Backed by Gov. O'Malley and Democrats, the $264 million tax package raises taxes and averts spending cuts.

Gov. Martin O'Malley announced Friday that he will convene a special legislative session May 14 to complete work on a budget that left the state with $512 million in cuts.

More than $500 million in cuts to education, local aid and other planned spending will go into effect July 1 if the legislature does not act.

Democrats and Republicans sparred over whether a special session of the General Assembly is needed to pass tax increases to avert steep budget cuts, while Moody's Investors Service warned the situation could hurt the credit ratings of localities that depend on state aid.

Gov. Martin O'Malley now must decide whether and when to call a special session after the meltdown of a Maryland budget compromise that would have raised income taxes to avert about $512 million in cuts

Legislative leaders call for special session to resolve financial issues.

The General Assembly's 90-day session is scheduled to adjourn at midnight.

Negotiators for the Maryland Senate and House remain at an impasse over the state budget with only four full days remaining before the scheduled end of the General Assembly's 90-day session.

Maryland lawmakers and legislative staff are hoping to iron out differences in budgets passed by the state Senate and House of Delegates by midweek.

On paper, the budget plan looks similar to the one that passed the Senate last week, which would also raise taxes and send retirement costs back to counties. Politically, though, the two options now represent bookends in a debate that could produce dramatically different perceptions about Maryland's fiscal priorities.

Maryland lawmakers and legislative staff are hoping to iron out differences in budgets passed by the state Senate and House of Delegates by midweek.

Maryland income taxes would rise and a split of teacher pension costs with local governments would be phased in over four years instead of one, under changes to Gov. Martin O'Malley's budget plan that were approved by the Senate Budget and Taxation Committee on Thursday.

Local Maryland officials and state residents on Wednesday expressed strong disapproval with provisions of a difficult budget-balancing measure, which includes a controversial shift of teacher pension costs to counties as well as increases in taxes and fees.

Article saying Maryland should create a voluntary "buy back" program in which the state would pay cash to public workers who agree to forego some of their pension benefits. If structured correctly, and if many Maryland workers have preferences similar to their Prairie State counterparts, this program could significantly reduce state pension fund liabilities while giving workers the cash they want.

Democratic lawmakers, who control the House, portrayed the $14.6 billion spending plan as a fiscally prudent and socially responsible approach to closing an estimated $1.6 billion shortfall. Republicans characterized the proposal as not going far enough to address Maryland's budget mismatch between spending and revenue.

Maryland's pension funding situation is one of the worst in the nation, a panel of financial experts said. The state has chronically shortchanged its pension system since 2002.

One major difference between the two neighbors: The Keystone State has tackled its pension morass, while the Old Line State is in the early stages of examining changes to its ailing system.

The state's fiscal watchdogs this summer voted to "smooth" massive investment losses in 2009 at the state fund over 10 years instead of the usual five. Smoothing is a technique used by pension funds to account for market volatility. Major upticks or downturns are accounted for over five years to make it easier to budget for annual contributions.

History of pensions in the state of Maryland and city of Baltimore detailing how pension plans ended up in a fiscal predicament.

2011 is shaping up as the year politicians begin to take serious aim at cutting promised benefits. What was a mere trickle of states and municipalities starting to address massive unfunded pension liabilities in 2010, which are now estimated to total more than $1 trillion, looks to grow to a torrent in 2011.

Article saying Maryland should create a voluntary "buy back" program in which the state would pay cash to public workers who agree to forego some of their pension benefits. If structured correctly, and if many Maryland workers have preferences similar to their Prairie State counterparts, this program could significantly reduce state pension fund liabilities while giving workers the cash they want.

Video of Bob Williams addressing the underfunded state pension fund problem facing so many states.  He states that the public cannot afford the benefits and suggests defined contribution programs as a solution.

Maryland lawmakers and legislative staff are hoping to iron out differences in budgets passed by the state Senate and House of Delegates by midweek.

Maryland income taxes would rise and a split of teacher pension costs with local governments would be phased in over four years instead of one, under changes to Gov. Martin O'Malley's budget plan that were approved by the Senate Budget and Taxation Committee on Thursday.

Local Maryland officials and state residents on Wednesday expressed strong disapproval with provisions of a difficult budget-balancing measure, which includes a controversial shift of teacher pension costs to counties as well as increases in taxes and fees.

