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General Assembly approves temporary fix to limit cuts to Baltimore schools

The General Assembly approved a temporary fix Monday to a problem that has contributed to Baltimore schools losing $50 million in state funding over the past two years.

On paper, Baltimore's wealth appears to be growing at a rate faster than anywhere else in the state, a circumstance that would normally mean the city could take on a greater share of education costs.

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But that growth has been fueled by tax subsidies, and the huge developments that have benefited from them pay little or nothing into city coffers.

City lawmakers unsuccessfully tried to tweak state education formulas so that Baltimore wouldn't be penalized by what House Appropriations Chairwoman Maggie McIntosh deemed "artificial wealth."

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McIntosh, a city Democrat, said Monday that her original plan to exempt wealth spurred by tax incentives from the funding formula hit resistance because "it would have wreaked havoc on school budgets across the state, and it wouldn't have helped Baltimore as I thought."

A compromise passed by the House last month and approved 45-0 by the Senate on Monday night only applies to subsidies approved after May 1, and the legislation expires in three years.

The sunset means that the biggest tax-increment financing project in city history — the proposed $535 million deal to redevelop Port Covington — would not be fully built until after a law designed to mitigate its impact on school funding expired. By then, lawmakers expect a state panel evaluating how Maryland pays for schooling will have completed its work and recommended a long-term solution.

"That's a gamble we took," McIntosh said. "What we wanted to do was make sure we were protected."

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Sen. Nathaniel McFadden, the Baltimore Democrat who sponsored the Senate version of the bill, said TIFs weren't widely used when the state's Thornton school funding formula was adopted in 2002. Since then, however, the deals have become large enough to affect the amount of money jurisdictions receive, he said.

Gov. Larry Hogan, a Republican, has not taken a position on the bill. He proposed — and the legislature agreed — to send Baltimore an extra $12.7 million this year to make up for some of what was lost because of the wealth issue and declining enrollment.

Within the past year, Baltimore's assessable tax base grew by about $2 billion as it added 8,000 jobs. Much of that wealth, however, is not on the tax rolls.

Amazon's new Southeast Baltimore warehouse, for example, was the biggest development in 2015 and was built with more than $40 million in city subsidies. The warehouse, celebrated for the 2,500 jobs it created, cost city schools $1.4 million in state aid.

Del. Mary Washington, a Baltimore Democrat who co-sponsored the House legislation, said the bill would prevent the city's wealth from being calculated in an "inflated" way.

"It'll be good for us getting an accurate picture of Baltimore's wealth when it comes to education," she said.

But Washington stressed that the legislation also will benefit other jurisdictions as more turn to these tax subsidies. "It's not just the city. Other jurisdictions are starting to use this tax-increment financing as part of the redevelopment of their downtown areas," Washington said.

The sunset would allow lawmakers to assess how the legislation is working after three years, Washington said.

McFadden said the legislation should give the Thornton formula commission time to factor in TIFs and other economic development tools.

"We hope that'll be a temporary fix," he said.

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