May 14, 2013
A recent article on the public interest news site ProPublica details “Everything We Know About What’s Happening Under Sequestration,” including an approachable Q&A section detailing its major components and effects thus far, and public statements from a variety of stakeholders.
From the article:
So what’s happened since March 1?
The indiscriminate cuts affected a wide range of federal programs and departments, making them difficult to track. (Even the White House struggled to explain exactly which programs they’d hit while it was denouncing them.) Jay Carney, the White House press secretary, told reporters Feb. 28 that sequestration would have “a rolling impact, an effect that will build and build and build.”
Congress passed a bill, signed by Obama on March 26, to spare a few programs from cuts this year, including an infant nutrition program, the nuclear weapons program and funding for security at U.S. embassies abroad — a sensitive area since the attacks in Benghazi, Libya, last September. The bill also gave some agencies, including the Pentagon, more flexibility in carrying out the sequester. And last week, Congress quickly passed (and Obama signed) a bill allowing the F.A.A. to scrap its furloughs of air traffic controllers, which had been blamed for long flight delays. But neither bill reduced the total amount the government is required to cut — $85 billion, or about 2.3 percent of the $3.6 trillion federal budget — by the end of the fiscal year in October.
Read the full ProPublica article online.
May 10, 2013
The Marketplace Fairness Act of 2013, which recently passed the U.S. Senate, would allow states and local governments to impose their existing sales tax on internet sales. The legislation also requires states to simplify or “streamline” their sales tax structure to make it easier for online companies to comply with the new requirements.
As passed by the U.S. Senate, states have two options for simplifying the state sales tax. Below is a brief summary of these requirements.
Option 1: A state can join the twenty-four states that have already voluntarily adopted the simplification measures of the Streamlined Sales and Use Tax Agreement (SSUTA), which has been developed over the last eleven years by forty-four states and more than eighty-five businesses with the goal of making sales tax collection easy. Any state which is in compliance with the SSUTA and has achieved Full Member status as a SSUTA implementing state will have collection authority on the first day of the calendar quarter that is at least 90 days after enactment.
Option 2: Alternatively, states can meet essentially five simplification mandates listed in the bill. States that choose this option must agree to:
- Notify retailers in advance of any rate changes within the state
- Designate a single state organization to handle sales tax registrations, filings, and audits
- Establish a uniform sales tax base for use throughout the state
- Use destination sourcing to determine sales tax rates for out-of-state purchases (a purchase made by a consumer in California from a retailer in Ohio is taxed at the California rate, and the sales tax collected is remitted to California to fund projects and services there)
As previously reported on Conduit Street, adopting the Streamlined Sales and Use Tax Agreement in Maryland could have fiscal consequences for local governments since local taxes that are not widely imposed or whose rates vary would not be permitted. Local sales and use taxes affected would mainly be those on telephones, energy and other utilities. These revenues total approximately $340 million.
However, Option 2 offers a much better approach that would allow the State to appropriately define the sales tax base for this purpose, which could leave local revenues out of the equation. Should the Marketplace Fairness Act of 2013 become law, MACo believes Option 2 provides the simplest and most appropriate approach for implementation.
May 10, 2013
MACo’s Legislative Director, Andrea Mansfield, recently met with the Maryland Association of County Health Officers, an affiliate organization of MACo, to discuss local health funding and the health department’s role in health care reform. These discussions are intended to frame discussions that will take place during the interim.
The Department of Legislative Services(DLS) released a report at the end of the 2012 interim titled “Survey of Local Health Departments in Maryland” which examined the funding of local health departments in the State. The report focused specifically on: (1) how local health departments (LHD) finance public health services; (2) the impact of federal health care reform on LHDs; and (3) the regionalization of public health services in the State. The findings of this study were posted in a previous blog on Conduit Street. To address the findings, DLS has recommended that additional research be performed to determine whether the current distribution of funds under the Core Funding Program is effective and whether LHDs could benefit from the regionalization of public health services.
The General Assembly also agreed to a study on local health outcomes in the 2013 Joint Chairmen’s Report, a document that accompanies the State budget and summarizes additional actions and recommendations.
