3840

VETOES

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall
take effect October 1, 1985.

May 28, 1985
The Honorable Melvin A. Steinberg
President of the Senate
State House
Annapolis, Maryland 21404

Dear Mr. President:

In accordance with Article II, Section 17 of the Maryland
Constitution, I have today vetoed Senate Bill 455. In light of
the very recent crisis in the Savings and Loan Industry and
associated increased State regulatory, insurance and management
requirements, enactment of this bill into law would be
inappropriate.

Senate Bill 455 would, in part, reduce the rate of the
franchise tax imposed on Savings and Loan Associations to half of
its present rate of 0.013 percent by tax year 1987. The fiscal
impact of this phased reduction of the franchise tax would be a
loss of revenues of $0.68 million in Fiscal Year 1986, $1.02
million in Fiscal Year 1987, $1.43 million in Fiscal Year 1988,
and continued losses in future years.

Although not an expressly dedicated revenue source, the
franchise tax was enacted as part of the Savings and Loan
Association Act of 1961 (Chapter 205 of the Laws of 1961) for the
purpose of levying an assessment on State and Federally chartered
Savings and Loan Associations to provide the necessary funding
for State regulation of the Savings and Loan industry in
Maryland. See, American National Building and Loan Association
v. Mayor and City Council of Baltimore, 245 Md. 23 (1966).

As I understand it, the purpose for approving Senate Bill
455 during the 1985 Session of the General Assembly was to
restore an equilibrium between the revenues raised by way of the
franchise tax and the costs to the State of regulating the
Savings and Loan Industry. As recent events in Maryland have
revealed, rather than maintaining State funding at prior historic
levels, the State's role in regulating Savings and Loan
Associations in Maryland will require enhancement in the short
term. Further, enactment of House Bill 6 during the 1985
Extraordinary Session of the General Assembly created the State
of Maryland Deposit Insurance Fund Corporation and transferred to
the State the insurance responsibilities previously performed by
the Maryland Savings-Share Insurance Corporation. In light of
the fiscal uncertainties associated with the State's new and
expanded responsibilities in the area of oversight and insurance