Preview the 2018 Session “Big Picture”

A compilation of Issue Papers previews major fiscal and policy issues facing the General Assembly in the year ahead. This resource is a handy guide to the top issues that your legislators will be tackling in the year ahead – a great preparation document for county officials in advance of meetings with their local Delegations.

Developed by the Department of Legislative Services, the 2018 Issue Papers are an annual staple for the Annapolis policy-inclined population. They are also a great resource for county officials tracking specific issues, or interested in the state budget and other top-tier topics.

Here are a few direct links to hot topics that may interest counties:

Operating Budget

Transportation Trust Fund

Pension Issues

Capital Budget and Debt

Education Aid and Maintenance of Effort

School Construction

Health Care Reform

Broadband Access

Public Safety

Environmental Issues

Aid to Local Governments

9-1-1 Funding and Modernization

U.S House Passes Tax Reform Bill

On a 227-205 vote, along mostly party lines with 13 Republicans voting no, the U.S. House of Representatives has passed its version of federal tax reform. In the weeks ahead, the Senate is expected to take up it own different version, and if that passes the two chambers will be obliged to reconcile their differences into one final version.

The House bill places a new limit on the amount of state and local taxes that may be deducted by taxpayers — limiting that deduction to only property taxes, and only up to $10,000. That controversial provision has been shown by numerous analyses to cause effective tax increases on many middle class families. Maryland is expected to be among the most hard hit states by this provision, with the highest share of tax returns claiming SALT as a deduction under current law.

From coverage in The Hill:

Passage of the tax bill, which was unveiled just two weeks ago, was relatively drama-free compared to the GOP’s failed effort to repeal ObamaCare earlier this year.

The stakes are high for Republicans, who are feeling pressure to show that they can govern ahead of next year’s midterm elections. The Democratic wave in last week’s gubernatorial and state house elections in Virginia and New Jersey has only added to their anxiety.

GOP leaders are hoping to get legislation to President Trump’s desk by Christmas, an ambitious timeline given the obstacles that are mounting in the Senate.

Americans Against Double Taxation, a coalition opposing reduction/elimination of the State and Local Tax Deduction (aka SALT) offered this statement after the bill’s passage:

This is only the first step in a long process, and we will continue to fight to fully preserve SALT and stop tax increases on the middle class. The House vote eliminates the most frequently claimed deduction in the tax code for the middle class, which voters oppose by a 2-1 margin. It will lead to cuts in education, public safety and other vital state and local public services. It overturns more than 100 years of sound tax policy that protected taxpayers from double taxation, and creates a double standard by allowing corporations to claim a deduction that would no longer be available to individuals and families.

Some major elements of the House tax plan, from the Tax Foundation, include:

  • Individual Income Tax Rates and Brackets: Consolidates current seven income tax rates into four, while retaining the top marginal rate of 39.6 percent and including an income recapture provision which phases out the effect of the 12 percent bracket for high earners.
  • Standard Deduction: Increases the standard deduction to $12,200 for single filers, $18,300 for heads of household, and $24,400 for joint filers.
  • Itemized Deductions: Retains the state and local property tax deduction, capped at $10,000, while eliminating the remainder of the state and local tax deduction, except for taxes paid or accrued in carrying on a trade or business; limits the mortgage interest deduction to the first $500,000 in principle value.
  • Child and Family Tax Credits: Increases child tax credit value to $1,600, with the phaseout for joint filers beginning at $230,000, while creating a new $300 per-person family tax credit for those not eligible for the child tax credit, to expire after five years.
  • Treatment of Pass-Through Income: Caps the pass-through rate at 25 percent and adds a lower minimum rate, with anti-abuse rules.
  • Corporate Income Tax: Cuts the tax rate to 20 percent, effective tax year 2018.
  • Visit the Tax Foundation site for a more complete list of tax provisions in the passed bill.

    A summary of the proposed changes to the House plan being contemplated in the Senate as a so-called “Chairman’s Mark” is also available on the Tax Foundation website:

    Last night, Sen. Orrin Hatch (R-UT) released the “Chairman’s Mark” to the Senate’s version of the Tax Cuts and Jobs Act. This much-anticipated amendment includes a number of important changes to the tax plan, including fitting the package within the constraints imposed by the Senate’s so-called “Byrd Rule,” which places limits on what can be adopted under the reconciliation process.

    An article on the Route Fifty website discusses local governments’ efforts to understand and prepare for the potential fiscal effects of the still-unresolved tax changes:

    Forty miles west of D.C. sits Loudoun County, Virginia. Loudoun’s citizens have the highest home mortgage interest deductions of any county the country according to the Tax Foundation. Already in the fifth hour of an evening Board of Supervisors meeting on Nov. 8, the county spent 40 minutes discussing the pending House tax proposal and what it may mean for the county.

