The budget committees of the General Assembly received their annual fiscal briefing from the Department of Legislative Services (DLS) on January 23, 2017. This briefing provides a comprehensive overview of the Governor’s fiscal plan, the State’s economic and revenue outlook, a detailed look at the Governor’s FY 2018 proposed budget, aid to local governments, Transportation Trust Fund outlook, the capital budget, and an outlook for Maryland’s economy in light of Federal changes.
The Quick Look at Fiscal 2018 Budget shows that although the Governor’s spending plan produces a structural surplus of $38 million in fiscal 2018, it does not address a structural deficit over a five-year forecast period of $1.2 billion by fiscal 2022. State DLS Executive Director Warren G. Deschenaux described the budget as:
…just another kick the can down the road budget… we ought to be doing better.
Highlights of the Potential Legislative Issues include:
- The Administration’s spending plan (large out-year structural gaps and cash reserves at 6.0% of general fund revenues) leaves the State vulnerable to expected federal cost containment actions including hiring freezes, spending reductions, and the repeal of the Affordable Care Act.
- Direct education aid for Baltimore City declines by $38.7 million due to enrollment declines, increased wealth, and the loss of a one-time fiscal 2017 declining enrollment grant. Direct education aid to Calvert, Carroll, Garrett, and Talbot counties declines by a combined $5.6 million.
- Most funding mandates enacted during the 2016 session are repealed or deferred, saving the State $96.2 million in fiscal 2018. …
- No bond capacity is reserved for local initiatives.
- The Transportation Trust Fund (TTF) forecast does not adequately account for operating expenses, which results in the capital program being oversubscribed. The fiscal 2018 capital program includes $53.0 million in grants, identified as part of the Administration’s plan to increase the Highway User Revenues (HUR) funding to local governments. Similar grants were funded at $25.0 million in fiscal 2016 and 2017. The TTF forecast also reserves nearly $700.0 million not included in the Consolidated Transportation Program from fiscal 2019 to 2022 to increase the share of HUR going to local governments.
The Governor’s proposed mandate relief caps statutorily-required state funding — including many programs supporting counties (other than for education) — at projected General Fund growth minus 1 percent, regardless of what the formula in law currently dictates. Deschenaux described this measure as “weak tea,” informing the committees that these expenditures only amassed 4 percent of the total budget – not enough for this measure to address meaningfully the structural deficit problem.
Useful links from the Briefing document:
- State Aid by Major Programs, Fiscal 2016-2018
- Proposed Reductions to State Aid Programs, Fiscal 2018
- Proposed Reductions to State Aid Programs by County, Fiscal 2018
- The six-year State capital program in the Maryland Department of Transportation (MDOT) fiscal 2017 through 2022 Transportation Trust Fund (TTF) forecast is $1.5 billion lower than in the prior year’s six-year program. Lower estimated revenue attainment, primarily motor vehicle fuel tax revenue, accounts for about half the decrease with higher projections for debt service and departmental operating expense spending accounting for the other half of the reduction in the capital program.
- Despite the reduction made to the State capital program, the net income debt service coverage ratio is at MDOT’s administrative minimum level of 2.5 for the final three years of the forecast.
- MDOT’s forecast reserves a total of $747 million to phase in an increase in the amount of Highway User Revenues (HUR) going to local governments. Increasing the statutory percentages of HUR going to local governments by the amounts reserved in MDOT’s forecast would require a further reduction in bond issuances (and the State capital program) of $1.33 billion over the forecast period in order to maintain the 2.5 minimum debt service coverage ratio.
