State Budget Outlook: The Sky’s Staying Put

Maryland’s budget shortfall is much lower than expected, learned members of the General Assembly’s Spending Affordability and budget committees yesterday from Warren Deschenaux, executive director of the Department of Legislative Services. Deschenaux, in his final presentation to a group of this size before his pending retirement, said the anticipated fiscal 2019 budget gap of $740 million is now $250 million. This results from favorable bond premiums, lower state employee health care costs due to vacancies and a reduction in Medicaid obligations.

He advised the General Assembly members to take a hard look at Maryland’s sales tax system. Sales tax revenues have fallen for some time due to boosted popularity of e-commerce, and a general transition from spending on goods to services.

From The Washington Post:

“The outlook is better than I expected it to be,” Deschenaux said.

To cover the smaller shortfall, he suggested that the General Assembly consider “freezing everything at current levels” except for mandated spending such as K-12 education and reimbursements for care providers who work with the disabled.

While the news was rosier than in previous years, analysts noted that the forecast did not include the devastating impact that federal changes to health care or the tax code could have on state revenue.

Helpful Links

Briefing document

Coverage by The Washington Post

The Costs of Luring Amazon

building-2762319_1920It seems like everyone is talking about luring Amazon’s second headquarters to their jurisdiction, and the State is no exception. With Amazon’s deadline for proposals coming this week, Douglass Mayer, spokesman for Gov. Larry Hogan, has said that Maryland will propose “the biggest incentive offer in the State’s history by a mile,” reports The Baltimore Business Journal

From that coverage:

Already, the state has invested more than $50 million in tax incentives for two Amazon distribution centers in Baltimore and Cecil County. Another package totaling at least $16.2 million is awaiting a deal under negotiation in Baltimore County at the former Sparrows Point steel mill site.

In total, Amazon has netted $1.24 billion in taxpayer backed incentives across the U.S., a special report by the Business Journals highlighted this week.

Mayer said Hogan had sanctioned the pie-in-the-sky tax break package as part of the ongoing push for HQ2 and monitors the developing bids daily. The historic incentive package no doubt will blast past the $317 million offered to the Federal Bureau of Investigation to move its headquarters to Prince George’s County last year.

Amazon’s deadline for proposals fors its estimated $5.5 billion investment and 50,000 jobs is this Thursday, October 19. Prince George’s, Howard and Baltimore City have all indicated their intentions to place bids.

More on the competition for Amazon:

UMD System Waives Tuition Rule For Amazon Employees

Baltimore submits city as a contender for Amazon’s 2nd HQ search

Governor To Seek Hometown Heroes Tax Break Expansion

Last Friday at the Western Correctional Institution in Allegany County, Governor Larry Hogan announced that he plans to seek legislation this upcoming session to expand the Hometown Heroes state and local income tax breaks to retired correctional officers. He also said he wants to expand the tax break to cover all pension income, not just the first $15,000 – a move that could cost counties significant amounts in local income tax revenues.

Last session the General Assembly passed Senate Bill 597/House Bill 100, referred to colloquially as the “Hometown Heroes Act” and substantially similar to the Governor’s Senate Bill 322/House Bill 388 of that name. The Act provides for a subtraction modification for the first $15,000 of retirement income for individuals at least 55 years of age who are retired law enforcement officers or fire, rescue, or emergency services personnel. MACo opposed this legislation on the grounds that it would cause local revenues to decrease by $2.5 million in FY 2018 and by $2.8 million in FY 2022. After many years of consideration by the legislature, the bill passed this year and the Governor signed it – making the tax deduction available for the 2017 tax year.  Bill Information | MACo Coverage

From the Governor’s press release:

The 2017 legislation exempted retired law enforcement and fire, rescue, and emergency response personnel from state income taxes on a portion of their retirement income. The Hometown Heroes Act of 2018 will expand the previous law to include correctional officers who perform some of the most difficult jobs in the public safety sector. In addition, the bill will exempt all retirement income received from these occupations from state income taxes.

The Washington Post covers the story.

Harford Partners With Chamber On County Business “Meet & Greet”

On September 28, the Harford County Department of Procurement, in partnership with the Harford County Chamber of Commerce, hosted its second annual “Meet & Greet” for local businesses to learn about doing business with Harford County government.

Procurement Director Karen Myers led the discussion on topics including insurance and other requirements, the meaning of “best and final offer,” and the importance of achieving “best value.” Director Myers told the audience of more than 40 attendees that fair competition and best value are key to all public procurements.

