ANNAPOLIS, Md. (AP) — Maryland lawmakers on Thursday discussed ways to spur job growth by accelerating borrowing in the state’s capital budget in upcoming years to invest in infrastructure.
It’s an option that could be part of a larger strategy in the upcoming legislative session, when a gas tax increase and tax incentives are expected to be considered.
House Speaker Michael Busch, D-Anne Arundel, said the idea is to make larger investments in schools and roads sooner rather than later in order to increase jobs in the state, while taking advantage of low interest rates and competitive labor costs. After that, lawmakers plan to slow the borrowing down in later years unless new revenue sources are found.
Busch said he believes it’s probably an accurate estimate that 15,000 jobs are created in the state’s capital budget.
“If we can get up to make 30,000 jobs through tax incentives, tax credits and revenue enhancements, I think, that can show the different communities a benefit, such as a road, a bridge, a school, a college facility.” Busch said. “I think that’s what the citizens want to see. They want to know that there’s a direct result where their tax dollars are going.”
The discussion on how to spur job growth is taking place amid a roughly $1 billion budget deficit in the next fiscal year.
Several new revenue sources already have been floated in Annapolis in recent months. A commission on transportation funding has recommended that the state raise about $870 million in new revenue for transportation projects annually. The chief component would involve a 5-cent increase in the state’s gas tax each year for three years.
Busch said he believed a gas tax increase is going to get a thorough hearing in the legislative session that begins in January. He noted that the 23.5-cent tax hasn’t been raised since 1992.
“You still have to come up with 71 votes and 24 votes in the Senate and have the support of your local governments,” Busch said. “Our goal is to see what’s the best way we can create jobs, what’s the fairest way to do it, whether it takes some incentives to help us with that. That’s what we’re going to try to do.”
Budget analysts also pointed out that to fully fund debt service with the state’s property tax in the next fiscal year, a tax increase of about $27.47 cents to the median home’s annual state property tax bill would be needed. That’s based on a Maryland Association of Realtors estimate that the October median home sale price was $228,879. Analysts said state policy that dedicates state property taxes to support debt service costs has provided a stable funding source and has reduced the Maryland’s general fund deficit.
Lawmakers also are discussing an increase in the state’s “flush tax,” an annual $30 fee on sewer bills to upgrade wastewater treatment facilities to reduce pollution in the Chesapeake Bay. Budget analysts say there is an estimated $382.6 million shortfall in Bay Restoration Fund revenues that threaten the ability to complete upgrades for the state’s 67 largest wastewater treatment plants.
Warren Deschenaux, the director of the nonpartisan agency that reviews state fiscal matters, said that any additional borrowing should be considered in tandem with new revenues, because the amount of debt the state can afford depends on its revenues. Budget analysts estimate that for every dollar of new revenue raised, the state could issue one dollar of additional general obligation debt, he said.
Deschenaux also said lawmakers have various approaches that could be taken to increase funding for infrastructure.
“The challenge you will have is having that money used in a way that has lasting benefits as well as provides the economic benefit that you might be seeking,” Deschenaux said.
It’s unclear, though, exactly how many jobs would be created by accelerated borrowing in the state’s capital budget, which is used to pay for infrastructure improvements.
One analyst estimated that $1 million in capital budget spending would create about 7.3 jobs. But Deschenaux said it’s hard to predict how many jobs would be created, because it depends on whether all of the money is being spent on construction that would put people to work building things like roads and schools.