Up the Street
of the Week: Budget, Pension Shift, and Taxes
Governor O’Malley unveiled his $38.9
billion state operating budget for fiscal year 2013 on Wednesday. The
budget is balanced through a series of revenue enhancements, budget cuts,
one-time transfers, and a controversial proposal to shift a portion of teacher
pension costs to county governments. The governor’s webpage includes an overview of the
governor’s budget actions.
Thornton Funding and State
Aid for Education:
The O’Malley budget fully funds
Thornton and the Geographic Cost of Education Index for FY13, which includes
$108.5 million more in direct state aid for education than in the FY12
budget. Here is the county-by-county
accounting of the proposed education aid
The O’Malley budget generates $311 million in new revenue
for the state as follows:
through income tax adjustments: cap deduction and phase out exemptions for the
20 percent of Marylanders who earn more than $100,000 annually. The
Gazette provides additional details on the income tax changes.
through the application of the sales tax on internet purchases.
revenue through closing some tax loopholes and $59m through court settlements
with pharmaceutical and insurance companies.
shifted from the state to county governments to cover a 50/50 split of total
retirement costs (pension + Social Security) in FY13.
receive new revenue (without requiring any local action) to mostly offset the
full cost of the FY13 shift. There is limited exposure in some counties,
but on the whole, all 24 jurisdictions receive $244.5m through five funding
the same income tax adjustments to local rates = $111m
receive financial benefit of recordation tax collection = $40m
a requirement for counties to repay their income tax reserve = $37m
a requirement for locals to reimburse for federally funded positions = $37m
disparity grant aid = $19.5m
revenue offsets are included in the BRFA and would continue in years moving
forward except for the funding realized in the disparity grants.
Additionally, while pension costs are expected to increase in FY14 and over the
next several years, the revenue offsets will decrease in the following year and
remain insufficient to completely cover the pension bill.
shift is a change in who pays the pension bill. It does not further
reduce benefit levels.
here for the county-by-county
allocation of shifted costs and revenue offsets
Proposed General Fund Spending Cuts:
55 percent of the budget deficit is closed by making general fund spending cuts
totaling $371 million. Those cuts are added to the general fund savings
realized in shifting $239 million in teacher pensions for a total reduction of
state spending in FY13 of $610 million.
response to the governor’s budget and pension shift proposal, MSEA President Clara Floyd
issued our statement of concern and opposition to the shift, and
called on the General Assembly to focus on protecting school funding by fixing
the broken maintenance of effort law.
News and Notes
Budget of $3.6 billion
Governor O’Malley also introduced a $3.6 billion capital budget that focuses on
new infrastructure projects, including a proposed $373 million for school
construction. The governor’s office estimates the capital budget will
help to create 52,000 jobs.
Transportation Package Expected Soon
O’Malley budget did not include any elements of a transportation package or
gasoline tax increase. The governor suggested to reporters that such a
package would be announced in the next two weeks. It is widely believed
that his plan will include an increase in the gas tax to support new road and
transit infrastructure projects, and perhaps enough money to reimburse highway
user fees that will benefit local governments.
The week ahead
Next week promises to be a busy one with likely highlights
budget briefings from the Department of Legislative Services to a joint
committee of Delegates and Senators from House Appropriations and Senate
Budget and Tax will be at 3pm on Monday, January 23.
day to guarantee a bill is drafted and can be dropped on time is Tuesday,
week: issue briefings, bill hearings, and ongoing committee meetings.
What can you do?
This session, we are asking MSEA members, Maryland
Legislators, and all supporters of public education to do your part for great
public schools! We have a lot at stake this year and will rely on your
continuous support and activism to encourage our elected leaders to fix
maintenance of effort and protect the critical investments in our schools and
our children’s futures.
part as an education advocate today by making sure Governor O’Malley and your
delegates and senators hear from you and your colleagues and friends. The
this week provides a way to send an email to your elected officials about the
budget, our concerns about the shift and the need to adopt a comprehensive fix
to the broken maintenance of effort law. Click here to
review a sample message, customize it to help communicate your story, and make
sure they hear from you. After you have done that, share the link with