Maryland Democrats fight over tax increases extends legislative session

August 31, 2024

Maryland’s $63 billion spending plan for next year is tangled in intraparty gridlock in Annapolis, as Democrats in the House and Senate have not meaningfully budged in the second day of a standoff over whether to pass $1.2 billion in tax and fee increases.

Proponents of the tax package say it’s needed to reduce projected deficits not seen since the Great Recession, but House and Senate budget negotiators are about $1 billion apart on how much money they think should be raised.

With time running out ahead of a key deadline next week, Gov. Wes Moore (D) implored lawmakers to reach a compromise. On Monday evening, he issued a routine executive order giving state lawmakers an extra 10 days to resolve their differences, saying the state needed certainty in the wake of the Frances Scott Key Bridge collapse.

About 24 hours later, the negotiators from both chambers hadn’t reached an agreement but did schedule a Wednesday afternoon discussion.

“We want them to sort of make a good-faith response,” House Appropriations Chair Ben Barnes (D-Prince George’s) told reporters, showing an email that suggested Senate negotiators declined to meet Tuesday.

Senate President Bill Ferguson (D-Baltimore City) told reporters that his chamber was ready to pass a budget as soon as the House agreed with the smaller revenue package they backed.

“I think that we will resolve it in the next few days,” Ferguson said. “The Senate’s position is now is not the right time to ask for an additional three or four hundred million of taxes and fees for transportation when things are still uncertain.”

The state faced long-term budget problems even before the collapse of the Key Bridge last week strangled access to the Port of Baltimore and wrought economic uncertainty.

The crisis has not hastened a compromise on how to fix it, and a lack of progress during a negotiation session Monday between members of the state House and Senate has recast what historically has been a perfunctory move to grant extra time into a signal that an impasse could be on the horizon.

“It’s pretty standard” to extend the session, even though it’s rarely needed, Barnes said Monday. “This year, it should be taken a little more seriously given that we haven’t come together yet.”

Democrats, who hold supermajorities in both chambers of the General Assembly and set state policy, have disagreed for months over whether to raise taxes now or next year. The chambers are divided, with the House’s leaders saying there’s no time to wait and the Senate’s leaders favoring a public-relations campaign to drum up public support first.

With the Senate willing to support a package that raises $250 million annually for some transportation needs and the House focused on raising money for education, too, the sides haven’t agreed on which problem needs to be addressed first.

The clock is ticking. A prized education program known as the Blueprint for Maryland’s Future that Democrats passed without a permanent funding stream has been the main driver behind budget deficits expected to reach $4 billion annually within four years. When fully implemented, it would provide money for preschool, increase teacher pay and funnel hundreds of millions in resources to schools in the state’s poorest neighborhoods, among many other initiatives to bolster the entire public education system.

“If we’re not going to follow through on it, if we’re not going to fund it, if we’re not going to make sure that our 3- and 4-year-olds get off on the best start that we can to a world-class education, then quite frankly, I’m not sure why we put that measure forward and why we voted for it,” House Ways and Means Chair Vanessa E. Atterbeary (D-Howard) said.

“We can’t just keep kicking the can down the road, and down the road, and waiting for the success for the next generation of kids,” she said. “We have to start now.”

On transportation, Moore cut $3.3 billion worth of planned projects last year as gas tax revenue projections cratered and inflation pushed construction costs higher.

The state does not have a plan to pay for other large infrastructure projects on the horizon, including replacing the aging American Legion Bridge over the Potomac River or building the Red Line transit project in Baltimore.

Those looming expenses don’t account for how Maryland will rebuild the collapsed Baltimore bridge and reestablish shipping at the port. Despite President Biden’s promise to “move heaven and earth” and pledge for the federal government to replace the bridge, Congress has to agree to pay for the full cost.

“To me, it seems like the wrong time to be going after that extra level of taxes,” Senate Budget Chair Guy Guzzone (D-Howard) said during the first budget negotiation Monday afternoon.

“Look, I’m thrilled that the president of the United States has indicated he’s going to pay for this bridge. But you know, that money still has to come through Congress,” said Guzzone, who leads the Senate negotiators. “There’s so much uncertainty ahead of us. We need to be carefully looking at all these things before we go to the residents of Maryland.”

Barnes, who leads the House budget negotiators, replied, “I think the uncertainty is all the more reason to do something now, to solve these problems now.”

Moore has not said he would veto a tax increase, but he said he has “a very high bar” to support one and wants to prioritize stimulating the state’s economy over asking residents recovering from record-high inflation to pay more.

“We have just seen an unprecedented tragedy in our state,” the governor said in a statement. “Tonight’s procedural step allows the General Assembly to continue working towards a final budget that makes Maryland safer, more economically competitive, more affordable and the state that serves while we navigate the impacts of the collapse of the Francis Scott Key Bridge.”

He did not offer guidance on how to resolve the unusual gridlock in a legislature that is typically collegial in public.

With bridge wreckage blocking the primary shipping channel to the Port of Baltimore, state officials project economic ripple effects. The port supports 15,000 jobs directly and another 140,000 indirectly, according to an estimate earlier this year that touted a record $80 billion worth of foreign cargo passing through port in 2023.

“It remains vital that the Senate and the House find compromise as soon as possible, pass the budget, and provide certainty at this challenging and uncertain time,” Moore said.

The Maryland Constitution requires the General Assembly to pass a balanced budget before it adjourns.

House Democrats have pushed an amendment to the constitution that would legalize and tax online poker, as well as a change in how corporate taxes are calculated, two measures projected to bring in $525 million a year to pay for the school program.

Senate Democrats are willing to support more modest measures that would impose a new fee on electric vehicles, among other measures designed to raise money only for transportation. The House supports those in concept but wants to go further.

Other options on the table have included a 75-cent fee for ride-hailing trips and sales taxes on used-car trade-ins.

The Maryland General Assembly was set to adjourn in a week, by midnight April 8. Moore’s order extends the session for 10 days, but only the budget may be considered after next Monday.

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