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O'Malley makes his case for 'investments' in Maryland

Governor concedes tax proposals won't be popular

By Michael Dresser and Annie Linskey, The Baltimore Sun

8:13 PM EST, February 1, 2012

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Gov. Martin O'Malley used his State of the State address Wednesday to make his case for his most ambitious legislative agenda since taking office.

Now comes the hard job of selling it.

In an upbeat, 33-minute speech to both chambers of the General Assembly, the governor issued a spirited call for an aggressive program to invest in jobs and honor the "human dignity" of families, whether the parents are gay or straight.

But O'Malley said that generating jobs, improving transportation and cleaning up the Chesapeake Bay would require additional revenue in the form of taxes and fees.

"Everything has a cost. Failing to make decisions that are consistent with the interests of the next generation – this too has a cost," he said. "Progress is a choice."

A leading Democrat said the governor must now follow up, lawmaker by lawmaker, to win approval.

"The proof is in whether or not he's able to deliver on what he's asked the body to do. These are very difficult times, and he's asked the body to do quite a lot," said Senate President Thomas V. Mike Miller.

"Now, unfortunately, the politics become a one-on-one game, and he's going to have to make his case individually," Miller said. O'Malley is capable of convincing legislators, he said, but "the question is, is he willing to put forth the effort?"

Republicans found little to like in the governor's address.

"I think you can flush most of what he said," said state Sen. Nancy Jacobs of Harford County, who is seeking the GOP nomination for Congress in the 2nd District. "It was all those cliches – with a gas tax! My gosh."

Senate Minority Leader E. J. Pipkin charged that O'Malley's proposals "are nothing more than the same old tax-and-spend and spend-and-tax policies that have slowed our economic growth."

In his address, O'Malley acknowledged that his requests for increased income taxes, a higher "flush tax" and an extension of the sales tax to gasoline will not be popular. But he said that the spending reductions his administration has made over the last four years, in addition to $800 million in his proposed budget, have left "fewer options for responsible budget-cutting."

"How much less education do you think will be good for our children's future?" he asked. "How much less public safety? How many fewer jobs?"

He repeated his call for passage of his bill to legalize same-sex marriage in Maryland, casting it as a protection of the children of those unions.

"It is not right and it is not just that the children of gay couples should have lesser protections than the children of other families in our state," the governor said. He also said that his proposal was written to respect the religious freedom of those who object to gay marriage.

O'Malley cast his proposals to raise a series of taxes and fees as necessary "public investments" in the state. To help close a $1 billion budget gap, he has proposed raising taxes on the top 20 percent of earners – including two-salary families earning $100,000 – by reducing deductions and exemptions.

Over three years, he wants to extend the state's 6 percent sales tax to gasoline purchases to pay for highway and transit projects. "Maryland has some of the worst traffic in America," the governor said. "We pay a heavy price in terms of the time we spend idling in bumper-to-bumper traffic when we could be home with our families."

The governor is also urging the General Assembly to raise the so-called "flush tax" to improve sewage treatment plants and thus the health of the Chesapeake Bay. And he has proposed shifting part of the costs of teacher pensions to the counties to cut $240 million from the state budget — a measure many county leaders are hoping to defeat.

O'Malley argued Wednesday that his tax proposals would give those jurisdictions revenues to help offset the added costs. "No prior proposal on this issue has ever offered this much help to the counties," he said.

While the governor pointed to his administration's record of recovering jobs lost in the recession, O'Malley said Maryland needs to do more to stimulate employment. He said his capital budget alone would generate 52,000 new jobs by building and renovating schools, upgrading water and sewer plants, restoring parks and launching other infrastructure projects.

"This year's budget is a jobs budget," he said. "It does more for job creation than any budget in recent history."

Senate Minority Leader Pipkin, delivering the Republican response to O'Malley's address, charged that the governor's proposals are "neither tough nor balanced nor an investment."

Seeking to turn President Obama's State of the Union address against O'Malley, Pipkin noted that the president proposed federal tax increases only on households making more than $250,000, where O'Malley's phase-out of income tax dedications would hit households earning $100,000 and above.

"Maryland taxpayers who fall into that 98 percent of American families, the ones President Obama said should not suffer a tax hike, are the very same people who will suffer the pain of Governor O'Malley's increases in the state income tax and other taxes," Pipkin said.

But House Speaker Michael E. Busch said he thought O'Malley's speech was well received in a year where "everybody realizes there are a lot of challenges."

"He outlined what he thought the issues were for the state of Maryland to continue on a path of being a national leader," the Annapolis Democrat said.

Howard County Executive Ken Ulman, a Democrat, said it was difficult for him to focus on anything in the speech other than O'Malley's proposal to shift pension costs to the counties, an initiative that could cost Howard millions of dollars a year. Ulman, considered a possible gubernatorial contender in 2014, when O'Malley is barred from seeking a third term, said the change would "completely change the historic relationship" between the state and counties and would be "devastating" to his budget.

Harford County Executive David Craig, a potential Republican candidate for governor, said there "was absolutely nothing new" in O'Malley's speech. He, too, was upset with O'Malley's decision to move pension costs to the counties. "It is like inviting your children over for dinner and saying, 'You have to pay for it,'" Craig said.

Liberal Democrats have applauded much of the governor's agenda. Del. Maggie McIntosh of Baltimore, who chairs the House Environmental Matters Committee, welcomed the governor's proposals on Chesapeake Bay protections and jobs. But as a gay woman she found his speech especially moving.

"I'm particularly very pleased that he included in his State of the State an appeal for all Marylanders to recognize same-sex loving couples and supporting marriage equality," she said. She called it O'Malley's "best ever."

Moderate Democrats such as Del. Norman Conway, chairman of the House Appropriations Committee, found some things to like in the address as well as some things less appealing.

"I think he was upbeat. Of course he always is," said Conway, who represents Wicomico and Worcester counties. He said he liked the governor's emphasis on job creation but he was less enthusiastic about O'Malley's call for a same-sex marriage bill.

"Just the term 'marriage' has its connotation for me," he said.

michael.dresser@baltsun.com

annie.linskey@baltsun.com



Highlights of O'Malley's agenda



Budget and taxes: What O'Malley calls a "balanced approach," with $610 million in cuts and $311 million in new revenue, mostly from phasing out income tax exemptions and deductions for the top-earning 20 percent of taxpayers.

Gas tax: Applying the state's 6 percent sales tax to gasoline purchases, phased in over three years, to raise $613 million for transportation projects.

Pensions: Shifting much of the cost of teacher pensions from the state to the counties, saving the state $240 million, to help balance the budget and to give local governments a stake in controlling pension costs.

Chesapeake Bay: Doubling revenue from the $2.50 a month "flush tax" to pay for upgrades of wastewater treatment plants. A second measure would place new restrictions on the development of housing that relies on polluting septic systems.

Offshore wind: A new regulatory scheme intended to foster the development of an offshore wind power industry to diversify the state's energy sources and reduce pollution, albeit at a cost to ratepayers.

Same-sex marriage: Allowing gay couples to enter into civil marriage on the same terms as opposite-sex couples, a move O'Malley contends would honor "human dignity" and protect families while respecting religious freedom.

Michael Dresser

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