Report on Local Health Outcomes and Funding for Local Public Health Services: The committees direct the Department of Health and Mental Hygiene (DHMH), in conjunction with the local health departments (LHD), to monitor and report on its efforts to address the challenges that LHDs are currently facing with regard to the significant funding reductions experienced since 2010 due to the rebasing of the targeted local health formula. Other State budget cuts to local health services should also be addressed. The report shall provide quantitative data from local jurisdictions on negative health outcomes due to State budget cuts to the seven core funding areas, with particular attention to family planning, maternal and child health services, and chronic disease prevention and treatment programs. The impact of reductions in direct care services for low-income populations that do not qualify for access to health insurance under federal health care reform should also be discussed.
These studies provide an opportunity for the LHDs to raise specific funding concerns and comment on their role in health care reform. Funding for LHDs has been cut significantly since Fiscal Year 2010. Cost containment actions of the Board of Public Works in August 2010 and further action during the 2010 General Assembly session, reduced funding from a high of almost $70 million to the base funding level to $37.3 million. In addition, a new interpretation of the statute which once provided for cumulative inflationary growth, is now being interpreted as only one year’s growth in inflation and population, permanently reducing and restructuring LHD funding.
More information on LHD funding and structure can be found in MACo’s blog series, which highlights the many budgetary challenges resulting from reductions over the past few years and describes the expanding pressures placed on these agencies through health care reform and the economic downturn.
May 9, 2013
As reported in Governing, the Governmental Accountability Office (GAO) recently released a report showing the fiscal challenges that state and local governments will face in coming years as costs increase and traditional revenue sources shrink.
To close the fiscal gap, governments would need to trim current expenditures by 14.2 percent and maintain that level of spending as a share of GDP in future budgets.
The report cites health care and pension costs as one of the main drivers of increasing expenses for state and local governments.
Most notably, the report cites rising health costs as the primary driver of the sector’s long-term fiscal challenges. Medicaid expenditures, along with health insurance costs for public employees and retirees, are expected to rise sharply.
A slow economic recovery and weakening tax returns present a difficulty in making up the needed budget.
On the revenue side, eroding tax bases have “buried” states, Boyd said. The economy has slowly shifted from goods to services, which governments traditionally are reluctant to collect taxes on. Furthermore, the rise of the Internet made it difficult to collect sales tax, particularly with the growth of downloadable music and e-Books.
For more information, including additional data and a graphical illustration, see the full story from Governing.
April 18, 2013
The “90 Day Report” is now available online on the Maryland General Assembly website. The Department of Legislative Services produces this report each year, which summarizes major issues discussed and/or enacted during the General Assembly session.
Sections of particular interest to local governments are listed below.
April 17, 2013
As reported in the Washington Post, House Speaker Michael E. Busch is considering a tax cut initiative as part of his goals for the next legislative session, which will begin in January 2014. According to the Post, the Speaker did not provide specifics,
He allowed only that the relief should be targeted to “working and middle-class families, who have borne the brunt of the recession.”
“It could take many forms,” Busch said.
Speaker Busch noted improvements in the state’s economy and the planned opening of two major casinos in Maryland: one in Baltimore in 2014, and another in Prince George’s in 2016 in his discussion about taxes.
For more commentary on this topic, see the full story from the Washington Post.
April 17, 2013
Among the many spending cutbacks in the President’s proposed budget are numerous grant programs distributed to state and local governments. From a roundup in Governing magazine, numerous areas have been affected by the broad spending plan recently submitted. Among them:
Program: Community Development Block Grants (CDBG)
Agency: Health and Human Services
What it does: The program is especially beloved by cities since it is one of the few big sources of federal funds that go directly to them. Governments have wide latitude in how they use CDBG funds, but they’re designed to support programs that assistant low- and moderate-income residents. The administration has said the funds are not well targeted and the program lacks focus. The numbers below are combined for both entitlement and non-entitlement recipients.
