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Why The Fuss Over Highway User Revenues?

Why The Fuss Over Highway User Revenues?

  • Recession-driven state budget cuts have starved funding for local roads and bridges
  • Replenished state funds didn’t help resolve the local funding problem
  • County and municipal leaders urge state policymakers to help get this back in play

This background was written with the Annapolis newcomers in mind – the scores of new legislators, the dozens of new county officials, and the countless others who may not really speak the language yet of local road and bridge funding. We hope the analysis here is useful to them, and anyone, who follows state and local finances – as this is an enormous issue lingering since “the great recession” upended everyone’s budgets.

So What Are Highway User Revenues Anyway?

For decades, Maryland used one workhorse system to fund its roads and bridges. The revenues from motorists – gas taxes, car titling, and some fees – went into one account split 70/30 between the state and local governments. This split served everyone’s purposes for generations, even though locals maintain many more road miles than the State does. No local governments have their own transportation revenue systems – they’ve counted on the state Highway User Revenues (that 30% share) as their engine to maintain local roadways.

Why Are Local Governments So Worked Up?

During the depths of the great recession, the State needed funds to resolve its general fund shortfall, and redirected more than 90% of most counties’ and cities’ Highway User Revenues to help balance the state budget. The deepest cut came in the summer of 2009 by the Board of Public Works, but when the recession lingered the big changes were made permanent, and are still built into the current year’s budget.

How Much Money Are We Talking About?

It’s staggering. Across the local governments, the annual average shortfall is about $350 million each year. Even with special funding targeted to municipalities, they are still far short of their historic funding levels.

That’s about $2.1 billion that would have been used to support local roadways.

No major segment of the state budget has seen cuts as drastic as local roads.

Wait – How Does Baltimore City Fit In?

Baltimore City has always been a special case. The state doesn’t maintain roads in the City – even the many numbered highways. So, they have always received a larger share than other jurisdictions, to reflect those huge responsibilities.

What’s left of Highway User Revenue can look pretty unfair – and many people conclude that the share for Baltimore City (larger than what’s left for the other counties and cities) proves they were spared the deep cuts of 2009 and afterward. Not true. Baltimore City’s share was cut by some $90 million per year – far, far more than any other jurisdiction, even scaled per capita.

Was All This Part of the Transportation “Lockbox” Debate?

Absolutely. The voters overwhelmingly approved a constitutional amendment last fall to fence off transportation funding, and make it harder to divert it to other purposes. Every analysis reveals that when the state has diverted its own share of transportation funds during emergency budget times, it has repaid those funds. The multi-year diversion of Highway User Revenues away from local governments and to the state (either to its general fund or to its own transportation program) has never been repaid. That adds up to more than $2 billion in funds (and counting) paid by motorists but used for purposes other than they had a right to expect.

However, while the constitutional amendment did make it harder to move transportation funds away from transportation projects it didn’t resolve the six-year pattern of short changing local roads and bridges in the priorities that get funded through state revenues.

But Didn’t The Locals Get Helped By The 2013 Transportation Bill?

Not a dime.

It’s an understandable question. In 2013 Maryland passed a bill to change the state gas tax (in several parts), which brought new funding for transportation and infrastructure across the state. However, an under-appreciated part of this package was that every dollar of this new revenue was directed to state projects – overriding the formulas that otherwise would have split that revenue with local governments.

Do Highway User Funds All Go To Transportation?

Yes. When the state does send funds to local roads and bridges, either before or since the devastating cutbacks, the locals are obliged to use it for transportation. That has always been in state law. Last year, an additional report was required to account for these funds – but the need for local transportation is so great (especially with pent-up demand after years of deep cuts) there’s no challenge to show the funding targets. Every jurisdiction has pothole problems, decaying roads, bridges with structural issues, and the always-uncertain threat of major snow removal.

Is This Just A One-Party or One-Region Issue?

Not at all. The two counties listed first alphabetically on any impact sheet make this case plainly. Rural Allegany County saw its combined county and municipal funding drop from BIG to SMALL during the 2009 cutbacks. Anne Arundel County, with its half million people, dropped from BIG to SMALL in the same time. These are massive cutbacks to those counties and to their municipal areas as well.

The Hogan Administration announced its support for a full restoration plan, and backed it up by introducing legislation to do it this past session. We anticipate a bill being introduced again this upcoming session.

And who has taken the lead in the legislature? A Senate bill was introduced this year sponsored by a metro-area Democrat. House bills were sponsored by legislators from all parts of the state, and both parties. A bipartisan Senate bill was co-sponsored by two other Senators from Western Maryland and Montgomery County during the 2014 session.

