CAMBRIDGE - Gov. Robert L. Ehrlich Jr. said yesterday he will seek to shave more than a penny from the state's property tax rate but will be careful in the coming legislative session about spending the current budget surplus in light of projected deficits in future years.
Ehrlich told business leaders at the Maryland Chamber of Commerce's annual convention here that the surplus - which he estimated at "almost $2 billion" - was generated as much by the national economy as by his administration's management.
In an interview after his speech, the governor said he believes the state can afford a substantial property tax reduction, but not a host of new government programs.
"That is the No. 1 challenge we have as an administration today," Ehrlich said. "There are a lot of groups, a lot of constituencies out there with wish lists, and they are often very expensive lists, and often they're good ideas. But part of leadership is prioritizing."
As the state's fiscal forecast improved last spring, Ehrlich proposed a 1-cent reduction in the property tax at the Board of Public Works, only to be rebuffed by Comptroller William Donald Schaefer and Treasurer Nancy K. Kopp. This year, he said he will try to make a cut in cooperation with the legislature through the budget process.
The state property tax - which is much smaller than county or city property taxes - is dedicated to paying for the state's bond debt. For years, officials kept the rate artificially low by supplementing property tax proceeds with general revenues such as sales and income taxes. But in Ehrlich's first year in office, a budget crunch made that no longer feasible.
In 2003, Ehrlich and the Board of Public Works raised the state property tax rate from 8.4 cents to 13.2 cents per $100 in assessed property value. For a home assessed at $200,000, tax bills rose $96 yearly. Each 1-cent reducation in the tax rate would save the owner of that home $20 a year.
Ehrlich said yesterday that property tax receipts alone are strong enough to support a penny cut, but that he will propose a larger reduction, which would require a general fund contribution and, in turn, eat into the current surplus.
In general, however, he said he would look to use the surplus for one-time expenses. State fiscal analysts are uncertain of whether higher-than-expected tax receipts will continue permanently, so they have predicted that expenses will again outpace revenues within the next few years.
Ehrlich told the chamber that Maryland's economy is in great shape and appears poised for additional growth in part because he has blocked or vetoed a host of what he called "anti-business" bills from the legislature. He said support from groups such as the chamber will be critical for his future success.
Chamber Chairman Terry F. Neimeyer said the group will be working to make its presence known in Annapolis this year, starting by working to sustain the governor's veto of a bill that would make large corporations - effectively just Wal-Mart - spend at least 8 percent of their payroll on workers' health insurance.
Ehrlich said later that he will likely introduce a slot machine gambling bill for the fourth year in a row in the coming session.