House and Senate Conferees Complete Work on the FY 2012 Budget

House and Senate budget conferees have completed their work to resolve the differences in each chamber’s respective FY 2012 budget plan (HB 70/ HB 72).  It is anticipated that both chambers will pass the revised budget by Friday.

As reported by the Washington Post, both sides have resolved differences over State employee and teacher pensions and retiree health care.

Under that compromise, state retirees will see their maximum out-of-pocket costs for prescription drugs more than double, as well as other health-care costs rise, but not as much as they would have under a plan proposed by Gov. Martin O’Malley (D) and largely endorsed by the state Senate. In 2020, the costs will more than double again when retirees are shifted to federal Medicare coverage. The course-correction on the state’s underfunded pension, meanwhile, will result in state workers paying a combined $200 million more annually through higher payroll deductions, and the state kicking in an extra $300 million. If the state realizes its projected annual rate of return of 7.75 percent, Maryland’s pension system will return to a federally recommended 80 percent solvency rate in 12 years, or 2023. Next year, Maryland’s state retirement system is projected to be funded at 59 percent.

A few items in the budget are contingent upon the 3% increase in the alcohol sales tax, which is in a separate bill, SB 994.  As reported by the Gazette.Net, the House will consider whether to support with the Senate’s plan to phase in the alcohol sales tax in over three years or to implement it all at once.

If delegates go along with the Senate alcohol tax plan, it would provide $21 million for additional education aid for Prince George’s County and Baltimore city, $5 million to reduce the developmental disabilities waiting list and about $3 million would go to the general fund. The Senate dedicated more money to developmental disabilities with the remainder going to the general fund. However if the House opts to raise the levy all at once, it could bring roughly $60 million more into the general fund.

Below is a summary of the major budgetary decisions with respect to local governments:

  • Rejected a transfer of 50 percent of teacher retirement expenses to local employers, but did approve a substantial (approximately $17m annual) cost shift for the administration of the system to schools and community colleges
  • Provided a one-time payment to counties (totaling $5 million) and municipalities ($8.2 million) for local roadways (county and municipality allocations)
  • Restored $58.5 million in education funding by increasing the per pupil foundation amount for each county’s distribution
  • Shifted 90 percent of costs associated with the assessment function (approximately a $35 million impact), but reduced the shift to 50 percent after two years
  • Rejected language that would authorize the Governor to flat fund programs on the FY 2012 level through FY 2016
  • Rejected significant proposed changes to the funding of Program Open Space and other programs currently supported by transfer taxes
  • Rejected proposal to permanently repeal the statutory requirement for “payment in lieu of taxes” for State forest and reserves, but discontinued the payments for two years
  • Adopted language to clarify that the calculation of withheld funds for a county missing MOE is based on the total increase in foundation funds regardless of the source of the funding
  • Adopted language to clarify the nature of the MOE funding mandate, specifying that MOE is a condition of receiving annual school funding increases
  • Adopted language to require local school systems to pay a share of costs of children in State custody who are placed in a nonpublic placement
  • Adopted language to authorize all county boards of health to establish fees for food service facilities based on actual cost of licensing and conducting related food safety inspections

A complete summary of all budget actions affecting local governments will be available soon.

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