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House School Construction Plan Draws from Tax

Correction

An earlier version of this story misstated last year's vote for HB1, which would close a real estate tax loophole to benefit schools. That bill passed the House 124-17. In addition, the story also misstated the House plan for excess funds in the state's Rainy Day Fund, which would be used to cover the lost revenue from a proposed reduction in the state's property tax rate.

By Deitrich Curry
Capital News Service
Wednesday, Feb. 2, 2005; corrected Feb. 3

ANNAPOLIS - House leaders vowed Wednesday to provide $250 million per year to pay down the multi-billion-dollar backlog in statewide school construction needs -- a proposal that does not rely on slot machine revenues.

House Speaker Michael E. Busch, D-Anne Arundel, has proposed a bill, heard in the House Wednesday, to close a real estate transfer tax loophole and devote the estimated $60 million from that to school construction.

While details are still to be worked out, Busch said the House plan could draw on that bill, the state's budget surplus, the Rainy Day Fund and funds already earmarked for school construction in the 2006 budget to meet the full $250 million commitment.

"Education is the No. 1 priority in Maryland," Busch said.

At the State House news conference, Busch also announced plans to repeal a property tax increase of 5 cents from the now 13-cents-per-$100 of assessed value. Busch proposed taking $100 million from the state's overallocated Rainy Day Fund to restore $166 million to state coffers from the loss in property tax revenue.

The House school construction proposal is much different from Ehrlich's.

Ehrlich earmarked $157 million in his state budget for school construction and said he'd devote $100 million more from slot machine revenues, should a bill to make them legal pass this session. Slot machine gambling bills have failed in the House the past two years.

Schools requested nearly $600 million for school construction this fiscal year, and outstanding unfunded needs approach $4 billion.

The House plan will provide the $250 million a year for school construction that was recommended by a task force to make up the deficit.

When asked how his plans fit into Ehrlich's plans for slots, Busch denied having a connection.

"(Slots) doesn't fit into any category as far as I am concerned."

Busch also said he hopes his HB1 school construction bill passes this session.

The bill would close a tax loophole that allows limited liability corporations to avoid paying the transfer tax that other corporations and county homeowners are forced to pay when real estate changes hands. It is expected to generate $60 million towards school construction.

Ehrlich opposes closing the tax loophole.

"I'm tired of being the only backstop in town here," Ehrlich said. "I don't think it's good policy. I don't think it's a very good idea."

He suggested the House devote funds, should it pass the bill, to Program Open Space, which purchases land for parks and conservation areas.

"We have a way to fund school construction another $100 million a year," he said.

Busch's tax loophole proposal last session failed to get out of the Senate Budget and Taxation Committee after passing the House with a 124-17 vote.

Sen. Ulysses Currie, D-Prince George's, Senate budget chairman, supports the bill, but is not sure if the bill will pass this year.

"Until the committee hears the bill, we won't know whether or not we have the votes to past it," he said. "But I do plan to vote for the bill."

Sen. David Brinkley, R-Frederick, said the speaker's moves were an attempt to nullify the incentive for the General Assembly to approve slots -- allocating even more money for school construction.

"He's desperate to do something," Brinkley said. "He's desperate to justify his continued obstructionism on slots."

Copyright 2005 University of Maryland Philip Merrill College of Journalism


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