House budget plan: less revenue, bigger problem next year

The House of Delegates’ money committees have completed their work on a budget package for the state. It will be debated in the full House of Delegates later this week.

Compared with the state Senate’s budget plan, the House package:

• Shifts teacher retirement costs more quickly than the Senate plan. The House plan phases in the shift over three years, compared with four in the Senate. Plus the House plan is front-loaded – shifting 50 percent of the cost in the first year. The Senate plan provides a more reasonable, sustainable transition for local governments.
• Raises less revenue. The House plan does not increase taxes on households with incomes under $100,000, however it raises only half the revenue as the Senate plan.
• Cuts slightly more from budgets.
• Transfers slightly more from dedicated fund balances – especially the University System of Maryland and Morgan State University.
• Leaves a smaller year-end balance.

One advantage of the House plan is that it has broader increases in taxes on tobacco products. The Senate plan included a large tax increase on cigars, but only a modest hike on chewing tobacco. The House plan significantly increases both. The revenue differences are minor, but the Senate’s failure to provide a significant increase on smokeless tobacco misses a big opportunity to reduce teen tobacco use. See our earlier blog.

Overall, the Senate plan is a better choice for the state. The House revenues are somewhat more progressive. However, the House plan will result in more cuts this year, and it will leave the state with a bigger problem next year.