Moving forward, Harford County will continue to follow best practices in procurement as it strives to ensure maximum value for taxpayer dollars.

Charles Not Taking Light Rail Cuts Lightly

The Maryland Department of Transportation (MDOT) will have its annual meeting on proposed transportation priorities with Charles County on Tuesday, October 24 at the Charles County Government Building in La Plata – and some hope to convince MDOT leadership to reconsider disinvestment in constructing a Southern Maryland light rail.

According to MDOT’s proposed CTP through fiscal 2023, MDOT plans to suspend work on project, retaining $9 million and relinquishing the opportunity for federal funding for planning the project at this time.

The Maryland Transit Administration issued the Southern Maryland Rapid Transit (SMRT) Study last May. The report summarizes options for bus and light rail along a 19-mile corridor that would parallel Route 5 and U.S. 301 from the Branch Avenue Metro station in Prince George’s to Waldorf-White Plains in Charles. The study – the fifth for this corridor in about thirty years – found that overall costs for a bus system would likely be $500 million less than for rail, but the annual operating costs of light rail would be lower by approximately $10 million. Significantly, it found that light rail service could be more easily expanded than bus to meet demand.

Gary V. Hodge, a consultant and former Charles county commissioner, continues to advocate fiercely for the light rail. From Maryland Independent:

Hodge explained that the SMRT study revealed that a bus rapid transit system would be at capacity the moment it launched, and could not be expanded.

“This puts the state administrators on the horns of a dilemma,” Hodge said. “We would spend a billion dollars to develop a [bus] system that will be obsolete the moment it launches.”

Hodge said that the light rail option has the support of every elected official in Southern Maryland.

The Charles County Board of Commissioners have submitted a letter to Transportation Secretary Rahn requesting that he reconsider the six-year funding suspension as well as his preference for bus over rail. From the letter:

Our citizens deserve the same quality of transit service that other regions of Maryland have enjoyed for decades.

Hodge hopes that members of the public will attend the annual meeting with MDOT. He said:

We’ve worked the bureaucracy. We’ve worked the planning process. We’ve lined up all the elected officials top to bottom. But to bring this home, the chief policymakers at the state level have to see the public demanding action from them.

Betting Sports Betting Makes Legislature’s Agenda

Representatives of Maryland’s casino industry delivered a message to the Joint Committee on Gaming Oversight yesterday: authorize sports betting, and move on this now.

The federal Professional Amateur Sports Protection Act (PASPA), passed in 1992, prohibits sports betting in most states, including Maryland. However, a number of states have considered legislation recently to allow or at least evaluate sports betting, including include Connecticut, Michigan, New York, Pennsylvania, South Carolina and West Virginia. Last session in Maryland, Delegate Jason Buckel sponsored House Bill 989, Gaming – Wagering on Sporting Events – Study and Implementation, which would have created the Task Force to Study the Implementation of Sports Gaming, and under certain terms, allowed the State Lottery and Gaming Control Commission (SLGCC) to issue sports gaming licenses.

The State of New Jersey actually passed laws in 2012 and 2014 meant to allow sports betting at state casinos and racetracks, and over the summer, New Jersey Governor Chris Christie signed into law a bill that imposes a 10.5 percent tax on winnings for companies that operate daily fantasy sports leagues. New Jersey’s activities triggered litigation that has arrived before the Supreme Court. Last June, the U.S. Supreme Court announced that it will hear the New Jersey case challenging the constitutionality of preempting most states from authorizing sports betting. It is expected to hear the case next spring.

But waiting until the Supreme Court makes a decision may be too late, argues the Maryland gaming industry.  The Baltimore Sun reports:

[Joe] Weinberg, chief executive of Cordish Global Gaming, urged members of the Joint Committee on Gaming Oversight to take up the issue in 2018 so that a constitutional amendment may be put on next year’s general election ballot. …

Weinberg warned that Maryland’s competitors for casino tax dollars already are lining up to change their laws in case the Supreme Court rules on a pending case to allow more states to offer sports betting.

“If we wait for 100 percent clarity on federal law, we will be two to three years behind the surrounding states,” he said.

The bottom line: if authorized, sports betting could materially affect the State’s – and possibly counties’ – bottom lines. All would welcome the additional tax revenue, we bet.

Legislative Auditor: Counties Counting Just Fine

Pursuant to Maryland statute, the State Department of Legislative Services Office of Legislative Audits (OLA) has completed its annual desk review of each local government’s annual auditing report – and counties fared well.

