This week the House Appropriations Committee heard a bill to alter the state’s education aid formula to account for reductions in tax revenue to counties that use tax-increment financing. During the hearing, the bill sponsor recommended the idea of a hold harmless adjustment to education aid formulas.

Tax-increment financing, known as TIF, is a tool used by several Maryland counties to encourage economic development. TIF is a public financing method that is used as a subsidy for redevelopment, infrastructure, and other community-improvement projects.

The House Appropriations Committee Chair, Delegate Maggie McIntosh of Baltimore City is the sponsor of the legislation to alter education funding formulas to reflect TIF.

In her testimony, the Chairwoman described how in the current education funding formula, counties that use TIFs appear to have additional wealth.

This whole notion of tax increment financing and its use by local government to do good work. . . what it does is create — when we do our education formulas — false wealth.

The Chairwoman stated that one of her reasons for introducing the bill was to raise the issue and look at the effects of tax-increment financing on wealth calculations for education.

Because state education aid is wealth-equalized, the state provides less funding to jurisdictions that appear more wealthy in their formula. Looking at the fiscal note for the legislation, the Chairwoman noted the potential negative effect of future TIF projects on education aid for Baltimore County, Prince George’s, and Baltimore City.

The Chairwoman suggested the Committee adopt a remedy for those counties planning TIFs that would not negatively affect education aid distributions to other counties,

I hope that after we look together at the bill and look at the urgency around, I think, three counties, I hope you’ll come to the realization that we need to hold these three counties harmless without impacting any other county’s calculations.

For more information, see the bill text, read the fiscal note, watch the video of the hearing, and read MACo’s testimony.