Finding funds for education is next hurdle

Md. cigarette tax increase will cover only two years of school plan spending

`Not all of this is paid for'

Legalizing slot machines, raising state sales tax among ideas mentioned

April 08, 2002|By Howard Libit | Howard Libit,SUN STAFF

If Maryland lawmakers thought approving a new school funding formula was difficult, just wait until they have to find the $1.3 billion to pay for it.

Legalizing slot machines, raising the sales tax and taxing more services are being mentioned as potential sources of dollars for the Thornton Commission plan, which was given final approval during the weekend by the General Assembly.

The legislation calls for large increases in state aid for schools over the next six years - but includes money to pay only for the first two.

"We will take a hard look at the money, a hard look at the revenue structure of this state," said House Speaker Casper R. Taylor Jr., an Allegany County Democrat.

"If, two years from now, the legislature determines that it can't go forward, then the Thornton funding will be frozen at that level until the legislature determines it can go forward," Taylor said.

The question of how to pay for the landmark legislation's increased school financing is quickly shaping up to be a crucial issue for this fall's elections, including the race for governor.

As part of the plan to change the school funding formula and direct more aid to the neediest districts, lawmakers raised the state's cigarette tax by 34 cents per pack.

The new levy of $1 per pack will make Maryland's cigarette tax one of the highest in the nation, but the expected $70 million in extra annual revenues would not fully cover the first two years of the Thornton recommendations.

By the 2007-2008 academic year, when the plan is to be fully in place, the $2.9 billion now spent by the state on public schools will increase to $5.1 billion. About $1.3 billion of that increase would come from the Thornton legislation.

Many legislators confidently predict that much of the money for the plan can be found by re-evaluating Maryland's spending priorities.

"If it means a greater percentage of the state budget would go to education and less would go to other things, then that's OK," said Del. Mark K. Shriver, a Montgomery County Democrat who helped overcome resistance of House leaders to the plan's large price tag.

However, no one suggests that all of the money can be found by cutting other areas.

"Not all of this is paid for. We can have that discussion a year or two from now," said Sen. Paul G. Pinsky, a Prince George's Democrat. "That will be a contentious debate."

The state budget for next year is $21.6 billion. About $10 billion is in the general fund operating budget, the portion driven by tax revenues, which covers education aid and most state services.

For the fiscal year beginning July 1, 2003, lawmakers project a $775 million gap between revenues and spending. The Thornton plan will add at least $75 million to that gap.

Educators across Maryland are counting on the money as a commitment for the future.

"Schools systems are now going to go forward on the basis that this plan will be funded and the money will be found by the General Assembly," said R. Allan Gorsuch, executive director of the Eastern Shore of Maryland Education Consortium. "There will have to be new revenues found.

"History has shown us that the best way politically to support a tax increase of any kind is to do so in the name of supporting education. That may be what the General Assembly has to do," Gorsuch said.

During debates on the House and Senate floors over the past few days, Republican lawmakers have warned that passage of the education plan all but guarantees the need for a tax increase.

"It is plain and simply a tax increase," said Del. Alfred W. Redmer Jr., a Baltimore County Republican and the House Minority leader.

When the Assembly has approved past changes to education funding formulas, it always managed to find the money, said Sen. Barbara A. Hoffman, a Baltimore Democrat and chairwoman of the Senate Budget and Taxation Committee. She said she expects the same for Thornton.

"I would be less than honest to stand here and say this does not require a tax increase, nor could I tell you it absolutely does," Hoffman said. "We may have to raise taxes somewhat, sometime. But not every year. That's not something any of us would be willing to do."

A one percentage-point increase to Maryland's 5 percent sales tax would add $550 million to $600 million in revenue annually, according to legislative analysts.

Extending the sales tax to services now exempt - such as work by lawyers and doctors - is an alternative that could raise hundreds of millions of dollars. Exactly how much would depend on how many services would be subject to the tax, though recent estimates have put the figure at as much as $450 million.

Taking away the 10 percent personal income tax cut given to Marylanders over the past five years could raise $600 million or more, according to lawmakers.

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