Pursuant to Maryland statute, all local governments, including counties, municipalities, and 17 special taxing districts, have to file regular audit reports with the State, including financial statements, accompanying notes, and auditors’ reports on opinions about the presentation of the financial statements. Financial statements must comply with generally accepted accounting principles, and audits must comply with generally accepted auditing standards. According to the report, OLA completes each desk review of the audits to:

  • Identify areas of noncompliance with our audit guidelines and certain
    accounting and auditing standards pertaining to the presentation of the
    financial statements and auditors’ reports.
  • Identify any instances of noncompliance with certain provisions of State law
    (for example, collateral for bank deposits, timely filing of audit reports).
  • Identify local governments with potential financial problems relating to deficit
    fund balances or unfavorable trends and ratios, based on analyses of financial
    data over the most recent five-year period (July 1, 2011 through June 30,

The report identifies a handful of counties with audit reports containing disclosures that cash deposits were not fully collateralized or otherwise insured. It identifies an adverse opinion against Baltimore City, which resulted from the Baltimore City Public School System failing to book its pension liabilities on its own statements as required under GASB  – an issue which the school system has since corrected.

All counties filed their reports in a timely manner and complied with relevant provisions of state law, and that no counties displayed signs of deficit fund balances or “unfavorable trends” or “ratios.” Legislative Auditor Thomas J. Barnickel III reports that

most of the financial statements filed by the local governments for the fiscal year ended June 30, 2016, along with the related independent auditors’ reports, complied with the accounting and auditing standards that we assessed.

At today’s hearing of the Joint Committee on the Management of Public Funds, Bob Garman, Assistant Director of Quality Assurance for OLA testified that while they found more local governments noncompliant than the previous year – about one third of all 203 local governments audited – most areas of noncompliance were relatively minor.

Learn Everything Autonomous Vehicles, Get P.E. Credits

Engineers hungry for P.E. credits and the latest on Connected and Autonomous Vehicles (CAVs) and can sate their hunger efficiently at the Young Professionals of Transportation Baltimore’s Connected and Autonomous Vehicles Panel.

The panel features Jill Sorensen, Executive Director of Bevi; David Woessner, General Manager at Local Motors; Joey Sagal, Director at CHART and ITS for the State Highway Administration; and Kenneth R. (K.R.) Marshall, Vice President & Northeast Regional Manager of ITS and Transportation Technology at WSP.



The event takes place on Tuesday, October 24th from 7pm to 8:30pm at the University of Baltimore’s John and Frances Angelos Law School, room 202. Click here to register.

MDOT Restructures Procurement Upon Discovering Poor Contracting Practices

The Maryland Department of Transportation (MDOT) Secretary’s Office is taking over procurement for the Maryland Transit Administration (MTA), reports The Daily Record. The move comes months after MDOT Secretary Pete Rahn replaced former MTA Administrator Paul Comfort after concerns about the agency’s procurement of office furniture surfaced.

MDOT indicates that about $15 million has been paid to as many as 31 vendors without proper contract authority – including $5 million to seven vendors without any contracts at all.

In addition to centralizing MTA’s procurement within MDOT, the department also plans to hire an inventory control officer who will report to MDOT’s chief procurement officer, install new software to track contracts and payments and provide additional training to MTA employees.

The Daily Record quotes Lt. Governor Boyd Rutherford’s comments to MDOT Deputy Secretary Jim Ports at today’s Board of Public Works meeting:

It’s sloppiness. This stuff is in the bowels of the organization and it takes time from the leadership, I know. I can fuss at you and fuss at the secretary but it means you’ve got to tell your people to burrow down into the bowels, the basement of your organization, and let them know. I truthfully don’t think it’s corruption. I think it’s sloppiness. I think it’s lack of education and I think it’s not looking out for the taxpayers’ dollars. The people who are doing these things don’t realize they are working with taxpayer dollars.

Procuring Advice On Upgrading Procurement? Governing’s Got You

Looking to bring your procurement processes into the 21st century? Governing has made available for download the sponsored publication, Procurement Automation: The Cornerstone of Modernizing Public Sector Purchasing

Here’s what the magazine has to say about it:

State and local governments across the country realize legacy procurement operations, often dominated by paper-based processes, must transform to meet the demands of modern government. With a comprehensive plan that also covers process reengineering and new training for procurement staff, state and local governments can create a foundation for ongoing improvements that turns procurement into a cost-effective strategic resource.