This issue isn’t urban or rural, it isn’t D or R. It’s about the importance of long-neglected roads and bridges, and delivering to motorists the full transportation system they believe they are already paying for.

How Can I Help?

If you’re a legislator – we need your support for legislation to get Highway User Revenues back on track. Get off the starvation diet for local roads, and get back to fair funding. The 2016 Session is only a few month away. Start talking now with your colleagues on the House Environment and Transportation Committee, the House Appropriations Committee, and the Senate Budget and Taxation Committee, and let them know this is a priority. Support – or co-sponsor – bills to restore the funding. And keep talking about this issue, and what it means to the citizens and communities back in your district.

If you’re a county leader or other stakeholder and want to help – keep delivering the message. Talk to your Senators and Delegates, write to your local paper, and raise the issue. We can’t let these deep budget cuts just continue because too many people forgot, or don’t understand, what has happened.

This article was originally posted on March 8, 2015.

IRS Data on MD Taxpayer Departures Left to Interpretation

Recently released IRS data (admittedly from a few years ago, tax years 2011-12) again shows that more taxpayers left Maryland than moved into the State. However, differing interpretations of the data make it difficult to determine what it’s really telling us.

As reported by MarylandReporter.com,

“The IRS data presents a snapshot in time for Maryland,” said Daraius Irani, chief economist at the Regional Economic Studies Institute of Towson University. “While many would argue that aha, ‘MD is a high tax state and therefore people are leaving as a result,’ this is a fallacy as it confuses causality with correlation.”

But some argue it shows where dollars are moving and jobs are being maintained and generated – an important factor for policymakers to consider.

The data indicate that Maryland is a net loser in terms of net taxpayer income change when compared to other states.

The state ranked 45th for net taxpayer income change and 47th in terms of percentage, with a .9% decline in taxpayer adjusted gross income, trailed only by Illinois, Connecticut and Alaska. Nevada topped the list, with a net gain 1.97% adjusted gross income. In terms of total net adjusted gross income, Florida, Texas and South Carolina saw the biggest gains with $8.3 billion, $6 billion and $1.6 billion respectively.

The biggest disagreement seems to be over the reasons why individuals are deciding to leave the state.

Irani said that people could move due to the weather, retirement or new job opportunities, and because of the state’s size and location they may continue to work in the state while moving elsewhere.

Pettit said a Gallup poll that found Maryland had the third-most residents who planned to leave the state in the nation, also cited that 31% nationwide plan to move where the jobs are, not for factors like weather or family.

Read the full article, and policy debate, on the Maryland Reporter website.

Capital Debt Affordability Committee Begins Review

At the first of three major annual meetings of the Capital Debt Affordability Committee, the Committee began to review the state’s debt projection with analysis from Department of Treasury and Budget and Management staff.  They also heard reports from the Maryland Stadium Authority, the Maryland State Department of Transportation and the Maryland Department of Environment on major projects.

A few topics discussed include:

  • Progress on Baltimore City School Construction: The Maryland Stadium Authority has everything that they need with regard to Baltimore City School Construction projects and the projects are moving forward.
  • Savings associated with two refunding issues in FY 2015: These refunding issues generated $80.1 million in debt service savings on a net present value (NPV) basis. One of these was related to the State’s Calvert Street Parking Garage.
  • Upgrades to waste water treatment plants: By the end of 2017, all of these upgrades will be complete, helping the State to achieve a positive mid-term watershed implementation plan (WIP) review by the US Environmental Protection Agency. The State’s progress on sewage, which is advancing ahead of schedule, will help accommodate areas that are behind schedule, including stormwater and septics. All of the debt associated with these projects will be retired before 2030.

Analysts presented three scenarios for the Committee’s consideration, one with an additional $75 million through 2020, which the Committee approved last year for planning purposes, one without the additional $75 million, and one based on the Governor’s proposed FY 2016 Capital budget. Following the Governor’s proposed FY 16 capital budget would leave to $541 less in issuances through FY 2020 than would following the plan approved last year by the Committee.

As described by the Maryland Manual, the Capital Debt Affordability Committee annually reviews a broad swath of information before making its recommendation to the Governor.

Annually, the Committee submits to the Governor and the General Assembly its estimate of the maximum amount of new general obligation debt that prudently may be authorized for the ensuing fiscal year. In making this estimate, the Committee considers:

  1. the amount of general obligation debt that will be issued and outstanding during that next fiscal year;
  2. the amount of general obligation debt that will be authorized but unissued during such fiscal year;
  3. the capital program plan prepared by the Department of Budget and Management for the ensuing five fiscal years;
  4. projections of school construction and capital improvement needs prepared by the Interagency Committee on School Construction for the ensuing five fiscal years;
  5. projections of debt service requirements for the ensuing ten fiscal years;
  6. other factors relevant to the ability of the State to meet its projected debt service requirements for the ensuing five years;
  7. criteria established or used by recognized bond rating agencies in judging the quality of State bond issues;
  8. other factors relevant to the marketability of State bonds; and
  9. the effect of additional debt authorizations on each of the factors enumerated above. The Committee’s estimate is advisory and not binding upon the Governor, the Board of Public Works, or the General Assembly.

