Budget battle draws sparks and threats of tuition hikes

Annapolis (Map, News) - Senate debate on further cuts to Maryland’s $31.5 billion budget for 2009 showed how difficult it could be to repeal the new sales tax on computer services, even as hundreds of high-tech businesspeople rallied against the levy outside. But Senate President Thomas V. Mike Miller said he and Gov. Martin O’Malley were open to amendments to the tax that would exempt some information technology subcontractors.

In a 26-19 vote, the Senate rejected a Republican attempt to trim another $214 million from O’Malley’s budget to allow for repeal. Senate GOP leader David Brinkley wanted to use $114 million from the state’s surplus and let the governor cut $100 million more from state agencies.

But Democrats, who already had cut nearly $400 million, objected strenuously. Sen. Verna Jones, a Baltimore City Democrat on the budget committee, called the move “premature … irresponsible” and “shortsighted.”

Jones has introduced a bill to increase the state income tax on households making more than $750,000 per year to 6.5 percent. The tax increase would raise about $175 million a year.

“We would be leaving our fund balance in a very precarious position,” said Sen. Richard Madaleno, a Montgomery County Democrat also on the budget panel. “You would have to turn to the largest discretionary item in the budget, which is higher education.”

Madaleno said steep cuts could lead to tuition increases of 20 to 25 percent at state universities.

“All of us would like to find a solution,” said Sen. Edward Kasemeyer, vice chairman of the Budget and Taxation Committee and the Democratic majority leader. “We don’t know how bad things could become. We’re probably going to write down [revenues] in September,” after a $332 million drop announced last week.

Miller said he had spoken to O’Malley on Tuesday, and the governor was “amenable” to changes in the computer services tax. But Miller said voters “need to see belt tightening” by the state before other new taxes are passed.

“The governor is open to repealing the computer tax if we can come up with an alternative way to come up with $200 million, whether through budget cuts or revenue increases,” O’Malley spokesman Rick Abbruzzese said.

llazarick@baltimoreexaminer.com

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