    Coupled with the potential elimination of the state and local tax deduction, the Board was concerned that the tax burden that once was deductible would quickly add up under both the House and Senate plans.

    “I’ve spend a heck of a lot of time with this tax plan and I’m telling you, for a lot of people in a typical Loudoun situation … you’re probably going to be net negative on this, even with the lower brackets,” Supervisor Matthew Letourneau said during the marathon session…

    Both MACo and NACo, among many other stakeholders, will continue to follow the developments on this landmark legislation, and its potential effects on Marylanders and local governments.

    Read previous Conduit Street coverage on federal tax reform.

    Montgomery Council Passes Revised $15 Minwage

    Following lengthy debate, a County Executive veto, a subsequent study and a series of compromise amendments, the Montgomery County Council unanimously adopted a phase-in to a $15 county minimum wage.

    Find details of the legislation, or view the Council discussion and vote, online.

    From the November 7 public hearings — and social media coverage of the long-awaited vote:

    Calvert County Recognized for Staff Training Practices

    The Local Government Insurance Trust, a MACo corporate partner, recognizes members each year for outstanding efforts to address risk management issues. At this year’s LGIT Annual meeting held October 27 in Annapolis, Calvert County received an award for their outstanding efforts with staff training.

    From the LGIT event program:

    With this outstanding effort, it is obvious that Calvert County understands the benefits and positive impact loss control and risk management training can provide. County attendance at training continues to benefit not only Calvert County staff and personnel, but the citizens of Calvert County and the community as a whole.

    Prince George’s Police to Target Human Trafficking w/Fed Grant Funds

    The Prince George’s County police department, partnering with the University of Maryland, have received federal grant funds to address human trafficking concerns.

    The grant, about $1.3 million over three years, builds on a partnership between the county government and Maryland’s flagship institution of higher education in College Park.

    From a release issued by the University of Maryland’s SAFE Center for Human Trafficking Survivors, the co-recipient of the grant:

    Prince George’s is one of only two counties in the country to receive the grant, which was created to enhance collaboration between service providers and law enforcement within human trafficking task forces. The Prince George’s County Human Trafficking Task Force (PGCHTTF) brings together law enforcement, social services, government agencies, and community organizations to combat human trafficking.

    “Human trafficking is unacceptable in this county or anywhere and it will never cease until we commit ourselves to thwarting this horrible mistreatment of innocent people,” said Prince George’s County Executive Rushern L. Baker, III. “Since taking office, my administration has taken this issue head on through the great work of our Human Relations Commission, Prince George’s County Police Department, State Attorney’s Office and other agencies, that are combatting human trafficking. In addition, we created the Prince George’s County Human Trafficking Task Force to bring together various partners committed to putting an end to this unthinkable treatment of people. This grant will go a long way in assisting our efforts to eliminate human trafficking throughout this county, state, and region. I want to thank the Department of Justice, our Congressional delegation and the University of Maryland for their partnership and fiscal support of our efforts to eradicate these inhumane acts from our communities.”

    Read more on the U of MD website.

    Kirwan School Recommendations Won’t Be Ready for 2018 Session

    High-profile school commission will not have funding recommendations for the election-year session

    Panelists present financing issues to the Kirwan Commission meeting October 25

    The Kirwan Commission (formally the Commission on Excellence and Innovation in Education) met in Annapolis yesterday, and its chair announced publicly that the body would not have time to reach a set of final recommendations on school funding by December. This derails widely held expectations that its recommendations, translated into proposed legislation, would become a major centerpiece of the 2018 session of the General Assembly.

    From coverage in the Baltimore Sun:

    Lawmakers were set to spend the first few months of 2018 debating the first major overhaul of education policy in more than 15 years. Instead, that discussion will be pushed back until after the 2018 state elections.

    William E. “Brit” Kirwan, leader of the commission issuing the policy recommendations, said Wednesday that his panel is moving toward consensus on recommending universal pre-K, a revamped pay structure for teachers and a new formula to more fairly distribute education funding across the state, among other measures.

    However, there’s not enough time to calculate the costs of the commission’s recommendations or come up with suggestions for paying for them before the new legislative session begins in January, Kirwan said.

    “There’s simply no point in producing a report the state can’t afford,” he said. “The alternative [to delaying it] is to have a wonderful report that is not based in fiscal reality.”

    An article on the MarylandReporter website discusses the steps ahead:

    Kirwan proposed the commission get as much done in its four meetings before the end of the year and then create a work group to meet with the legislative staff and consultants to determine what its recommendations would cost. He said it was not unusual for major commissions to ask for more time to finish their work.

    NCEE President Marc Tucker told the committee that if the commission recommended some of his group’s nine proposed “building blocks” without making changes in the structure of education, “you would have a bill you could not pay.”

