Maryland Legislature Considers New Pension Funding Proposal

The General Assembly is weighing a proposal to change funding for the State Pension System that could provide additional funding for other parts of the budget over the next few years. The proposal would end the plan to reinvest savings from recent benefit reductions, but would accommodate a repeal of Maryland’s highly criticized corridor funding method in favor of the commonly used actuarial funding method.

As reported in the Baltimore Sun, 

Warren Deschenaux, the legislature’s chief analyst, said years of strong investment returns have put the state on a path to reach the 80 percent goal by 2021. His department is proposing to scrap the supplemental payments and shift to actuarial funding in next year’s budget plan.

The effect of that change would be to reduce the state’s payments into the system next year and over the next several years. Deschenaux said the state could do so and still hit its original funding target date of 2023.

Michael Rubenstein of the Department of Legislative Services presented the proposal at the meeting of the House Appropriations Committee on Friday. According to discussion at the meeting, short-term savings of the proposal could result in additional costs in the long-term, unless a new amortization period is adopted.

The State Pension Board of Trustees will discuss the pension funding proposal on Tuesday.

For more information, read the full story from the Baltimore Sun here or view the presentation on the proposal from the Department of Legislative Services here.

Shore Delegation Hears MACo Initiative Updates

On February 27, the Eastern Shore Delegation heard from MACo Executive Director Michael Sanderson, with an update on MACo’s top priorities for the 2015 session.

In talking about MACo’s top priority – restoring local roadway funding – Mr. Sanderson said, “it’s very important that this is coming from everywhere. Several bills are in, and they are from both urban and rural legislators, both Democrats and Republicans.”

He commented on the state’s strict maintenance of effort law, citing its inflexibility creating a “disincentive to spend more than you have to in the schools.” MACo is seeking legislation to alter several components of that law.

Mr. Sanderson also expressed optimism about meaningful drug-related legislation passing this year, saying “this issue is clearly getting taken seriously, and we’re hopeful we’ll see some good bills get out this year.”

He relayed the lingering concerns with pretrial processes, and the reliance on contract attorneys to provide representation before District Court Commissioners. “We really dislike the current year’s provision,” he said, “where the state can bill the county for cost overruns. We don’t even control it.”

For more on MACo’s slate of legislative initiatives, read previous Conduit Street coverage.

Infrastructure and Education Are Focus of Vice President Biden’s Address to Counties

Vice President Biden addressed county leaders gathered in Washington DC for the annual Legislative Conference of the National Association of Counties this week. The Vice President began by recalling his own time as a local government official and noted that local government is the most important, least appreciated form of government.

The Vice President remarks focused on two main goals: investment in infrastructure and education.  The Vice President spoke on the importance of partnerships between businesses and community colleges, and the tie between a our citizens’ education levels and our country’s ability to compete globally. On transportation infrastructure, he said that currently only 20% of surface transportation funding goes towards transit and noted the challenges of accommodating our growing population’s transportation needs. He shared plans to increase transit funding to 30% and eliminate tax loopholes to help fund transportation infrastructure.

Listen to a full audio of the Vice President’s remarks below, starting around the 47 minute mark.

MACo Supports Independent Financial Analysis of Education Funding Waivers

On February 26, Robin Clark, MACo’s Policy Analyst, testified to the House Ways and Means Committee in support of HB502, State Department of Education – Financial Advisory Board – Establishment. This bill would create a Financial Advisory Board to review and analyze a county board’s application for a maintenance of effort funding waiver based on local fiscal conditions. The maintenance of effort law mandates that a county provide the same amount of funding per pupil towards education each year. There are limited opportunities for a county to apply for a one-year waiver from the mandate, one of these is a waiver based on local fiscal conditions significantly impeding the county’s ability to meet the level of funding required.

The Financial Advisory Board would provide the State Superintendent with advice on six factors relating to a county’s fiscal condition for her preliminary assessment of a county’s waiver application. The Financial Advisory Board would also prepare a plain English analysis of the waiver application for the public.

The written testimony explains:

This bill properly provides a financial analysis where appropriate and selects a suitable body to produce that analysis. At the same time, the legislation preserves the ultimate authority of the State Board over the grant of the waiver.

For more on MACo’s 2015 legislation, visit the Legislative Database.

New Bill Bolsters Incentives for Local Funding and Public-Private Partnerships in Education

A newly introduced bill – HB 1079/SB 627 sponsored by Delegates Shoemaker, Afzali, Buckel, Ghrist, Hornberger, Long, McKay, Metzgar, Reilly, Simonaire, and Szeliga, and Senators Eckardt, Ready, and Reilly – presents several fixes to the local education funding system that would promote county government investment in new education programs and technologies, and public-private partnerships in school construction.

