DLS recommends modifications to Disparity Grant program, cut to Baltimore City

The Department of Legislative Services has issued its analysis of the budget section collectively entitled “Payments to Civil Divisions of the State.” In this analysis, DLS recommends statutory changes to the disparity grant, as well as a permanent reduction of a specific grant to Baltimore City.

With respect to the Disparity Grant, the DLS recommendation is not a “fix” to the much-discussed dropoff of funding to certain jurisdictions in FY 2011. Rather, the legislative staffagency calls for some adjustments to the way last year’s “cap” was put into place — limiting any future distribution to any county at the amount it received in FY 2010. From the analysis:

The Department of Legislative Services recommends that consideration be given to modifying Article 24, Title 9-1101 so that the funding cap is based on the overall fiscal 2010 funding level. This will permit newly eligible jurisdictions to receive funding, as well as for current grant recipients to receive funding when their per capital income tax worsens, relative to the statewide average. as long as the program is funded below $121.4 million. Once the cap level is reached, it would be more equitable to allocate the reduction above the cap on a prorated basis to all disparity grant recipients.

The grant to Baltimore City was created during the 2007 Special Session, as part of HB 5, the bill that restructured transportation revenues. While its context is not evident from its current statutory appearance (simply inserted into law as a mandated appropriation of just over $3 million to Baltimore City) the funding represents the share of security interest filing fees that had been historically directed to the City by law. From the HB 5 fiscal note, page 29:

Security Interest Filing Fee Revenues

A security interest filing fee of $20 is required for securing the title of a motor vehicle not wholly owned by the purchaser. Revenues are allocated among the general fund, the MVA, and the TTF. The general fund receives $14, of which $5 is then distributed to Baltimore City. The remaining $6 goes to the MVA Assurance Fund, which is used to compensate parties who have suffered a loss as a result of an error made by an MVA employee relating to security interest filings. Any revenues in excess of a $25,000 balance in that fund are transferred to the TTF.

A substantial number of funding elements in HB 5 of the Special Session involved “even swaps” of funding streams — eliminating this sort of revenue dedication, and replacing it with simple, unexplained mandated appropriations. Unsurprisingly, none of this background is included in the DLS analysis, and instead the unnamed grant and its FY 2010-11 funding is described as follows:

Impact of Cost Containment

Section 34 of Chapter 487 authorized the Governor to maintain funding at the fiscal 2010 level in fiscal 2011 and 2012 for any mandated appropriations that were not otherwise modified by that legislation. Section 9-1104 of Article 24 mandates a general fund grant of $3,075,000 annually for Baltimore City; however, this amount was reduced to $2,575,000 in the fiscal 2010 budget. The Administration has opted to exercise the mandate relief provision to this grant authorized by Section 34, at the revised $2,575,000 level, which effectively saves $500,000.

The staff agency offers this recommendation, citing broad budget pressure rather than anything in the nature of the grant itself:

Recommended Actions

1. Delete mandated grant to Baltimore City. The State needs to reduce its cost structure to address the structural general fund deficit. The deletion of this mandated grant is recommended as non-core spending. A separate action to delete the mandate in statute will be recommended in conjunction with budget reconciliation legislation.

Michael Sanderson

Executive Director Maryland Association of Counties

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