House and Senate fiscal leaders agreed Friday on a $40.5 billion budget plan with what they hope are enough sweeteners to break an impasse with Gov. Larry Hogan and shake loose money for education and health, and to avoid a state employee pay cut.
The plan will move to the House Saturday and later to the Senate, though the chambers could delay action until Monday to bargain with Hogan.
"I see the light at the end of the tunnel," said Del. Maggie L. McIntosh, the chief House negotiator.
Acting with just days to go before the 2015 legislative session ends at midnight Monday, top lawmakers simultaneously made conciliatory gestures to Hogan and delivered blunt warnings that time was running out to reach an agreement that would free parts of his legislative agenda.
House Speaker Michael E. Busch, previously the hard-liner in dealings with Hogan, allowed some of the governor's top-priority bills to move out of committee — a necessary step if they are to pass.
Senate President Thomas V. Mike Miller, who had been the more accommodating of the two top Democrats, delivered a blunt warning to Hogan that "there will be consequences" if $68 million for a geographic education funding formula was not in the budget by Monday night.
Miller predicted the money would be restored and said, "I think everything's going to be fine." But as insurance, he said, a Senate committee would start moving a long-dormant bill that would make full funding of that formula mandatory.
In his budget, Hogan had called for funding the index — which benefits jurisdictions with higher costs of educating children — at 50 percent. Both Miller and Busch have made 100 percent funding a top priority.
Moving to pass a bill that would require full funding is a potent threat because it would significantly constrain Hogan's budget flexibility in future years. Senate Minority Leader J.B. Jennings of Baltimore County called the proposal "troublesome."
The House-Senate conference committee also addressed another priority for Assembly Democrats: preventing a 2 percent pay cut for state employees. Hogan had proposed canceling the raise that took effect in January.
Conferees wrote language into their budget plan that recognizes employees' current salary as their base level for future raises and for their pension benefits. They also fenced off money in the budget that Hogan could use to avoid the pay cut.
McIntosh said the governor could still withhold the raise for one year but added that the Assembly had done all it could to protect state workers.
The negotiators also decided to block Hogan from making unilateral cuts in formula-driven education funding in future budgets, rejecting a Senate-backed cap on the growth of that spending.
The agreement makes some gestures in areas that are important to Hogan. Lawmakers added about $10 million for nonpublic schools that could be used for technology, textbook and building projects. It was not the way Hogan wants to aid nonpublic schools — through tax credits to corporations that make contributions to them or to public schools — but it was a nod in his direction. The money is conditional on full funding of the geographic index.
Budget Secretary David R. Brinkley did not know whether the move would satisfy Hogan but said he thought the governor would be "pleased to see the House has a newfound love for public and nonpublic schools."
The lawmakers addressed another Hogan concern by agreeing to a boost in the state's supplemental contribution to the state pension system from the $75 million level set in the House bill. McIntosh said the change could yield as much as $125 million a year, closer to the $150 million Hogan has demanded.
The conference agreement came as House committees approved some of Hogan's most cherished bills — including measures increasing a tax exemption on military retirement pay, granting more flexibility to high-performing charter schools and eliminating the mandatory stormwater fees in large jurisdictions that the governor calls "the rain tax."
Matthew A. Clark, Hogan's communications director, said Friday night that the administration was still evaluating the conference committee agreement but saw a glimmer of hope.
"The governor's legislative agenda moving is a positive sign," he said.