The bill has three main elements:

  • Clarifying the process for county government investment in one-time costs, such as the start-up of new educational programs, new computer labs, new technologies, and new libraries
  • Ensuring that business investment in school construction provided the same treatment as traditional school construction under education funding laws
  • Repealing mandated increases in local education funding that have no relation to school operating or facility costs

Current laws intend to provide opportunities for special one-time county government investments in education through an exclusion to the maintenance of effort law. Implementation of the exclusion, however, and recent reports on costs that have been denied by the Maryland State Department of Education reveal impediments to accessing the nonrecurring cost designation. Under maintenance of effort laws, counties must provide the same amount of education funding per pupil each year to local school boards. Only when a cost is approved as nonrecurring by the State Board of Education may it be excluded from the annual maintenance of effort calculation – without this designation, even if an expense is one-time, it will be added in to the education budget in all future years.  This bill clarifies types of costs that are excluded from maintenance of effort and the process for nonrecurring cost applications.

A platform for private-public partnerships in public school construction is outlined in the Maryland Code’s provisions for alternative financing. The law provides that in order to finance, speed delivery, transfer risks, or otherwise enhance the delivery of public school construction, a county may use alternative financing methods, including public-private partnerships. Local education funding laws, however, fail to clarify that alternative financing qualifies for the same fiscal treatment as traditional school construction, creating a chilling effect these novel uses for private investment in our schools.  This bill provides that county funding for public-private partnerships will be excluded from the maintenance of effort calculation after the lease of a school facility under the partnership has ended.

The “escalator clause” of the maintenance of effort law provides that in some cases, a county must increase its education budget based on a factor of county education funding and local wealth. Under current law, Baltimore City and Worcester County could be required to increase their minimum payments towards operating expenses of their public school systems next year, even absent additional costs. According to the Department of Legislative Services, Baltimore City has a 25.2% poverty rate and Worcester County has a 10% poverty rate, but the wealth calculation used by the State for the escalator clause emphasizes property values, which can be high in urban areas like Baltimore and Ocean City.  These jurisdictions also have additional pressing needs, including addressing the public safety concerns of the heroin epidemic and aging transportation infrastructure, which require large portions of the local budget.  This bill repeals the maintenance of effort escalator.

The House Ways & Means Committee will hold a hearing on HB 1079 on Thursday, March 5. The Senate Budget and Taxation Committee will hold a hearing on SB 627 on Tuesday, March 10.

21 Counties Make Progress on Age of School Facilities

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Budget analyses of Maryland’s Executive Agencies often contain notes about their progress towards strategic goals.  In its analysis of the Interagency Committee on School Construction budget, the Department of Legislative Services includes some information on statewide school construction.

The average age of school facilities is a metric used to gauge progress on statewide school construction goals.  The state’s baseline average, determined in 2005, was an average age of 24 years.  The 2014 average age was 28 years.

Here are a few highlights from the analysis:

  • From fiscal 2005 to 2014, 21 [counties] improved their standing in terms of deviation from the State average age.
  • The oldest schools are in Baltimore City, but schools in Anne Arundel, Washington, Baltimore, Allegany, Prince George’s, and Kent counties are also below the 2014 statewide average of 28 years.
  • Talbot County has the newest schools, with an average construction date of 2000, or 15 years old.

The report also notes,

Since fiscal 2005, increase in the number of school systems with average square footage above the statewide average indicates an overall improvement in the condition of schools in Maryland and reflects the large amount of State and local funding that has been allocated to public school construction in recent years.

In recent years, the State has fulfilled its aim of investing $250M per year in school construction, and now Governor Hogan has proposed to continue a high level of school construction funding.  County governments provide a large share of school construction funding, allocating $981M for capital projects in K-12 education in FY 2014 alone.

For more information, see the Analysis of the FY 2016 Maryland Executive Budget, 2015.

Maryland Community College Faces Difficulty in Funding Its Budget

Recent debate over the Governor’s proposed budget has focused on K-12 school funding, however the Governor’s proposed budget provides Maryland’s community colleges with $13 million less than current law funding levels. This week, MACo’s Education Subcommittee hosted Dr. Bernie Sadusky, Executive Director of the Maryland Association of Community Colleges.  Dr. Sadusky spoke with MACo’s Committee about the need to return to statutorily required funding levels as soon as possible.

Decreases in state funding put additional pressure on county governments that share responsibility with the state for funding community colleges.  As reported by The Frederick News-Post, Frederick Community College (FCC) is now looking at a difficult year to fund its proposed $49 million budget.  As described in the article,

. . . Gov. Larry Hogan presented a budget that reduced FCC’s funding an additional $180,000. “We did not expect that $180,000 hit,” [Community College President Elizabeth] Burmaster said. The college’s proposed 2016 budget counts on $333,000 more from the county to pay for the 1 percent COLA and $430,000 to offset an estimated drop in revenue from tuition and fees. “If the funding doesn’t come from the county, there would have to be cuts in the existing budget,” Burmaster said.

For more information, read the whole story from The Frederick News-Post here.