- Appendix 2: Changes from General Fund Baseline Expenditure Growth: Fiscal 2018 Proposed Budget
- Appendix 10: General Fund Reductions Contingent on Legislation
- Appendix 17: Budget Reconciliation and Financing Act of 2017 (HB 152/SB 172)
- Appendices 18-21: State Aid to Local Governments
- Appendix 22: Student Enrollment Growth and Local Wealth Impact on Local Education Aid
- Appendix 23: Per Pupil Wealth Amount Used to Allocate State Education Aid
- Appendix 24: Proposed Change in Direct Aid to Local Governments: Fiscal 2018
Linda Lamone, State Administrator of the State Board of Elections briefed the Senate Education, Health and Environmental Affairs Committee Thursday on the operation of the 2016 General Election. She began with the numbers:
- 2.8M voters out of 3.9M eligible (72%) – down from usual 80% in Presidential
- Early voting increased 31%
- Absentee ballots at 6% of total, steady compared to previous years
- 7,800 registrations and 8,000 address changes during early voting
She then briefly discussed some issues that arose on election day. It was reported that 3% of precincts experienced unusually long lines, which the State Board is investigating. In this regard, she stated that the ratio of voting machines (image scanners) to registered voter is 1:3000, contrary to some reports. Ms. Lamone also mentioned an issue with absentee ballots being folded resulting in some scanning errors (41 ballots in Baltimore County, for example). These were re-scanned and counted appropriately. There were also a few instances of scanners grabbing two pages of a ballot together.
Following Ms. Lamone’s testimony, information was shared by Larry Moore, Founder and CEO of Clear Ballot Group, which conducted a full audit of the election results.
“This is the first time a statewide, 100% audit has ever been done in this country.” Larry Moore, Clear Ballot Group
Mr. Moore went into some detail about the process of auditing the 2016 General Election. The bottom line, however, was that the audit resulted in a .062% discrepancy between the State’s count and Clear Ballot’s. This is far below the threshold ratio of .5%, which would trigger concern.
As the 2017 session ramps up, talk of state tax changes have filled the headlines. A level deeper, though – what state tax decisions might have direct or carryover effects on county budgets?
A quick primer:
PERSONAL INCOME TAXES
The state income tax is the top source of general revenue, and the biggest overall target for policy changes. Since county tax rates are independent of the state rates – counties are affected by some state changes, but not all of them. In essence:
- changes to state tax rates do not affect counties, since they don’t affect a taxpayer’s taxable income
- changes to deductions (called “subtraction modifications”) affect the taxable income base, and do flow through to county revenues
CORPORATE INCOME TAXES
As the state discusses business competitiveness, the corporate income tax rate has also taken center stage. The corporate income tax is virtually all state revenue, with only a small sliver being shared through the Highway User Revenues distribution. There is no major direct sharing of corporate taxes, nor any counterpart county-level taxation of corporate profits.
REAL PROPERTY TAXES
Taxes on real property (land and buildings) are a fairly minor state revenue, with the revenue dedicated to the state’s annuity bond fund (to pay debt service). The state rate is 0.112 (or 11.2 cents per $100 of assessed value) – which is roughly a tenth of the typical county rate. Property taxes are a much larger part of county budgets than the state – both as a share of the county budget and in total dollars.
PERSONAL PROPERTY TAXES
Maryland’s taxation of business personal property (equipment and some inventory) is completely local, with most counties levying a tax but granting several major exemptions authorized (but not mandated) by the state. The state receives no direct revenue from personal property taxation.
In the discussion of small business tax relief during the 2015 session, the taxes due on personal property was dwarfed (for many small businesses) by the state-levied filing fee for corporate entities. Governor Hogan has proposed a reduction in those fees.
Amidst the discussion of tax policy, other items come up – with details arising from case law, taxpayer concerns, or legislative proposals. Many of these are a mix of state and local revenues, but hardly any have the “carryover” effects that the income tax and property taxes do.
State “sin taxes” on products like alcohol and tobacco do not have a local component (local distributions were abolished in the early 1990s), and some functions like the hotel tax and admissions and amusements tax are exclusively local.
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In 2015, facing a wide range of proposed changes to state and local taxes, MACo adopted a general statement on tax matters – expressing a preference for local flexibility, rather than mandated participation in state changes.
MACo offers thanks to readers who have found this analysis useful, and sought to have it run again.
Anne Arundel County has recently published a list of resources for citizens that suffer from addictions and are looking to get help.
According to Eye on Annapolis,
“As we continue to fight the heroin and opioid crisis in our county, we are committed to providing a complete list of resources to our citizens looking for help,” said County Executive Steve Schuh. “The ‘Not My Child’ Resource Guide will effectively connect our citizens to the help they need to conquer addiction.”
