Tax Increases and Teacher Pensions

In an opinion piece in the Gazette.net, Barry Rascovar writes that members of the General Assembly may find themselves identifying ways to reverse reductions in the Governor’s budget, including considering tax increases and teacher pensions.

Given the vastness of Maryland’s red ink, the main focus this session will be on the state’s finances. Gov. Martin O’Malley has decided to show citizens what it means to close a 10-figure budget gap without raising taxes.

His spending blueprint will be frugal in the extreme.

Liberal Democrats, who dominate the legislature, will be startled by some of these reductions. The depth of their dismay could determine if there’s enough support to pass tax increases in order to soften the blow.

At that point, the governor will negotiate a compromise with legislators on which programs receive budgetary relief.

The governor also is letting lawmakers play the role of “bad guys” on pension reform. O’Malley says he’ll propose structural changes in computing teacher pensions. Those moves will lessen the state’s burden — but not at the expense of the counties.

Legislators aren’t likely to be so kind to county governments. Why should they? The counties are getting a free ride on teacher retirement costs and helped create the current mess by giving teachers frequent pay raises without thinking about how that inflates the state’s retirement costs.

If there is good budget news, it will come when economic projections are adjusted late in the legislative session. By then, business hiring should be reviving and consumer spending accelerating, as workers see larger paychecks thanks to a one-year reduction in withholding taxes.

Indeed, December’s gloomy fiscal outlook could brighten sufficiently by March so that the governor can reverse some budget cuts.

This could be an unusual legislative session in many respects. The first General Assembly session after an election normally accomplishes little, as new members use this time to get acclimated.

But the pressing budget deficit changes things. Strong action is needed, not only to balance the state’s books but to comply with the Spending Affordability Committee recommendation that lawmakers get serious about shrinking Maryland’s chronic structural budget hole.

But as committees confront the pain of the governor’s budget cuts, the tenor of debate may shift. Finding ways to reverse cutbacks that harm constituents could become the prime imperative — even at the risk of provoking public unease by raising taxes.

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