May 14 Special Session – Issues on the Table

As recently announced, Governor O’Malley will convene a special session beginning on May 14 to finalize Maryland’s FY 2013 budget plan.  This budget plan, which did not pass on the last day of session, would have shifted teacher pension costs to county governments and enacted a number of revenue measures to fund certain priorities in the budget.  Instead a “doomsday” budget, which would cut approximately $500 million from education, state agencies, and other programs,  passed the General Assembly. These issues are to be addressed during the special session.  As reported by the Washington Post:

Legislative aides said Friday that they expect the first special session to last about three days. Although a few details remain to be worked out, lawmakers have agreed to pick back up with a pair of revenue bills that House and Senate negotiators approved but did not come to votes in both chambers before the midnight deadline April 9.

Under that legislation, single filers making more than $100,000 and joint filers making more than $150,000 would pay higher income tax rates. Depending upon the bracket, the increases would be 0.25 percent or 0.5 percent. The legislation also would reduce or eliminate personal exemptions for higher-end earners.

Together, those changes would net the state nearly $250 million in the coming fiscal year, legislative analysts project.

Lawmakers are also expected to take up again a provision that would partially shift teacher pension costs from the state to counties.

Counties have long resisted the change, but it was included in legislation that leaders of both chambers intended to pass on the final night of the session.

Previous posts on Conduit Street summarize what occurred on the last day of the session, the effects of the “doomsday’ budget on county governments, and the compromise on the teacher pension shift.

Based on conference committee discussions at the end of the session, it appears that the teacher pension shift incorporated into legislation to be considered during a special session would largely follow the House’s more aggressive shift schedule in the first year, with a move of 50% of the employer’s normal cost in FY 2013.  The additional costs would then be phased-in over 3 years (65%, 85%, 100%). The following offsets, which were included in either the Budget Reconciliation and Financing Act of 2012 or the State and Local Revenue and Financing Act of 2012, would still be included as a part of the plan.

  • Forgives repayment of $367 million to income tax reserve fund
  • Changes to personal exemptions generating $31.5 million for local governments
  • Closes the recordation tax loophole on Indemnity Deeds of Trusts (IDOT)
  • Provides $27.6 million to certain counties through the Teachers’ Retirement Supplemental Grant
  • Restores cuts to local police aid and inflationary increases for health departments beginning in FY 2014

Tune in to Conduit Street to follow the special session.  Search “State Budget” for current and previous posts summarizing state budget actions and their effect on county governments.

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