$63B state budget compromise reached; includes increased vehicle fees, tobacco taxes

Maryland lawmakers said Wednesday they’ve compromised on a $63 billion budget plan after divisions over raising a menu of taxes and fees to solve looming budget deficits had threatened to derail the final days of the annual three-month session.

The spending plan — for the fiscal year beginning July 1 — aims to raise about $250 million in new revenue, and up to $350 million within three years for transportation and up to $90 million more for education, by increasing taxes on tobacco products and raising or creating a series of fees around vehicles.

It will make a dent in, but not solve, the budget deficits in the coming years.

The plan includes a 75-cent fee on rideshares such as Uber and Lyft, a $125 surcharge on electric vehicle registrations and various levels of fees for heavier vehicles that have an outsized impact on deteriorating roads.

It does not include additional taxes on corporations, as House Democrats had sought, or broad-based personal income and sales tax changes, which some Democrats had proposed but had not seen much momentum this year. The agreement also does not call for the first toll increase in a decade — an idea that had initially seemed likely to pass but that lost steam and then became more complicated after the tolled Francis Scott Key Bridge collapsed last week.

“It’s a pretty strong deal that both sides can be satisfied with. It’s truly a compromise,” said House Appropriations Committee Chairman Ben Barnes, a Prince George’s County Democrat and his chamber’s top budget negotiator.

Lawmakers entered the session in January facing a darker fiscal picture than previous years, which were buoyed by an influx of pandemic-era federal funding.

Democratic Gov. Wes Moore’s budget proposal aimed to fill a roughly $1 billion immediate cash shortfall by pulling from reserves, cutting the budgets for some programs and borrowing more. It left the state on the hook, however, for a structural deficit that will grow to $3 billion in four years and it took no steps toward resolving another $3.3 billion, six-year transportation funding shortfall.

Moore’s administration announced the transportation funding issue in December and later said it would restore $150 million to avoid immediate rollbacks. But future years of new highway construction, road and bridge repair, and plans for expanding mass transit were still at risk.

House Democrats entered the high-stakes budget negotiations in recent weeks by pushing a $1.3 billion revenue plan that they said would resolve the entire transportation shortfall and throw a lifeline to the Blueprint for Maryland’s Future, the education plan that is scheduled to run out of funding within three years.

Senate Democrats stood firm in rejecting pieces of the plan that would have raised money by legalizing online gambling and implementing what’s known as combined reporting, which prevents multi-state corporations from using shell companies to avoid state taxes.

But they agreed to House Democrats’ proposal for a statewide fee on transportation network companies — such as Uber and Lyft — and the increased registration fees for heavier vehicles. Details of those vehicle fees broken down by amount and weight class were not immediately available Wednesday.

Full details on the tobacco tax increase were also not available, though Barnes said packs of cigarettes will cost $1.25 more under the plan. That will raise $80 million to $90 million to make sure the Blueprint is fully funded through the 2027 fiscal year.

The looming transportation deficit, meanwhile, could now be mostly resolved through the next budget and part of the 2026 fiscal year.

A panel set up last year called the Transportation Revenue and Infrastructure Needs, or TRAIN, commission will continue working on that issue — which may only grow more complicated by last week’s bridge collapse.

Democratic President Joe Biden has pledged for the federal government to fully fund the cleanup and bridge rebuild, but congressional action will be needed for some of the funds and other work may also be necessary for the state to pick up.

Senate Budget and Taxation Committee Chairman Guy Guzzone, a Howard County Democrat who also announced the budget deal Wednesday, said part of the agreement involves asking the governor to set aside money to fund work related to the collapse. That could include night work on Interstate 695 that might require additional payments for workers, he said.

“I’m incredibly grateful of President Biden, the administration for stepping up to cover the cost of the bridge. We need to follow that over the coming days. We need to know exactly what’s going to be coming from the federal government. All that will play into it and we’ll have all those discussions,” Guzzone said.

A budget negotiating committee led by both Guzzone and Barnes is scheduled to meet Thursday to adopt the agreement. The budget plan will then need to pass both the House and Senate before the session ends Monday night.

Moore, during a daily press conference about the bridge response in Baltimore, said Wednesday he was thankful for the budget agreement and that he was looking forward to going through the details.

“This is going to give the people of our state the certainty that they need right now, and that they deserve right now,” Moore said.