For more information, see the presentations made to the Committee here. The next meeting of the Committee is on September 16.

Register Now for LGIT’s Annual Meeting “Service: The Key to Success” – October 29th

Local Government Insurance Trust (LGIT) will be hosting its 28th Annual Meeting, Service: The Key to Success, on Thursday, October 29, 2015 at the Navy-Marine Corps Memorial Stadium in Annapolis, Maryland.  The day-long event will feature guest speaker Tom Leonard, President & CEO of Tom Leonard’s Farmer’s Market, and part owner of Stew Leonard’s. Academy for Excellence in Local Governance Public Information Act (PIA) course will also be offered.

LGIT compressedFor more information, please view the event details or meeting agenda.  Click here to register.

LGIT is a nonprofit association authorized by state law, wholly owned and managed by its local government members. The Trust’s main purpose is to provide joint self-insurance programs or pools for towns, cities and counties in the State of Maryland. The concept is simple – rather than paying premiums to buy insurance from an insurance company, local governments contribute those premiums into a jointly owned fund. The money in that fund is used to pay for the members’ claims, losses and expenses.

Questions? Contact LGIT at 800.673.8231. LGIT is a MACo Gold Corporate Partner.

Montgomery Leaders Gather to Discuss Education Funding

As reported in the Bethesda Beat, Montgomery County leaders gathered at a Rockville elementary school Monday to talk about the need for more money dedicated to education.

Montgomery County is the largest school system in the state, and its local and state elected officials, and representatives of the school board are united in their aim of increasing the county’s education funding. As described in the article,

County Executive Ike Leggett again hinted at raising property taxes. State Sen. Nancy King (Dist. 39) promised a renewed fight in Annapolis for state funding during the next legislative session. The vice president of the countywide PTA organization suggested a bigger cut of casino revenue should be reserved for education.

County Executive Leggett, MACo’s President, stated,

“I brag constantly about our school system, but I cannot continue to hold that flag up unless we are prepared to provide the resources that we’ve talked about,” Leggett said.

The article also quotes Montgomery County Councilmember Craig Rice, chair of MACo’s Education Committee,

Council Education Committee President Craig Rice worried the system may not be able to provide that level of education for much longer if not provided with enough state funding.

Gov. Larry Hogan’s decision in May not to release $17.8 million of education funding to Montgomery County roiled many in Annapolis, Rockville and the education field.

Rice said he urged Lt. Gov. Boyd Rutherford not to make the same move earlier this month at a conference of state elected leaders in Ocean City.

For more information, see the Bethesda Beat.

Police Body Camera Commission Explores Best Practices

The Commission Regarding the Implementation and Use of Body Cameras by Law Enforcement held a day-long meeting on Tuesday, September 1, to explore the best practices for police body cameras. Commission members took a close look at a number of topics including:

  • Circumstances requiring camera activation
  • Cessation of recordings
  • Notification
  • Confidentiality
  • Storage and maintenance of recordings
  • Review and retention of recordings
  • Dissemination and release of recordings
  • Training and discipline
  • Privacy

Commission members thoroughly debated each topic and proposed amendments to tailor a working document of best practice proposals to the needs and concerns of the State. Each issue went to a vote.

Commission members tabled the discussion of storage and maintenance of recordings as the technical nature of proposed amendments required additional study of the matter. Members will vote on storage and maintenance best practices at a later date.

The issue of dissemination and release of recordings generated significant discussion. As previously reported on Conduit Street, access to public records was one issue the Commission decided they were not going to address. This was an important issue MACo testified on during the legislative session. The Chairman had noted at the previous commission meeting that the Maryland Public Information Act governs public disclosure, and that camera footage is considered a public record under the act. Consequently changes to the law were deemed outside the scope of the Commission’s power and would require an act of the legislature.

Before concluding Tuesday’s meeting the Commission voted to include with their best practices report a letter to the General Assembly advising them to consider conducting a review of the MPIA as it relates to body worn cameras and whether any changes to the current law are needed to address privacy concerns.

The Commission’s report to the Maryland Police Training Commission (MPTC) and the General Assembly on the best practices for the use of body cameras by a law enforcement officer is due by October 1, 2015.

