Fight Coming Over Highway User Revenue
Municipalities throughout Maryland are currently considering the passage of a resolution that calls for the state to restore the draconian cuts in Highway User Revenue and State Aid for Police Protection to local towns and cities imposed by the current administration in Annapolis in order to balance the state budget.
On June 29, at the recent Maryland Municipal League (MML) summer convention, the membership unanimously approved a resolution calling for the reinstatement of the funding and initiated an effort to have all of the state’s local towns and cities approve a similar resolution. As of September 13, approximately 25 percent of the state’s cities and towns have adopted the resolution.
On September 1, the MML Legislative Committee chose restoration of the state revenue sharing funds as one of the two issues to be presented to the MML membership for consideration and adoption at the fall legislative conference in Annapolis October 21-23.
According to a recent MML release, the league would like “to build on the League's public relations campaign and ongoing efforts to recoup lost municipal State Shared Revenues … to convince the administration and the General Assembly to restore the funding of state shared highway user revenues and police aid to municipalities as soon as possible…”
The 2010 session of the Maryland General Assembly allocated $1.6 million to Maryland’s 157 municipalities, which represent over 1.5 million state residents.
Compare this to the budget for fiscal year 2008 when $45 million was distributed and you can only imagine the impact on local municipal budgets as a result of the 90 percent reduction.
The challenges for municipalities have been made even worse when one takes into consideration that state revenue distribution for local police has been concurrently cut by 35 percent.
Looking at the total picture, the state of Maryland has balanced its budget in recent years by cutting funding for local cities and towns by a whopping 62 percent. Meanwhile, Maryland counties have only lost seven percent of its state shared revenues in the same time period.
In the past 22 years, the state has robbed the highway user fund 10 times. In the last seven years, cuts in highway funds have been used to help balance the budget five times – most of which have occurred under the current administration.
In the past several years, the Maryland Municipal League has stepped up a campaign to make sure that the public is better informed about just how local cities and towns are funded.
Over the last 70 years the General Assembly has chipped away at funding sources for local municipalities, to the point where, at present, statewide, local cities and towns now derive an average of approximately 60 percent of its funding from property taxes – a funding source since the first municipal charter was granted in Maryland in 1683.
The second largest source of revenue – an average of 15 percent for municipalities statewide – comes from individual income taxes, which have been a source of revenue for the state since 1937, although not necessarily available for municipalities until the current tax structure was essentially enacted in 1967.
After World War II, a concerted push on the part of the state began in earnest to streamline and organize municipal tax structure in Maryland in effort to make some coordinated uniform sense out of the hodgepodge of disparate and differing tax laws which varied widely from one municipality to the next.
Although much of the media and state officials refer to the current revenue sharing as “state aid” to local governments, that is certainly not how it began.
As many local tax structures were either taken away or taken over by the state, the General Assembly magnanimously offered to collect the tax revenue as a favor to the municipalities since the state was, after all, in a better position to administer the bureaucracy required in the collection of the revenue.
To be clear, currently the state takes our money away from local municipal residents, that before went straight in to local city halls, and as a favor, then gives it back. Originally, the money was designated to belong to local government, that is, unless, as in recent years, the state needs it more.
If you collected money that belonged to your neighbor and did not give it all back because you needed it more, it would be a crime. When the state does that to local cities and towns, it is called a reduction in state aid to local governments.
One of the streamlining efforts came about in 1946. This was when highway user funds were first established as a statutory portion of the Transportation Trust Fund.
Highway user revenue is now, across municipalities throughout the state, about seven percent of the average budget for a local town or city.
The revenue comes from state gas taxes, titling taxes, rental car sales taxes, licensing and registration fees, federal transportation funds and bond sale proceeds. It was supposed to be dedicated to counties and municipalities for local transportation projects.
Currently many municipalities throughout Maryland have been forced to drastically reduce services, lay off workers and even, in some cases, impose property tax increases to make up for the reduction in state-local government revenue sharing.
The proposed resolutions for the consideration by municipalities statewide are a good start at raising public awareness and reinvigorating a discussion about the financial health of our municipalities during the current gubernatorial election campaign.
It is critical that the state and the local cities and towns work together to overcome this loss in revenue. Local cities and towns simply cannot afford to continue to disproportionately shoulder the burdens of this current Great Recession and the consequences of the state of Maryland’s legislative amnesia and inventive budget process.