The eighteen page resource guide lists treatment providers throughout the county that provide the necessary services to help citizens suffering from addiction. Along with the name of each provider, the guide lists contact information for the organization, as well as a list of treatment services offered. The guide is authored and updated by the County Executive’s Office of Constituent Services.
The guide can be found online at: http://www.aacounty.org/departments/county-executive/constituent-services/forms-publications/resource-guide.pdf. New providers wishing to be added to the guide should contact Nancy Schrum, Director of Constituent Services, at 410-222-1785.
Maryland’s Board of Public Works reviews projects, contracts, and expenditure plans for state agencies – many of which have effect on county governments. It meets on alternating Wednesdays and the meetings are open to the public. The meeting will be held in Governor’s Reception Room on the 2nd floor of the State House in Annapolis.
The Board’s next meeting is scheduled for Wednesday, January 25, 2017 at 10 a.m. Material for the upcoming meeting is available online:
For “frequently asked questions” about the Board’s charge and meetings, visit the Board’s website.
A Daily Record article (2017-01-13) discussed the challenges facing the House Judiciary Committee as it begins the 2017 Session 3 members down and with a host of new faces. From the article:
Since last term, the panel lost five delegates due to resignations from the legislature or transfers in committee assignments, while picking up a 22-year delegate and a rookie legislator.
“I have lost a lot of good players,” Del. Joseph F. Vallario Jr., who chairs the panel, said Friday. “It’s going to be a new committee. It’s going to be a new day.”
Gone from the House, and thus the committee, are William C. “Will” Smith Jr., Jill P. Carter and John W. E. Cluster Jr.
In addition, Dels. Samuel I. “Sandy” Rosenberg, D-Baltimore City, and Marice Morales, D-Montgomery, were transferred to the House Health and Government Operations Committee.
Joining the Judiciary Committee this session are Dels. Dan K. Morhaim, who entered the House in 1995, and Joseph C. “Joe” Cluster, son of the former delegate.
In all, the committee shrunk from 22 members in the 2016 General Assembly to 19 at the outset of the 2017 term. Vallario, D-Prince George’s said more delegates might be added soon but provided no specific number. …
The three departures from the committee and House occurred when Smith, D-Montgomery, was appointed by Hogan last month to the Senate seat that was held by Jamin B. “Jamie” Raskin, who resigned in November after being elected to the U.S. House of Representatives; Hogan named the elder Cluster, R-Baltimore County, to the Maryland Parole Commission last summer; and Baltimore Mayor Catherine E. Pugh named Carter, D-Baltimore City, director of the city’s Office of Civil Rights and Wage Enforcement.
The article also included comments from some of the Committee’s new members on how they were going to approach issues and participation for the 2017 Session.
The Maryland Department of the Environment (MDE) gave a proverbial lump of coal to 5 counties and eight municipalities on December 22, 2016, when it announced they were to be subject to the federal National Pollutant Discharge Elimination System (NPDES) Municipal Separate Storm Sewer System (MS4) Phase II permit for stormwater mitigation. The 5-year MS4 permit requires affected entities to mitigate stormwater runoff, such as by improving stormwater infrastructure and retrofitting a certain amount of existing impervious surface. Phase I MS4 permits are individually tailored to the jurisdictions they affect while the Phase II permit is a general permit containing the same basic requirements for all affected permittees. The MS4 permit program is overseen by the United States Environmental Protection Agency who has delegated administration authority in the state to the Maryland Department of the Environment.
The proposed permittees include:
- Queen Anne’s
- St. Mary’s
(These counties would join the two existing Phase II MS4 counties of Cecil and Washington. Ten other counties are subject to Phase I MS4 permits.)
- North East [Cecil]
- Perryville [Cecil]
- Rising Sun [Cecil]
- Indian Head [Charles]
- La Plata [Charles]
- Easton [Talbot]
- Boonsboro [Washington]
- Williamsport [Washington]
(These municipalities would join 20 other municipalities already subject to a Phase II MS4 permit. No municipality is subject to a Phase I MS4 permit.)
