Senate Cuts $391 Million From Budget, Rejects Amendment Paving Way For Repeal of Computer Services Tax


ANNAPOLIS (March 13, 2008) - The Maryland Senate rejected an amendment to the state budget Wednesday that would have paved the way for repeal of the unpopular computer services tax.

The amendment failed on a day when the full Senate passed 220 Budget and Taxation Committee amendments intended to cover an estimated revenue shortfall of more than $330 million. Those amendments made cuts to the state's stem cell research program and the Department of Health and Mental Hygiene, and created new regulations on how and when agencies may spend the money allotted to them.

The computer services tax was passed in the November special legislative session to bring in an estimated $214 million to help cover a budget deficit of $1.7 billion. But a number of lawmakers from both parties now want to repeal the tax.

Sen. David Brinkley, R-Frederick, proposed to make up the money that would be lost from the repeal through $114 million from excess money in the general fund and $100 million in various cuts by the governor.

Adoption of the amendment would have made the tax unnecessary just as House and Senate committees were hearing eight bills to repeal the unpopular revenue measure.

Despite wide acknowledgement of the shortcomings of the tax, opponents called Brinkley's amendment a "one-time fix" that would not help with future budgets. It was defeated 26 to 19, in part because of concerns over continuing economic woes that may further pinch future state budgets.

"I expect that, come next session, we're going to be looking at more cuts," because of a continuing economic downturn, said Sen. Robert Garagiola, D-Montgomery.

Just as the full Senate was completing its morning business, a standing-room-only House Ways and Means committee hearing was taking up bills to repeal the computer services tax. Some legislators and several panels of information technology professionals said the tax would hurt businesses and possibly force them to relocate.

``Keeping the tax is going to cost more money than repealing it,'' said Delegate Gail Bates, R-Howard. ``We will lose income tax, we will lose money that they put in the economy, we will lose corporate taxes.''

Witnesses, particularly those representing chambers of commerce, said that while they do not support the computer services tax, they are opposed to making up the lost revenue by taxing higher-income residents, a suggestion offered by some.

Among the $391 million in budget cuts made by the full Senate, the most contentious was an $18 million reduction to the state's stem cell research funding.

"It was an issue of cash flow," said committee Chairman Ulysses Currie, D-Prince George's. "It wasn't that the committee was opposed to the issue."

Cuts to the Department of Health and Mental Hygiene will mean a decrease in state funding for health care and less money for programs intended to keep hospitals from imposing limits on the number of days patients can stay.

In addition, several revisions to the budget restrict agencies from using their allotted money until they submit reports on spending and plans for future programs to the House and Senate budget committees.

The Senate also limited to 50 the number of new positions a state agency may add after the start of the next fiscal year on July 1. The amendment makes an exception in cases where new positions are not funded by the state, but those positions must be eliminated if the funding for them ever runs out.

The Senate will vote Friday for final approval of the budget, which if passed, then moves to the House.

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