion column in the Gazette, columnist Blair Lee discusses the potential cessation of federal stimulus funding and the impact it will have on Maryland’s budget.  Mr. Lee also strongly attacks the State transfer of county monies from the Local Income Tax Reserve Fund.

Instead, the state is going to issue IOUs. Even though [Governor Martin] O’Malley and the legislature have used every accounting gimmick and raided every available reserve to limp through the election, there’s still one big slush fund left — the local income tax refund reserve. But there’s one tiny problem, it’s not the state’s money, it belongs to the counties.

In Maryland the income tax is split, by law, between the state and the counties. The state collects the tax and, periodically, sends the local share back to the counties. But until it’s sent back, the local share is parked in the local income tax refund reserve.

This reserve fund fluctuates between $700 million and $2 billion, an irresistible temptation. So O’Malley’s been dipping into it. Last year he “borrowed” $363 million, this year $350 million. And, now, if the Medicaid money from Congress doesn’t show up, he’s borrowing another $200 million.

That’s a $913 million raid that must be repaid. The state is issuing IOUs for 60 percent of the amount, which will add to next year’s state deficit and probably be paid by a massive 2011 post-election tax increase.

But here’s the greater scandal — O’Malley and the legislature are forcing the other 40 percent ($363 million) to be repaid by the counties. That’s right, the victims must pay for the robbery! …

Like a hot potato, each level of government is tossing the political pain to somebody else.

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