March 25, 2011

House passes budget; Senate committee makes retirement changes

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By Megan Poinski and Len Lazarick
Megan@MarylandReporter.com, Len@MarylandReporter.com

The Maryland House of Delegates passed a slightly trimmed version of Gov. Martin O’Malley’s $34 billion budget on a mostly party-line vote Thursday evening.

About 90 minutes before, the members of the Senate Budget & Taxation Committee passed its own version of the same budget. They agreed to most of the changes made by the House which had been suggested by the Department of Legislative Services, but they disagreed on a few key points.

The Senate committee cut health benefits for retired state employees far less than the House had done, but it also raised the retirement age for state pensions, and capped cost-of-living increases on those pensions at a lower amount.

House debate

The House debate and votes were echoes of Wednesday night’s long session on the fiscal 2012 spending plan — the budget itself and the Budget Reconciliation and Financing Act, which changes legislative mandates and formulas. The budget bill passed the House with a vote of 97-42, while the BRFA was approved 96-42.

Del. Wendell Beitzel of Garrett County was the lone Republican to vote for the budget bills.

Del. John Bohanan Jr., chairman of the Appropriations subcommittee on education and economic development, said that the state has come through the worst economic times that anyone serving in the House of Delegates has ever seen.

Yet, he said, the budget passed by the House is balanced without new taxes, and improves funding for education and transportation. The “rainy day fund” has remained untapped, and has nearly a $1 billion cushion. And the state has maintained its AAA bond rating.

“This budget is progress for our state that is emerging from a very difficult time,” he said.

He added that the budget incorporated 17 suggestions from the Republican caucus, which wrote its own spending plan in hopes of cutting costs further. The House Appropriations Committee did not adopt many of their suggestions — which included deep cuts to education and the end of some grants — but this year’s budget process is the first truly bipartisan effort in many years, Bohanan said.

Many Republicans were grateful that their suggestions were considered, but said that the budget the House passed did not cut enough. Minority Leader Tony O’Donnell said that if disaster strikes — meaning war breaks out in the Middle East and sends oil prices sky high, the euro crashes, or federal spending is cut so drastically that many Marylanders will be out of work — the state’s budget is leaving Maryland ill-prepared.

“This budget sets us on the track to fiscal ruination,” O’Donnell said.

Senate committee action

In some major differences to the House-passed budget that the Senate will take up next week, the Senate budgeters approved making the counties pay for 90% of the cost of the state’s property tax assessments, as O’Malley had proposed, and not 50% as the House enacted.

While there were other disagreements on minor issues, the Senate committee differed with the House substantially on retirement health benefits and pensions.

For a transitional period, the Senate committee limited co-payments for subscription drugs passed by the House, but added a deductible and a higher cap on co-payments.

The Senate committee also reduced health insurance premiums for retirees from 25% to 20% of the total premium.

To reduce billions in unfunded liabilities on state pensions as the governor had proposed, the Senate committee went along with most House actions and O’Malley’s proposal. But the senators also voted to increase the retirement age for government workers and teachers by using “the rule of 92.” That means that to receive full benefits, an employee’s age and years of service must add up to 92, rather than early retirement ages allowed in the current plan. Currently, state employees can get a full pension after 30 years of service regardless of age.

The senators also capped cost-of-living adjustments at 2% per year rather than 3%.