ANNAPOLIS — Legislators who want to continue state income tax reductions will have to find other programs to trim since the governor’s 2003 $22 billion budget, released Tuesday, relies on rescinding a 2 percent tax cut to balance the budget.
Although the budget grew by 2.7 percent from 2002, it provided no new program funding.
Required school spending was maintained and previous school initiatives were protected while new money was earmarked only for an expanded Medicaid program.
“We have always maintained that education is our top priority and we are not wavering from this,” Gov. Parris N. Glendening said.
The General Assembly would have to pass legislation to delay the tax cut so Glendening could use the $175 million in expected revenue for other purposes. The original 1997 tax cut measure provided for a total 10 percent reduction spread over five years.
There is little support for such a measure, said Senate President Thomas V. Mike Miller, D-Calvert.
Senate Budget and Taxation Committee Chairwoman Barbara Hoffman, D- Baltimore, agreed, saying the suspension of the cuts was politically undesirable.
Add to that the fact that Glendening is at the nadir of his power – he is in the final year of his term and barred from running again – and the likelihood of such a bill decreases.
Legislators who promised to complete the tax reduction this year will have to face constituents at the polls this fall.
Taking away the tax cut is “virtually a tax increase,” said Senate Minority Leader Lowell Stoltzfus, R-Somerset. A recession is not the time to be increasing taxes, he said.
Stoltzfus blamed the governor’s spending in part for budget problems.
Transit and environment programs could be cut to allow for the tax cut, he said.
However, according to the governor’s plan, legislators couldn’t continue the tax cuts or create new programs without cutting other essential state programs.
“It is going to be hard for legislators to find money” for the tax cut, said Mike Morrill, Glendening communications director.
Late last year, the state was predicted to have a $521 million revenue shortfall for 2003, largely blamed on the slumping economy and increased security costs following the Sept. 11 terrorist attacks. Glendening announced $205 million in cost-saving measures over two years, including a hiring freeze, to bring the budget in line.
Funding sources, such as removing tobacco settlement funds from escrow in the state’s dispute with lawyer Peter Angelos, would not cover recurring costs, Morrill said.
The proposed $229 million expansion in education funds covers increased student enrollment and a continuation of existing programs, including higher teacher salaries and lower classroom size efforts.
The budget also adds $367 million in Medicaid spending to maintain existing Medicaid recipients, eliminate the state debt for the program, and allow for new applicants in this time of recession.
“We should remember that we are a civil society,” said Glendening, referring to the Medicaid funding. Maryland should be ready to help its citizens through difficult times, he said.
Other state programs were maintained at current funding levels.
Budget saving measures announced last year, as well as the tight budget released Tuesday, keeps the state in the black through 2003, said Morrill. However, if the economy continues to sour, or another catastrophic event occurs, the state could be in serious budget difficulty in 2004 and beyond, he said.
Glendening was quick to point out that Maryland’s budget this year fared much better than many other states, which faced large program cuts in order to balance books.
“Maryland is facing the budget slowdown from a position of strength,” said Glendening.
The state’s continued balanced budget and good economy have allowed it to put away 5 percent of revenues per year in a rainy day fund. Those measures help it keep a triple-A bond rating, which allows it to get lower bond interest rates.
– 30 – CNS-1-15-02