MD Budget Hits Senate Floor This Week
Every legislator who lives near Maryland’s boundaries knows the impact on state sales tax revenues by citizens who cross the border to make large and small purchases.
This time of year, high schoolers cross the Mason-Dixon line to purchase prom dresses in Pennsylvania where clothing is exempt from sales tax. The Eastern Shore no longer has any furniture stores because of the penchant for state taxpayers to visit Delaware (which has no sales tax) for big-ticket purchases. Obviously, residents also leave the state to purchase certain items, such as cigarettes and alcohol, which Maryland legislators have carved out as high-taxed commodities.
In 2007, Governor Martin O’Malley decided that Maryland’s sales taxes were not high enough. During a special session convened just for the purpose of raising taxes, O’Malley’s 20% increase in the sales tax passed by wide margins of votes from Democrat legislators.
Sales tax revenues are tumbling. Between 2008 and 2009, baseline sales tax revenues dropped 5.5% and overall revenues dropped 1.5%. In the report by the Board of Revenue Estimates issued on March 10th, sales tax revenues failed to meet estimates by $33 million just in the last quarter and comprise one-half of the $66 million write-down in state revenues for the current fiscal year.
When these estimates were released last week, the $66 million shortfall was praised by O’Malley as an indication that the revenue losses are leveling off. However, the reduction cut into fund balance of $274 million that O’Malley had hoped to retain in his FY11 budget proposal. Moreover, O’Malley balanced his budget with a prayer for $389 of federal assistance through a Medicaid match that has yet to be approved.
This week, legislators will wade through the morass that O’Malley has created with his failed budget policy. The long-term actions taken by the Senate Budget and Taxation Committee trim about $3 billion off of the O’Malley structural deficits of $8 billion for the next governor. That’s a start, but the long-lasting O’Malley legacy will be a Maryland left drowning in budgetary red ink.