O'Malley's budget update

Friday, September 28, 2007

(Frederick County Democratic Central Committee)

FYI: Budget Update: Our Comprehensive Solution

September 28, 2007

Dear Friend,

Yesterday, we went at Annapolis Elementary School, bringing together the various pieces of our solution to the $1.7 billion structural deficit we've inherited.

We will be working hard in the coming weeks to find consensus with the General Assembly on a fair, long-term plan to overcome this deficit and get our state back to the business of making progress.

Below you'll find a summary of our plan, which I hope you'll share with friends and colleagues. More information will be available on the state's website. And as we work toward a special session, we'll continue communicating to ensure that you are getting accura ·te information about what is being proposed.

Thank you for helping to move Maryland forward.

Sincerely,

Martin O'Malley

Governor

A FAIR, LONG-TERM SOLUTION
TO MARYLAND'S STRUCTURAL DEFICIT

THE PROBLEM: A STRUCTURAL DEFICIT

Maryland faces an inherited $1.7 billion structural deficit next year.
The problem has been 10 years in the making. A $1 billion income tax cut in 1997, combined with $1.5 billion in increased education spending with the Thornton law, has opened up a $1.7 billion hole in next year's budget.
Over the past few years, the problem has been masked by tuition hikes, fee increases, and raids on open space and transportation funds.

THE SOLUTION: STRUCTURAL REFORM

Governor O'Malley is proposing:

A fair plan that protects middle-class families, education and public safety.

It starts with $280 million in spending cuts and eliminates 147 government positions and reduces spending growth by $1 billion over the next 2 years.

Most families will pay less in taxes, as we keep Maryland competitive.

And it represents long-term structural reform that will get our fiscal house in order, not a short-term gimmick.

The Maryland Department of Budget and Management estimates that 83.5% of Marylanders will pay less - savings from income and property tax reductions will exceed the penny sales tax increase.

THE COMPONENTS

Reforming Progressive Income Tax:
Add new brackets for wealthiest Marylanders,
and reduce taxes for 95% of households.
Reduce Property Tax:
Reduce income taxes by $177 million for homeowners
and other property owners struggling with rising assessments.

Close Corporate Loopholes:
End gimmicks that allow half of Maryland's largest
corporations to pay $0 in corporate income tax, and
enable corporations to sell a $120 million building with
no transfer tax, while someone selling a $200,000
home must pay a $4,000 transfer tax.

Tuition Increases

University of MD, College Park

Invest In Maryland's Critical Infrastructure:
Split a 1% increase in the corporate tax - which will
still keep us below neighboring states - between:

Making college affordable for middle class families;
And improved transportation to reduce traffic and improve our quality of life - also includes additional Transportation Trust Fund increases.

Protect Education:
Ensure accountability for results and long-term security
following the state's historic $1.5 billion increase in our
annual education investment through the Thornton law.

Make Healthcare Affordable:
Increase tobacco tax by $1 to reduce smoking and invest
in making healthcare coverage more affordable and
accessible for Marylanders - i ·ncluding small businesses.

Protecting Maryland's Seniors:
Double the senior citizen income tax exemption from $1,000 to
$2,000, and create a new $50 sales tax rebate for seniors and
others earning less than $30,000.

Recapture Slots Revenue For Maryland Priorities:
Achieve consensus on a compromise slots bill to protect
more than 600,000 acres in horse-related open space, 18,000
racing-related jobs and capture more than $400 million
dollars spent by Marylanders in other states for our · priorities.

Modernize Sales Tax:
Remain competitive with surrounding states by increasing sales tax by a penny, while expanding to a handful of services - while creating permanent sales tax holidays for back-to-school clothes and energy efficient appliances.

HOW DOES THIS AFFECT ME?

The Governor's plan provides a long-term
solution through which most Maryland families
will pay slightly less.