Government Relations Archive

The Maryland Independent College and University Association (MICUA) provided the following summary of the Maryland General Assembly’s special session which adjourned on November 19, 2007.

The Maryland General Assembly passed the six bills introduced by the Governor with many amendments.

In aggregate, legislation passed during the Special Session raises about $1.3 billion in revenues and cuts the fiscal 2009 budget by about $550 million. The Budget Reconciliation Act reduces state appropriations in fiscal 2009 in four areas:

• Cuts state aid to local schools by altering the Thornton formula;
• Reduces utility grants provided to local jurisdictions;
• Reduces appropriations to Program Open Space; and
• Cuts overpayments to the Health Benefits Fund for state employees.

These specified cuts total about $330 million. In addition, Governor O’Malley must identify $212 million in additional cuts in the fiscal 2009 budget. The Sellinger Program is preserved with full funding. In addition, the General Assembly passed a provision within the Budget Reconciliation Act stating that funds appropriated to the public universities through the newly created Higher Education Investment Fund will be included in the formula used to calculate Sellinger grants. This provision will increase state aid under the Sellinger Program in future fiscal years.

The Budget Reconciliation Act contains a troubling provision stating the legislature's intent that the Governor consider legislation to "defer and alter formula mandates to slow the growth" in the state's baseline budget. This provision was added as a concession to the House Appropriations Committee, which tried to alter several mandated programs (including Sellinger) during the Special Session.

The General Assembly passed legislation proposing a constitutional amendment to authorize video lottery terminals (slots) at five locations in Maryland. This constitutional amendment will go to the voters during the General Election in 2008.

Several adjustments were made to the State's tax structure. The following is a summary of the major adjustments:

Income Tax:
The state income tax rate is increased to 5% for earnings over $150,000 (individuals) and $200,000 (joint filers); 5.25% for earnings over $300,000 (individuals) and $350,000 (joint filers); and at 5.5% for earnings over $500,000. In addition, the legislation includes an increase in personal exemption amounts and expands the refundable earned income tax credit for low-income Marylanders.

Sales Tax:
The sales tax rate increases from 5% to 6% and is expanded to include certain computer services, such as software planning and design, hardware and software installation, data recovery, and management services.

Titling Tax:
The titling tax rate is increased to 6%, but allows a reduction for the trade-in value of a vehicle. In addition, the vehicle title fee is increased from $23 to $50 and the cost to correct title certificates is increased from $20 to $50.

Tobacco Tax:
The tobacco tax is increased by $1.00 to $2.00 per pack.

Corporate Tax:
The corporate tax rate is increased from 7% to 8.25%. In the first six months (FY 2008), $16 million of this corporate tax revenue is dedicated to the Higher Education Investment Fund to reduce tuition at public universities and for capital projects at public universities and community colleges. In future years, about half of the increased corporate revenue is dedicated to the Higher Education Investment Fund. The Department of Legislative Services estimates that $50 million in corporate tax revenues will be dedicated to the Higher Education Investment Fund in FY 2009. These provisions will benefit the MICUA state-aided institutions by increasing the Sellinger grants in future years and by providing some relief in the Governor's capital budget program.

In addition, the General Assembly passed legislation requiring a study to evaluate the use of "combined reporting" to calculate Maryland taxable income by affiliated corporations.

Controlling Interest Provisions:
The General Assembly passed legislation imposing recordation and transfer taxes on the transfer of real property through the sale of a "controlling interest" beginning in FY 2009.

The General Assembly also passed legislation introduced by the Governor to expand Medicaid health care coverage for low-income Marylanders and to provide incentives for small businesses to offer health care insurance to employees. In addition, the General Assembly passed a provision to create a Chesapeake Bay Trust Fund to support programs to clean up Maryland's bays and rivers.