Tobacco and food are tax targets State Senate committee studies a budget package.

March 14, 1991|By William Thompson | William Thompson,Evening Sun Staff

A Maryland Senate committee looking for ways to balance the state's 1992 budget opted for new taxes on tobacco and food, deeper cuts in spending and a pay cut for top wage earners in the Schaefer administration.

The unorthodox package of money-saving and -raising proposals which includes borrowing up to $20 million from the state's automobile insurance fund to help Baltimore -- was approved by the Senate Budget and Taxation Committee yesterday and is expected to come before the full Senate next week.

After rejecting a House plan to help balance the governor's proposed $11.6 billion budget by reducing the state's capital gains tax exemption, the committee instead approved tax increases on cigarettes that were higher than those approved by the House.

The Senate plan would add 14 cents in taxes to a pack of cigarettes by adding a nickel to the 13-cent excise tax and also subjecting cigarettes to the state's 5 percent sales tax. Currently they are exempt from the sales tax.

The Senate plan would raise an estimated $59 million from cigarette taxes, $22 million more than the House plan. The House plan would extend the sales tax to include cigarettes and other tobacco products, but would not increase the excise tax.

The Senate committee also approved a proposal by Sen. John A. Cade, R-Anne Arundel, to borrow up to $60 million from the Maryland Automobile Insurance Fund to help balance the budget and send $20 million to the city to help with its court system and sheriff's department.

The Cade proposal drew criticism from members of the committee who represent rural parts of the state, but it passed 9-4 after city lawmakers said the financial aid was crucial.

"We are like a patient on life support," said Sen. Barbara A. Hoffman, D-City. "We can't go a year without oxygen."

Under the Cade plan, MAIF would be repaid with interest over four years. MAIF, which currently has an $85 million surplus, offers insurance coverage for drivers unable to get policies through private companies.

The committee also recommended repealing a sales tax exemption currently covering food sold in school and hospital cafeterias. If the exemption is removed, legislative fiscal experts said, the state could raise about $14 million.

The Senate budget plan hinges also on deeper spending cuts for higher education and the state Department of Economic and Employment Development than does the House's budget proposal.

And, in what one lawmaker called a "Western Union amendment" designed to send a message to the Schaefer administration, the Senate panel recommended 1 percent pay cuts for about 450 upper-level state workers during the next fiscal year. The savings would be about $300,000.

"Everyone at the executive level bleeds a little," said Cade, who proposed the idea. "Not much, just a minor wound and maybe next year they'll remember."

Top lawmakers were angry with Schaefer this week because his administration announced that an increased welfare caseload would require legislators to lower benefits in two key welfare programs. In a letter to welfare recipients, Maryland Secretary of Human Resources Carolyn W. Colvin blamed about $9 million in cuts on the General Assembly's refusal to raise taxes proposed by the governor.

If the full legislature approves action taken by the Senate committee and the governor agrees with the plan, funds would be raised to prevent the welfare cuts.

Schaefer was preparing to leave on a three-day trade mission to Kuwait last night and was unavailable to comment on the Senate action. Lawmakers expressed irritation yesterday that the governor would leave the state at such a crucial point in budget deliberations.

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