In addition to announcing the proposed permittees, MDE also unveiled its new proposed Phase II permit. Public comment on the proposed permit runs until March 30, 2017. MDE will also be holding a public hearing on the issue on February 6. From MDE’s Phase II MS4 webpage:
Questions concerning the General Permit may be directed to Mr. Raymond Bahr at Raymond.Bahr@maryland.gov, or by phone at 410-537-3545 or 1-800-633-6101 or to make an appointment during the hours of 8:00 AM to 5:00 PM. Copies of the document may be procured at a cost of 36¢ per page.
MDE will hold a public hearing concerning this tentative determination from 10:00 AM to 12:00 PM on February 6, 2017 at MDE, Aqua/Terra/Aeris conference rooms, 1800 Washington Blvd., Baltimore, Maryland, 21230. Any hearing impaired person may request an interpreter by contacting the Office of Fair Practices at 410-537-3964 at least ten working days prior to the scheduled hearing date. TTY users should contact the Maryland Relay Service at 1-800-201-7165.
Written comments should be directed to Mr. Raymond Bahr, Maryland Department of the Environment, Water Management Administration, Sediment, Stormwater, and Dam Safety Program, 1800 Washington Blvd., STE 440, Baltimore, Maryland 21230-1708. Written comments concerning this tentative determination will be accepted through March 30, 2017. This comment period already incorporates the additional 60 day extension period provided in Environment Article §1-606(d)(2)(ii).
MACo, the Maryland Municipal League (MML), and the Maryland Municipal Stormwater Association (MAMSA) are jointly sponsoring a Phase II MS4 General Permit Regulatory Workshop to provide assistance and guidance to those local governments already subject to or proposed to be subject to a Phase II permit . The Workshop will be on February 13 from 1:00 PM – 4:30 PM in Baltimore City. Attendance is limited to local governments only. Look for more information soon.
The social media site Twitter has become a fast-moving setting for news, information, and advocacy on public affairs. We welcome followers of MACo’s own twitter feed for updates from the Conduit Street blog and other MACo hot topics, and often use Twitter to reach our own audience, and to hear from others following the same issues as county leaders.
Here are some tweets that caught our eye this week:
For more news and information:
Former teacher Bill Gordy has been selected to lead the school board as president of the Worcester County Board of Education.
Gordy, who joined the school board in 2014, was elected to hold the seat of president at Tuesday’s regular meeting. Longtime board member Doug Dryden was chosen to serve as vice president.
As reported by The Dispatch,
“It is indeed a privilege to serve with this dedicated group of professionals,” Gordy said. “We look forward to a period of growth and prosperity in Worcester County that will continue to provide, at even a higher level we hope, every child in our system with a quality education.”
In spite of his relatively recent admission to the board he’s a well-known figure to many in the school system, as the Snow Hill resident spent several years teaching at Worcester Technical High School. After spending 25 years as a Maryland State Police detective, he helped start the criminal justice program at the high school. He was an instructor in the program until retiring in 2013.Gordy said he looked forward to working with the rest of the school board to improve Worcester County’s school system. Gordy also alluded to a commitment to support the county’s teachers.
“Our pledge to you is that we will work tirelessly to restore Worcester County to a position that will better enable us to recruit and retain quality personnel in our system,” he said.
Read the full article for more information.
Question: Did you know that Calvert County is home to the oldest tournament of Maryland’s official state sport? (Jousting)
It’s true! Calvert County is home to the oldest tournament of Maryland’s official state sport, jousting. Held each year on the grounds of Christ Church in Port Republic, the tournament celebrated its 150th year in 2016. According to the Maryland Jousting Tournament Association, during the special February session of the Maryland legislature in 1962, the Honorable Henry J. Fowler Sr., Delegate from St. Mary’s County, introduced a bill into the Maryland House of Delegates giving recognition to the sport of jousting as the Official State Sport of Maryland. This bill passed both chambers of the Legislature by an overwhelming vote and was signed into law by Governor J. Millard Tawes. Thus, as of June 1, 1962, Maryland became the first state in the United States to adopt an official state sport.