Shifting the Burden
The Dundalk Eagle on January 27, 2012
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State budget would pass pension cost to counties
by Bill Gates
The state budget bill introduced last week by Gov. Martin O’Malley is a 180-page document accompanied by a six-inch thick manual.
So it’s understandable that the legislators from the 6th District have not yet digested every aspect of the $36 billion plan to balance a budget facing a $1 billion deficit.
“Obviously, I’m still poring through it,” said Del. John Olszewski Jr. (6th District), the chairman of the Baltimore County delegation. “At first glance, it needs considerable revision.”
Del. Joseph “Sonny” Minnick (6th District) is taking a ‘wait-and-see’ approach.
“I’m going to keep an open mind on it and not make a commitment one way or another,” Minnick said. “By the time it comes out of committee and all the compromises are negotiated, everyone could be satisfied with it.”
One part of the budget bill that has immediately caught attention — and criticism — is the proposal to shift $240 million in teacher pension costs from the state to local county governments.
That, and a proposal to start phasing out state income tax exemptions and deductions for individuals making more than $100,000 a year and couples making more than $150,000.
For instance, people reporting those incomes would see the $2,400 personal exemption removed.
Taken together, the two actions “will have a disproportionate negative impact on Baltimore County,” Olsezewski said.
“If this passes, local governments will see a bump [in tax income]. But Baltimore County, given the [teacher] retirement burden placed on the county, will receive $2.9 million less than it’s receiving this year.”
In contrast, the changes in the state income tax and the shifting of teacher pension benefits will still see Montgomery County come out $18 million ahead, Olszewski said.
(Montgomery County faces less of a burden from teacher pensions and has more $100,000-plus wage-earners than Baltimore County, so it will gain much more tax income without having to spend as much on teacher pensions.)
Minnick wondered how the shift in teacher pensions would effect the ‘maintenance of effort’ law passed by the state in 1984, which requires local governments to provide public schools with a consistent level of per-pupil funding over time; i.e., counties may not spend less on education than the previous year.
“The question is, will money for teachers’ pensions go toward maintenance of effort?” Minnick said. If it does, the counties will be okay.
“I don’t like reducing exemptions and deductions for people making over $100,000 a year. It’s unfair that a person goes out and pays for an education to get a good job at a good salary, then has to pay higher taxes.”
Sen. Norman R. Stone said the money for teacher’s pension “will have to come from someplace. The counties will have to pay one way or another.”
Overall, Stone feels there are still options to raising taxes or eliminating deductions and exemptions on personal income taxes.
“The budget committee really needs to go through the budget with a fine-toothed comb,” Stone said. “Some cuts will hurt, but it’s much better than increasing taxes and putting caps in deductions.”
One suggestion being floated around the General Assembly is for the state to start taxing Internet purchases.
Not taxing purchases made online “hurts our local businesses,” Stone said. People will make large purchases over the Internet rather than buy locally, to avoid paying sales taxes.
“I’m not one to advocate a tax. But this would just provide a level playing field for local businesses competing against on-line retailers.”
Minnick said he isn’t sure taxing online purchases is a good idea, but “might be the fairest way to bring in more money.”
The proposed increse in the gasoline tax is not part of the budget bill, but is included as part of the separate transportation package.
The proposed increase in the “flush tax” is also in a separate bill.
It has been suggested the flush tax have a ‘sunset’ provision, in that the increase will be eliminated when, for example, improvements to the Back River Wastewater Treatment Plant have been completed.
“Some people seem open to that,” Olszewski said.
And the further increase in the state sales tax suggested by Gov. O’Malley at the start of the session?
“Dead on arrival,” Minnick said. “But adding sales tax to services — haircuts, beauticians, auto repairs — is another issue floating around. I would oppose that strongly.”
