The state Senate added millions to Gov. Martin O'Malley's budget proposal Tuesday evening, passing a $14.6 billion spending plan that relies on a new tax on alcohol to restore funding to schools in Baltimore and Prince George's County next year.
The Senate is expected to give final approval Wednesday to add a 3 percent surcharge to the sales tax on beer, wine and liquor, which appears to be the largest area of difference to emerge between the House and Senate budget bills — a conflict that sets up a philosophical battle between the two chambers.
Gov. Martin O'Malley, who pledged during his re-election campaign that he would not propose new taxes this year, has not ruled out accepting increases initiated by the General Assembly. He would need to sign any legislation to increase taxes.
The Senate met in three separate sessions Tuesday before passing the budget proposal, 37-10. Two Republicans joined the majority Democrats to support the plan.
Fiscal leaders from the House and Senate will meet in the coming days to negotiate the differences between the two chambers' plans. The Senate proposal would put about $25 million more back into the state's general fund. The House cut about $7 million from O'Malley's proposal.
"Resolving the riddle of this year's budget was hardly simple," said Sen. Edward Kasemeyer, who is chairing the Senate Budget and Taxation Committee this year for the first time. "We continue to have more work to do next year."
The Senate plan bites nearly 45 percent out of the state's structural deficit, the continuing gap between expected state revenues and promised expenditures. There's widespread discussion in Annapolis that more taxes will be considered this fall when the legislature reconvenes to take up redistricting.
The legislation would require state workers to pay millions more in prescription drug costs while asking counties to shoulder the cost of collecting property taxes. But it would also give back some funding for higher education.
Senate Democrats said the new tax on alcohol, which would raise the sales tax on beer, wine and spirits from 6 percent to 9 percent over three years, is needed to restore money stripped from two of the state's largest school systems.
"We are making good progress in Prince George's and Baltimore City," said Sen. Richard Madaleno, a Montgomery County Democrat. "We can't jeopardize the momentum that those school systems have. Let's find a way to hold them harmless." The two areas would receive two-thirds of the revenue from the tax, he said.
But Republicans questioned the equity of that plan.
"Why should all the citizens of Maryland be hit with this increase with the significant benefit going to two counties?" asked E.J. Pipkin, an Eastern Shore Republican.
Senate President Thomas V. Mike Miller noted that Baltimore and Prince George's County are two of the largest consumers of alcohol. The two jurisdictions accounted for a quarter of the sales of beer, spirits and wine sold in Maryland last year.
House Speaker Michael E. Busch said his chamber, which raised fees but not taxes in its budget, is "open" to the Senate proposal on alcohol.
"We are going to take a look at it," Busch said.
The Senate budget debate usually spans several days, but was confined to a single day this year to accommodate Sen. J.B. Jennings. Jennings, a Republican who represents Baltimore and Harford counties, has been called up to active duty as a member of the Maryland Air National Guard.
There was little discussion of another gap between the House and Senate plans: the prescription drug plan for state workers.
State workers' medication costs are currently capped at $700 a year. O'Malley has proposed increasing the cap by six times for individuals and 13 times for couples, sparking outrage in particular from retirees who say the increases could consume much of their pensions.
The House approved dropping the cap back down to $1,000 for individuals and $1,500 for couples. The Senate nudged it up again, to $2,000 cap for individuals and $3,000 for couples.
Some said the budget writers seemed at times to undercut policy enacted by the body: The Senate budget would chop $5 million from a state grant intended to stabilize tuition costs at community colleges, putting financial pressure on the state's higher education program. Separately the body also asked the 16 community colleges to admit more illegal immigrants by directing them to charge in-state and in-county tuition.
Sen. Christopher B. Shank, a Western Maryland Republican, said the combination "adds insult to injury" for the community colleges.
Some in the Senate had hoped for further cuts to the state's spending programs. Sen. David Brinkley, a longtime member of the budget committee, voted against the plan for the first time in years.
The Western Maryland Republican vented his frustration on the floor Tuesday night, saying that O'Malley was absent during the budget process and the lack of political will means his committee will have to work harder in upcoming years.
"Some of the decisions we are now making are going to take longer for us to get out from under," he said.