    The consultants plan to work up a “dynamic model” for the cost of the each recommendation. That would predict “If we increase this, how much would we save on that,” Tucker said.

    Materials from the Commission’s multiple meetings this year are available on the General Assembly website, and the meetings are all viewable online by searching the House Appropriations Committee room on the dates of each meeting.

    Suit Challenges County “Tax Cap” Override, State’s Authority

    Taxpayers in Prince George’s County are suing, arguing that a 2015 tax rate increase adopted under state-passed provisions violates a citizen-enacted charter limitation. The lawsuit has advanced through preliminary motions, and will be heard in Circuit Court in December. The litigants seek to place the 2015 measure onto the ballot in 2018, for approval by county voters.

    From coverage on the WTOP website:

    The county is confident the courts will find it acted lawfully, a county spokesman said.

    “The property tax increase that was implemented and voted on by the Prince George’s County Council was done in accordance to state law, which allows for property tax increases in jurisdictions that have tax caps, as long as it is restricted to funding education,” said Scott Peterson, spokesman for Prince George’s County Executive Rushern Baker.

    The central argument in the case, apparently, will be the state’s authority to legislate a provision that overrides elements of a county charter. Four counties currently have rigid tax limitations in their charters, but 2012 legislation authorized counties to exceed those limits if they did so to support public education. The Attorney General opined soon after that bill’s passage that the provision was legal.

    Lunch & Learn: Strategic Sourcing Summit, October 10 in Dorchester County

    US Communities, working with MACo, is offering a complimentary event for public sector purchasers and decision makers — to learn how to save time and money through the U.S. Communities program.

    Network, enjoy lunch, ask questions and share feedback. Don’t miss the opportunity to:

  • Learn about new solutions and the latest innovations in procurement
  • Network with other local agencies using cooperative purchasing and hear what is working for their agency
  • Connect with U.S. Communities’ suppliers to receive their lowest overall government pricing
  • There is no cost to attend and lunch will be provided. For more info, contact Matt East.

    Register now for the Strategic Sourcing Summit!

    Baltimore Fiscal Health Report Card Packages Numerous Indicators

    The Baltimore City Budget Department has developed a “fiscal health report card” to isolate ten measurable items as a quick look at the city’s fiscal status:

    The measures, ranging from the City’s debt ratios to its funding reserves, spotlight many indices of fiscal health and responsibility, and can offer citizens a quick one-stop-shop to get a snapshot of the City’s fiscal situation. The FY 2017 version of the report card is available now.

    Indiana County Raises Income Tax for… 9-1-1?

    A county in Indiana has established a county-wide “Public Safety Answering Point Tax” at 0.1% of residents’ adjusted gross income, to supplement the waning revenues from that state’s 9-1-1 telephone surcharge.

    Conduit Street doesn’t make a regular habit of covering news and notes from local governments across the country… but the parallels in this Indiana jurisdiction map awfully well onto a high-priority debate here in Maryland. The county’s revenue from a dedicated fee is falling far short of needs to maintain its system, forcing the county to increasingly supplement its costs with general tax revenues. In Maryland, the same plight faces our counties, where the combined state and county 9-1-1 fee is only $1 per monthly bill (not per line, like every other state), and most counties commit more tax revenue than fee revenue to 9-1-1 operations.

    In Howard County, Indiana, the solution was a dedicated income tax increase. From coverage in the Kokomo Tribune:

    The Public Safety Answering Point tax, which was approved unanimously by council members, imposes a tax rate of 0.1 percent on the adjusted gross income of county taxpayers.

    The tax hike is expected to raise between $1.5 million and $1.7 million annually for Howard County dispatch, according to Auditor Martha Lake, and will cost a resident with $50,000 in adjusted gross income a total of $50. Taxpayers will see the change on their paychecks starting Jan. 1.

    “One of the reasons for this ordinance is … the 911 fund has been funded by phone – charges on phones, and then as the landlines have dropped, the income for this fund has also gone down,” said councilman Jim Papacek, who presided over Monday’s meeting in the absence of President Dick Miller.

    “And this is a way to keep all this new equipment that we’ve received, help keep it all up to date, the maintenance on it, and make any additions to it that we need,” Papacek added, referencing the county’s newly implement P25 radio program.

    For more coverage of the Howard County, Indiana PSAP Tax, see the Kokomo Tribune article online.

    Maryland counties generally face a similar challenge as that described in the Indiana article. Maryland’s one-of-a-kind system of levying the 9-1-1 charge per bill, rather than per line, has made the revenue losses here even sharper, as many wireless phone companies have aggressively marketed multi-line plans, which has an indirect but profound effect on 9-1-1 fee revenues. A fiscal note from recent state legislation suggested tens of millions in lost 9-1-1 revenue from Maryland’s anomalous fee structure alone (even before any comparison of the rate structure with those of other states).