Maryland state budget (2012-2013)

Note: This article was last updated in 2013. Click here for more recent information on state budgets and finances.

This page summarizes key events in the fiscal year 2013 budget process in Maryland.

Special session for gambling

Gov. Martin O'Malley called a special session to begin on August 9, 2012, to consider expanding gambling in the state in an effort to generate more revenue (as much as additional $100 million in the first year).

Special sessions cost taxpayers approximately $20,000 a day.

Special session for state budget

Gov. O'Malley called a special session to begin on May 14, 2012, to complete work on the state budget rather than accept the budget that resulted from the regular legislative session.

On May 16, 2012, the legislature agreed to raise the income tax rate on individuals making more than $100,000 and families making more than $150,000. The new top state-local tax bracket tied for fourth-highest in the nation, at 8.95 percent.

The additional $250 million in revenue generated by the tax increase meant that the state could avoid making cuts that were to take effect on July 1, 2012.

The budget also raised taxes on small cigars and smokeless tobacco products to bring their costs more into line with those of cigarettes. A companion bill also transferred teacher pension costs to counties.

The budget can be accessed here.

Doomsday budget

On April 9, 2012, the regular legislative session ended without the legislature approving an income tax measure, meaning that a doomsday budget would take effect when the fiscal year began on July 1, 2012. The doomsday budget included no tax increases and huge cuts to public and higher education.

It wasthe first time since 1992 that the legislature did not complete its work on the budget during the 90 days of the session.

Cuts in the 'doomsday budget' included:

• Eliminating the Geographic Cost of Education Index, which helps parts of the state where schooling costs more, saving $129 million;
• Public higher education would be cut by 10 percent to save $38.5 million;
• Community colleges would lose approximately $20 million in state funding.

Legislative proposed budget

As of April 6, 2012, the conference committee was at an impasse on the issue of raising income taxes, which needed to be determined to establish how much money the state would have to spend in the budget. The legislative session ended on April 9, 2012.

On March 23, 2012, the House of Delegates approved its version of the state budget. The House budget targeted the state’s top fifth of tax filers, or most of those earning above $100,000, unlike the Senate's version, which collected most of its new revenue from an across-the-board income tax hike.

The Senate approved a fiscal year 2013 budget package that consisted of four separate pieces of legislation, including a bill to increase income taxes and another to close loopholes in local school funding requirements. The bills together would balance the fiscal year 2013 budget and cut an ongoing $1.1 billion deficit in half.

The Senate approved an income tax increase to 5.75 percent on those making over $500,000 on March 14, 2012, which was expected to generate more than $440 million in the next year. The Senate did not approve amendments offered by Republican lawmakers to avoid an income tax increase by making larger budget cuts.

Both the Senate and House plans followed the governor's proposed budget plan to increase taxes instead of cutting spending, and funding education at record levels. Both plans maintained general fund spending at fiscal year 2012 levels, but permitted borrowing and overall spending to increase $1 billion, or three percent.

Governor's proposed budget

The governor presented his proposed budget on January 18, 2012, and it can be accessed here.

The budget spent a record $5 billion on public K-12 education direct aid, $108.5 million more than the state spent in fiscal year 2012, and $373 million for new construction and renovation for public schools, bringing the six-year total to $2 billion.

The plan included different ways to raise an additional $300 million in revenue by phasing in roughly 20 cents more per gallon in state fuel taxes to fund road and transit work. Additional increases included:

• Raising income taxes on Individuals who earn more than $100,000 and couples that make more than $150,000;
• Sales tax on some Internet purchases and downloads;,
• Higher fees on most Maryland residents’ water and sewer bills to fund environmental cleanup efforts for the Chesapeake Bay, known as a "flush tax;" and
• Increasing fees on electric bills to pay for an offshore wind farm.

The governor also recommended a significant shift of teacher pension costs from the state, which at the time paid the entire bill, to the counties, resulting in nearly $240 million in new expenses to the counties. The governor included money to help them make the transition, including about $111 million in new revenue from reducing tax exemptions for people who earn more than $100,000. County officials voiced their disapproval of the move at the Senate Budget and Taxation hearing on February 29, 2012.

Background

The state faced a $1 billion shortfall in fiscal year 2013 due to slower than expected revenue growth and Gov. Martin O'Malley said that new taxes might be necessary to close the gap. The governor said he supported a five-cent increase in the state's 23.5-cent gasoline tax every year for the next three years. Then, in January 2012, on the first day of the 2012 session of the General Assembly, he suggested increasing the tax from six percent to seven percent as an alternative to a 15-cent increase in the gas tax. Democratic leaders said they were likely to raise taxes to help pay for roads, schools and other infrastructure projects.

The chief fiscal analyst for the Maryland General Assembly, Warren Deschenaux, warned lawmakers that they needed to prepare for the “big train that is coming” from federal budget cuts by reducing the state’s running budget deficit in the then-current legislative session. He explained that the state had a structural deficit of about $1.1 billion and the governor's proposed budget lowered that deficit to $400 million.