MACo Opposes Mandated New Costs in Shared Projects

Today in the Health and Government Operations Committee, MACo Legislative Director Andrea Mansfield testified opposing HB 336, Procurement-State Funds- Energy Efficient Outdoor Lighting Fixtures. This bill would prohibit State funds from being used to install or replace a permanent outdoor luminaire unless specified energy efficient lighting requirements are met. This bill could limit qualified bidders and place more onerous requirements on the counties, increasing the costs of local contracts funded partially with State dollars.

MACo’s written testimony explains:

Counties have made concerted efforts to be more energy efficient. Many counties have dedicated sustainability offices and all have implemented energy efficient practices. Under current practice, counties have the flexibility to establish procurement preferences while meeting their fiscal goals. Imposing State requirements onto the local procurement process would ultimately limit local flexibility and the number of competitive bids, increasing project costs.

The Legislative Database has information on all of MACo’s 2015 positions.

Governor Shares Charter School Vision, Others Raise Concerns

The Governor’s first legislative agenda includes the Public Charter School Expansion Act, a bill that would make several fundamental changes to charter school funding and administration in Maryland. The bill is scheduled for a hearing in the House of Delegates on February 26 and in the Senate on March 4 and proponents and opponents to charter reforms are beginning to align.  Major elements of the proposal include repealing the requirement that teachers at charter schools are public school employees, providing charter schools eligibility for State school construction funding, and allowing charter schools to apply the State Board of Education for a comprehensive waiver from regulations governing other public schools.

The Governor’s Press Release  shares his vision for expanding Maryland’s charter school program,

Since the introduction of new laws over 12 years ago, just 47 charter schools currently operate in Maryland, with approximately 18,000 students enrolled. According to the National Alliance for Public Charter Schools, Maryland has the fewest public charter school of any state in the nation where charter schools are permitted. Governor Hogan’s proposed legislation to Strengthen Maryland’s Public Charter School Law will deliver greater autonomy and could allow for new innovation in public charter schools through changes in the way public charter schools are regulated by education authorities.

According to the Office of the Governor, the provisions of the legislation will do the following:

  • Require public charter school operators to include in their applications a plan to provide rigorous program instruction and ensure that professional staff will be well qualified and credentialed
  • Provide an operating funding formula based on per pupil allocation and a capital funding stream by authorizing charter schools to be eligible for that capital improvement program
  • Ensure that public charter schools have access to public facilities commensurate with other public non-charter schools
  • Authorize charter school employees to be employees of the public charter school rather than of the local school system
  • Exempt public charter schools from the state teacher certification requirements
  • Authorize public charter school employees to form their own exclusive bargaining unit
  • Allow public charter school employees to be exempt from collective bargaining agreements of local school districts

Some members of the education community have already voiced opposition to this legislation, including the Maryland Association of Boards of Education (MABE).  In its recent legislative publication, GreenSheetMABE states that,

The proposed legislation would set charter schools above other public schools, in terms of per pupil funding and facility funding, and at the same time weaken or eliminate quality assurances for teachers and principals. In addition, the proposed legislation would allow the State Board of Education to directly oversee the operation of charter schools it authorizes.

The Maryland State Education Association (MSEA), the largest union and professional association in Maryland, has also commented on the proposal.  MSEA states on their website,

While we support Maryland’s charter schools and are open to further strengthening our already strong law, many of Gov. Hogan’s proposals are extreme, counterproductive ideas that would lower the state’s high standards for quality, accountability, and equity. Maryland’s high standards have supported a number of successful charter schools while avoiding the pitfalls experienced by states with lower standards. By the metrics of fostering accountability, fiscal responsibility, and educational quality, Maryland’s charter school law has proven to be one of the strongest in the country.

For more information, read the GreenSheet, the Governor’s Press Releaseand read the Public Charter School Expansion and Improvement Act of 2015.

MACo Testifies in Support of “QZAB” School Construction Program

The Budget and Taxation Committee heard testimony today, February 18, on SB 79, Creating of a State Debt – Qualified Zone Academy Bonds. As described in the Department of Legislative Services fiscal and policy note,

The federal Tax Reform Act of 1997 created Qualified Zone Academy Bonds as a new type of debt instrument to finance education projects. Financial institutions, insurance companies, and investment houses are the only entities allowed to purchase the bonds, which provide for a federal tax credit instead of interest earnings.

MACo’s Policy Analyst Robin Clark testified in support of the bill which would authorize the Board of Public Works to issue interest-free Qualified Zone Academy Bonds (QZABs) this year, thereby increasing local school board revenues for school renovation by $4.6 million. These bonds would be used for development or improvement purposes of qualified schools in accordance with criteria established under the Aging Schools Program.

MACo’s written testimony states:

 These programs fill an important niche by covering projects that would not normally qualify as true capital projects eligible for general obligation bond (GO) funding. The counties, who share responsibility with the State for Maryland’s schools, appreciate financial support for their infrastructure goals.

For more information on MACo’s 2015 legislation, visit the Legislative Database.