Additional Coverage:

Maryland Panel Wants Law Changed to Restrict Body Camera Footage (The Washington Post)

What is Maryland’s Largest County by Land Mass?

MACo County Triviamaryland-county-map

This Week’s Question:

What is Maryland’s Largest County by Land Mass?

Make a guess and send your answer to Kaley Schultze before the close of business Thursday. A correct answer will be chosen at random and the winner and answer will be published in the Hot Topics section of Friday’s This Week on Conduit Street.

Maryland Boards of Education Representative Questions School Funding Study

As reported in the Herald Mail, Maryland Association of Boards of Education representative Donna Brightman is questioning the interim reports of the Study of Adequacy of Funding for Education in the State Of Maryland.

For example, the school size study recommends that the state establish maximum school sizes and begin a competitive grant program to pay for school construction and renovations. The maximum cost of construction through this program would be $2.5 billion.

Brightman said she and others at the briefing want to know whether this would be new money appropriated by the state, or if it would be carved from other resources. She also questioned whether it would be equitable, with all 24 school systems having an equal chance to get the grant money.

Brightman also questioned the study’s process, finding that it has not been inclusive of all jurisdictions. As quoted in the article,

Brightman said she has other concerns, including the fact that some jurisdictions, including Washington County, have not been represented in various parts of the process. Questions need to be raised as it continues, she said.

While some of the interim reports from the adequacy study have included recommendations that could affect funding, ultimately, a change in the school funding formulas would be accomplished through legislation in Maryland’s General Assembly. A change in capital funding for school construction would be accomplished through the Governor and General Assembly’s budget process.

For more information on Brightman’s concerns, read the whole story from the Herald Mail.

For more information on the adequacy study and its interim reports and recommendations, see our previous posts, Is Maryland Counting Its Low-Income Students Correctly?Study Recommends School Formula Changes For Enrollment Gains, Drops, and Maryland Publishes School Size Report with Enrollment Recommendations.

Frederick Council Approves Manufacturing Tax Credit

The Frederick County Council approved a measure during its meeting yesterday to create a manufacturing tax credit in the county. The program that would provide tax credits for up to 10 years for new and expanding manufacturing businesses.

As reported by the Frederick News-Post,

In a 5-2 vote, the governing body passed a commercial and industrial tax credit, which would be available to manufacturing, fabricating and assembly businesses currently in or looking to move to Frederick County that invest at least $5 million and create 25 full-time jobs.

Council President Bud Otis stressed the urgency in passing the tax credit Tuesday night to further attract two businesses that are considering expanding in or moving to Frederick County, and would qualify under the current legislation.

“To solidify the offers you are trying to make right now, it’s important for us to get this bill into law with the understanding that we will probably have some amendments” at a later date, Otis said.

As previously reported on Conduit Street, the City of Frederick passed a similar credit earlier this month.

States Adopt Drone Usage Laws, Feds in Midst of Regulatory Process

Ac­cord­ing to the Na­tion­al Con­fer­ence of State Le­gis­latures, the past two years have seen 26 states pass le­gis­la­tion con­cern­ing drones, as reported in Route Fifty. The laws range widely in their treat­ment of drones, from the mildly lim­it­ing to the ex­tremely re­strict­ive, the article describes.

Maryland is one of the states that recently passed legislation on drones. Maryland’s new law does not restrict drone usage, however. The new law intends to encourage drone industry experimentation in Maryland by prohibiting any local regulation of drone usage, establishing the state as the entity able to do so. MACo opposed the legislation, pointing out that the FAA considered local law enforcement to be a needed partner in policing drone activity. Recent events in Maryland have highlighted the need for that partnership.

The Federal Aviation Administration will regulate safety aspect of drones (which they call “UAS,” unmanned aircraft systems), and the increasing amount of drone use could expedite the federal regulatory process.  At this point, the federal regulations are still in draft form. As described by Route Fifty,

The main over­seer of the na­tion’s air­space, the Fed­er­al Avi­ation Ad­min­is­tra­tion, is in charge of study­ing safety as­pects of com­mer­cial drone flights and is fi­nal­iz­ing a set of safety rules for com­mer­cial users. A draft of its pro­posed rules was an­nounced in Feb­ru­ary, and FAA of­fi­cials have said they ex­pect to be fin­ished by mid-2016.

For more information, see our previous posts, Drone Intercepted Near Maryland Prison, Plot to Smuggle ContrabandCongressman Asks FAA to Stop Drone Interference with Emergency ResponseGeneral Assembly Passes Drone Bill With Study Amendment, and Federal Regulators Speed Approvals of Commercial Drone Use.