Maryland Gov. Larry Hogan (R) unveiled a plan Wednesday to pour billions into construction projects statewide and eliminate all state income taxes for retirees by 2028, all while spending record amounts on state parks, education, police and more.
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The final budget proposal of Hogan’s tenure doles out a historic $4.6 billion surplus as the term-limited governor seeks to shape his legacy and cast himself as a bipartisan pragmatist.
“We want to work together, Republicans and Democrats,” Hogan said at an Annapolis news conference where he laid out plans for the state’s overflowing coffers.
Maryland is flush with cash after two years of federal stimulus and unexpected economic growth. Hogan’s budget announcement formally launches weeks of negotiations with the Democratic-controlled legislature over how best to spend the windfall.
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For all the record-smashing initiatives, the governor left out $125 million that lawmakers had directed to high-poverty schools.
Hogan highlighted safety net programs, including more money to help people pay utility bills, support child-care workers, and give food assistance to seniors and to children during the summer.
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He also continued a program that gives out $10 million in scholarships for students to attend private schools, paid for negotiated raises for state workers, proposed new raises for police and stashed billions into the state’s saving accounts.
Extra cash proposed for higher education, a 13 percent annual increase that includes community colleges and historically Black colleges and universities, prompted University System of Maryland Chancellor Jay A. Perman to issue a statement saying he’s “deeply grateful.”
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However, the governor did not send the jurisdictions with the highest concentration of high-poverty schools $125 million intended to help pay for sweeping education reforms.
Hogan had opposed — and vetoed — the 2020 education overhaul because of its price tag. Lawmakers overrode him, and this year Hogan put money in the budget for other mandated elements of the reforms. But he left out cash dictated by a state formula designed to help the state’s poorest schools, which are primarily in Baltimore City and Prince George’s County.
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The overall, $58.2 billion proposal and its companion $3.97 billion construction plan now land in the General Assembly, which can cut Hogan’s budget but has limited ability to unilaterally rearrange it.
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A central line of negotiation, lawmakers said, will be whether Hogan’s tax cuts need to be so generous and whether the state would be better served spending less on construction and saving more for education improvements.
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“When you have the kind of revenues we have, it gives you the opportunity to address some long-term problems,” Senate Budget and Taxation Chairman Guy J. Guzzone (D-Howard) said. “Our job is going to be digging in deeper and see if we are accomplishing those big-picture goals.”
The state’s balance sheets have both a one-time extra pool of $4.6 billion and an unanticipated, ongoing revenue stream of roughly $2 billion over the next five years.
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Hogan — who is weighing his political future in a divided Republican Party — portrayed the surplus as largely a consequence of his fiscal policies.
“It’s a lot of hard work,” he told reporters. “It’s a lot of tightening the belt. It’s a lot of dramatically increased revenues because of our growing economy — more people working, more businesses open, all of our revenues way up. And it certainly didn’t hurt with the federal stimulus that was pumped into the economy.”
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Hogan said he hoped to work with Democrats to pass a budget that “seizes the historic opportunity we now have.”
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The governor printed the state budget in purple-bound volumes to represent “red and blue coming together,” rather than the black-bound tomes he issued during the previous seven years, which many viewed as a symbol of austerity.
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“He does do a lot for lower-income Marylanders,” House Appropriations Committee Chair Maggie McIntosh (D-Baltimore City) said, but added that some of Hogan’s marquee proposals might be a tough sell.
The retiree tax cut, for example, ramps up at the same time the sweeping education overhaul reaches its most costly point, raising questions about whether the state will be able to afford both.
Hogan proposed eliminating all state income tax for people over 65 who are also drawing Social Security, starting with the first $10,000 of income in the 2022 tax year and scales up to include all income by 2028. Social Security income is already exempt from state taxes, but pensions and withdrawals from retirement accounts are taxed as income, Budget Secretary David R. Brinkley said. Hogan’s proposal would cost $4 billion over six years.
“Having anyone retired not paying any state tax on income, regardless of how much they make, that’s a nice thing to want,” McIntosh said. “But you also want to make sure you fully fund the programs that you’ve already passed and that people are already counting on, like good schools and good roads.”