Article saying Maryland should create a voluntary "buy back" program in which the state would pay cash to public workers who agree to forego some of their pension benefits. If structured correctly, and if many Maryland workers have preferences similar to their Prairie State counterparts, this program could significantly reduce state pension fund liabilities while giving workers the cash they want.

Democratic lawmakers, who control the House, portrayed the $14.6 billion spending plan as a fiscally prudent and socially responsible approach to closing an estimated $1.6 billion shortfall. Republicans characterized the proposal as not going far enough to address Maryland's budget mismatch between spending and revenue.

The state's huge unfunded pension liability cannot be addressed effectively without changes for current employees. But the changes being proposed are hardly draconian or unfair.

History of pensions in the state of Maryland and city of Baltimore detailing how pension plans ended up in a fiscal predicament.

The state's fiscal watchdogs this summer voted to "smooth" massive investment losses in 2009 at the state fund over 10 years instead of the usual five. Smoothing is a technique used by pension funds to account for market volatility. Major upticks or downturns are accounted for over five years to make it easier to budget for annual contributions.

One major difference between the two neighbors: The Keystone State has tackled its pension morass, while the Old Line State is in the early stages of examining changes to its ailing system.

Maryland's pension funding situation is one of the worst in the nation, a panel of financial experts said. The state has chronically shortchanged its pension system since 2002.

This all boils down to who gets to pick taxpayers' pockets first, public pensioners or municipal bond investors? More people are waking up to the hard reality that when it comes to state and local government, somebody has to lose money over the next few decades. The National Association of Bond Lawyers is worried enough about it to issue "Considerations" for advising clients who think they're getting safe investments.

Despite an organized campaign to stop public pension reform, reality is beginning to break through.  One recent report outlines a possible path to long-term solutions and another details the necessity of states and municipalities finding their own way because federal bailout is impossible.  And Chicago Mayor Rahm Emanuel released a plan that could have been based on both reports.

Hey, young public employees, what are you going to do when your pension checks bounce after you paid in for decades? That is what will happen in many - maybe all - states and municipalities sooner or later if they do not reform right now. If you want to see the future, just look at Illinois. One citizen there did, and came up with a real reform plan that might work.

Public employees should take their pension money now and run to avoid risk of getting reduced benefits - or nothing - in the future. It's the best deal for them and for taxpayers. A growing chorus of credible voices including the Government Accountability Office, a Federal Reserve bank and now the Harvard Kennedy School Mossavar-Rahmani Center for Business and Government confirm state and local government finances are "spiraling out of control" and even draconian reforms only make it "more likely" that future benefits will paid in full.

In what universe would $500 million in cuts from a $35.4 billion budget be a doomsday scenario? Perhaps for Democratic lawmakers set on raising taxes again, the failure of their bill was a disappointment - but the end of the world? Hardly.

Hey, young public employees, what are you going to do when your pension checks bounce after you paid in for decades? That is what will happen in many - maybe all - states and municipalities sooner or later if they do not reform right now. If you want to see the future, just look at Illinois. One citizen there did, and came up with a real reform plan that might work.

While state lawmakers grapple with spending issues in special sessions, the state is hemorrhaging money paying for lawmakers' overtime.

This is what it sounds like when the Federal Reserve Bank screams: "Much has been written about the various headwinds restraining economic activity over the near term. However, our economy also has other headwinds to confront over the medium- to-longer-term. ... the finances of some state and local governments are also under stress and in need of serious adjustments."  - Federal Reserve Bank of Cleveland President Sandra Pianalto

States are taking action to prepare for possible downgrades and future revenue cuts by proposing possible solutions now. But which plan is the best plan?

Often referred to as the "Death Tax," the federal government imposes a tax on the estate of deceased individuals regardless of the means of transfer. Many states initially jumped on the bandwagon and began taxing "unrealized" wealth, but more recently, some states are turning their backs on estate taxation or tweaking it in next coming years.

Will Minnesota Governor Mark Dayton join the rest of us living in reality? So far, it's not looking good.

The state's huge unfunded pension liability cannot be addressed effectively without changes for current employees. But the changes being proposed are hardly draconian or unfair.

Minnesota Governor Mark Dayton's move to raise the state income tax to be the highest in the nation ignores the fact that recent similar efforts have not been successful.

If the state does nothing more than adhere to the commission's current recommendations, we certainly will find ourselves here again: asking public servants for more concessions and taxpayers for more support.

Fiscal stress and strain continues in the fifty states this week as more legislators look for ways out of the black holes in which they find themselves. Solutions sought by states include delayed retirement, increased pension contributions, and furloughs.