FY 2012: $2.949 billion
FY 2013: $2.801 billion
FY 2014 proposed: $2.784 billion
Program: HOME Investment Partnerships Program
Agency: Housing and Urban Development (HUD)
What it does: According to HUD, its the largest federal block grant to states and localities exclusively designed to create affordable housing for low-income households.Grantees have a wide range of uses for the funds, including purchasing, rehabilitating and building housing for rental or ownership. According to the budget, the cut is mitigated by a $1 billion investment in the Housing Trust Fund.
FY 2012: $1 billion
FY 2013: $950 million
FY 2014 proposed: $945 million
Read the full article from Governing.
For previous coverage on Conduit Street, see this analysis from the National Association of Counties.
April 12, 2013
Three of MACo’s legislative initiatives yielded successful bills this session, making our organization’s success rate significantly higher than average. Those initiatives include:
- HB390 Adding a county representative to the State Pension Board of Trustees
- HB1190 Authorizing counties to decouple the personal property tax rate
- HB 409 Changing the local comprehensive planning cycle to ten years
As reported by the Washington Post, 766 of the 2,610 measures introduced in the Maryland General Assembly passed both the House and the Senate, a 29.3% success rate for bills in the 2013 Maryland Legislative Session. This passage rate is common in the Maryland legislature where “only the strong survive,” as described the Post.
This year, however, the Governor’s Administration counts many legislative victories. As reported, “I thank everyone for coming together and probably making this the most successful legislative session of my lifetime,” [the Governor] said. For more commentary on the legislative session, see the full story from the Post.
For more information on MACo’s legislative efforts, see the following legislative wrap-ups:
2013 End of Session Wrap Up: Business Affairs
2013 End of Session Wrap Up: Education
2013 End of Session Wrap up: Elections
2013 End of Session Wrap Up: Employee Benefits & Relations
2013 End of Session Wrap Up: Environment Legislation
2013 End of Session Wrap Up: Finance and Procurement Legislation
2013 End of Session Wrap Up: Government Liability and Courts Legislation
2013 End of Session Wrap Up: Planning & Zoning Legislation
2013 End of Session Wrap Up: Procurement Legislation
2013 End of Session Wrap Up: Public Information and Ethics Legislation
2013 End of Session Wrap Up: Public Safety & Corrections Legislation
2013 End of Session Wrap Up: Tax and Revenue – Homestead Tax Credit Legislation
2013 End of Session Wrap Up: Tax and Revenue – Recordation and Transfer Tax Legislation
2013 End of Session Wrap Up: Tax and Revenue – Personal Property Tax Legislation
2013 End of Session Wrap Up: Tax and Revenue – Transportation Related
2013 End of Session Wrap Up: Transportation and Public Works
April 9, 2013
The Department of Legislative Services (DLS) recently posted their summary of State aid to local governments by program and county. This document provides an overall summary of Fiscal 2014 aid compared to Fiscal 2013. It also provides a county-by-county funding breakdown for each program for the two fiscal years.
State Aid by Program and County – Two Year Comparison
April 9, 2013
After several years of budgets with spending reductions and tax increases, the House and Senate approved a $36.9 billion Fiscal Year 2014 budget which contained neither. As reported by MarylandReporter.com:
The budget, HB 100, raises overall spending 3% and is $500 million less than Gov. Martin O’Malley originally proposed, largely by setting aside funds in case federal budget cuts impact state revenues.
There was none of the contention that led to an impasse last year and eventually a special session to resolve the budget in May. The major difference between the House and Senate budgeters was $100 million senators cut in pension contribution.
The approved budget continues to close the structural deficit and constrains spending. The budget also increases fund balances and sets aside $100 million to address possible reductions due to federal sequestration. All budget actions are summarized in the Conference Committee Report.
The Fiscal 2014 budget also includes funding for enhancements to the Disparity Grant Program. Under the modified program, eligible counties will continue to receive the amount of funding provided in Fiscal Year 2010, but a minimum grant has been added to the program based on local tax effort. The local income tax rate to be eligible to receive a grant is also being increased from 2.4% to 2.6%.
See county funding breakdown
See prior Conduit Street coverage of the Senate action on disparity grants.
See DLS analysis and recommendations on disparity grant issues.