Lawmakers compromise on `flush tax'

House, Senate negotiators agree to direct fee for septic system owners

Tough choices loom for Ehrlich

University tuition limits among thorny decisions

General Assembly

April 11, 2004|By Michael Dresser and Kimberly A. C. Wilson | Michael Dresser and Kimberly A. C. Wilson,SUN STAFF

State Senate and House negotiators made a breakthrough on Gov. Robert L. Ehrlich Jr.'s so-called "flush tax" yesterday, agreeing to impose a fee on septic system owners in addition to the surcharge on sewer bills the governor proposed.

Del. Maggie L. McIntosh, a Baltimore City Democrat and chairwoman of the House Environmental Matters Committee, said her panel ratified the agreement by a 19-3 vote last night. She called it a sign of strong bipartisan support for the compromise measure - intended to provide hundreds of millions of dollars to clean up the Chesapeake Bay.

The agreement came as the General Assembly, facing an adjournment deadline tomorrow night, raced to complete its business. It gave the governor some hard-won victories as well as some difficult choices on possible vetoes.

Creation of a new Department of Disabilities and expanded opportunities for small businesses were two of the items on Ehrlich's wish list to receive final approval during a long day of legislative activity.

The House and Senate reached agreements on some high-profile bills that could force the governor to make tough decisions.

One measure would hold down future tuition increases at state universities by temporarily raising the corporate income tax. A second would close a gaping tax loophole while forcing Ehrlich to choose whether to grant companies amnesty for money owed from years past. Yet another would require holders of large state contracts to pay their employees a "living wage" of at least $10.50 a hour.

In other Assembly action:

The state's $23.8 billion operating budget, delayed until the end of the 90-day session by a dispute over slot machines and taxes, moved a step closer to passage as House and Senate negotiators settled their differences on the spending plan.

Negotiators met over a revenue bill, with the House dropping its plan for a $670 million package of tax increases.

The Senate passed a bill to spur the development of "clean" renewable energy sources such as solar and wind power. The measure was opposed by business groups and many Republicans, but the measure received enough votes in each chamber to override a veto.

Ehrlich's most important victory yesterday may prove to be the agreement on the sewer and septics bill - even if the result is not entirely to his liking.

McIntosh said negotiators scrapped a House proposal to tax septic systems indirectly through the companies that pump them out.

Instead, it will impose a $30-a-year charge directly on owners of septic systems - equivalent to the $2.50 a month to be charged to sewer users - and will leave the method of collection to an advisory group that will work with local governments. The Senate had originally left it to the administration to work out those details.

McIntosh and Sen. Paula C. Hollinger, a Baltimore County Democrat who is chairwoman of the Senate's environment committee, also decided to exempt local governments from the fee.

A spokesman could not be reached last night to say whether Ehrlich would sign the much-altered version of his bill. However, the measure passed both chambers by overwhelming margins.

Another important issue House and Senate negotiators resolved yesterday concerned a loophole that allowed companies to escape corporate taxes by setting up Delaware holding companies to shelter income from their business in Maryland.

The House and Senate had differed over an amnesty period allowing discounts to companies that pay up their previously owed taxes and interest between July and November.

Under the deal, the House version of the bill would close the loophole without the amnesty provision. The Senate measure would just provide the amnesty, said Del. Anne Healey, vice chairwoman of the House Ways and Means Committee.

"We'll send the two bills to the administration," the Prince George's County Democrat said. "We are hoping they will veto that Senate bill. The Senate wanted to have the opportunity to vote on that amnesty, and reluctantly we agreed."

The Assembly's decision likely will put Comptroller William Donald Schaefer - a vocal opponent of amnesty - in the position of lobbying Ehrlich to veto that measure.

Meanwhile, the Senate gave preliminary approval to a plan - which House leaders said they would accept - that would cap university tuition increases at 5 percent yearly for the next three years. To pay for it they would temporarily raise corporate income tax rates from 7 percent to 7.7 percent for the same period.

The plan comes in response to Ehrlich's deep cuts to the budget of the state university system last year, which resulted in tuition increases of about 20 percent. Another 10 percent increase is scheduled for the fall semester.

The Senate plan differs slightly from a similar bill passed by the House, lowering the amount of the tax increase and leaving it in place for three years instead of four. House Speaker Michael E. Busch said his chamber will agree to the changes if the bill receives final Senate approval tomorrow.

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