WASHINGTON — With most of the state’s revenue spoken for and few options left for raising more, Maryland Gov. Martin O’Malley announced Wednesday that he will introduce a proposal to repeal a sales tax exemption on gasoline as part of a larger plan to inject money into transportation infrastructure and create jobs.

Delivering his state of the state address to the Maryland General Assembly, O’Malley said 84% of the budget is already allotted to public safety, health services and the school system, but that the state clearly has infrastructure problems that can’t be solved with current revenues.

Therefore, O’Malley said, he will soon introduce a bill to repeal the current state sales-tax exemption on gasoline purchases, which would apply a 6% tax increase on Maryland gas purchases in 2% increments over three years.

Maryland currently imposes a flat 23.5 cent tax on each gallon of gasoline. That’s well below the U.S. national average of 30.4 cents, according to the American Petroleum Institute. Twenty states impose higher total fees.

O’Malley, a Democrat, said he knows the proposal will not be popular, but insists there is no sound way to solve the problem with spending offsets.

A 2011 study by the Maryland Blue Ribbon Commission on Transportation Funding found the state needs an additional $870 million annually in new transportation revenues just to address current needs.

“Every passing year brings fewer and fewer responsible choices for cutting,” O’Malley said.

The governor’s FY 2013 proposal includes almost $800 million in cuts to bridge a $1 billion structural deficit.

The Maryland branch of the small-government advocacy group Americans for Prosperity strongly opposes the proposal, arguing that it will kill the very jobs O’Malley said he aims to create by raising new tax revenue for infrastructure construction.

“Gas prices are soaring towards $4.00 a gallon with no relief in sight,” AFP said in a release. “Coupling a 6% sales tax to gas with the base 23.5-cents-per-gallon tax will place Maryland as one of the most expensive places in the country to fill up the gas tank.”

The governor said his proposal includes a “breaking provision” to reinstate the exemption in the event that gas prices skyrocket.

Besides raising taxes, O’Malley also announced an effort to encourage more public-private partnerships.

He submitted legislation to the state Senate last week creating a new system for evaluating and approving P3 projects, and it is currently awaiting committee approval.

O’Malley’s P3 push comes a month after the Joint Legislative and Executive Commission on Oversight of Public-Private Partnerships issued a report advocating more use of P3s.

Maryland is one of only a handful of states to have undertaken major P3 projects already, such as a 50-year lease agreement between the state and Ports America Chesapeake to operate the Seagirt Marine Terminal, a major cargo handling facility in the Port of Baltimore.

O’Malley said more could be done to use the state’s “dynamic private sector” to spur job growth and rebuild aging infrastructure. “We can leverage even more private dollars for public good,” he said.

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