Dial-In Meeting: Northeast Regional Counties Conference Call

NACo Northeast Regional Conference Call

Wednesday, February 22, 2017

8:00AM EST

Dial-In:1-719-359-9722

Dial-In(toll free): 1-888-757-2790

Guest Passcode:299194

Conference Call Objectives

  • Regular update from your NACo Regional Representative
  • NACo Staff update on critical issues legislatively and organizationally
  • Address issues of concern to you

General Legislative/NACo Update

  • HADI SEDIGH – NACo Associate Legislative Director – Justice & Public Safety
    • Executive Orders on Immigration and Sanctuary Cities and the possible impact on counties
    • Opioid Town Hall Update
    • Justice and Public Safety sessions at the Legislative

Should “Good Actors” Subsidize Bad Actions?

The General Assembly is considering intriguing issues about how Maryland, and its local governments, assess and collect fees, user charges, and penalties. These bills raise policy questions about cross-subsidies between people who pay on time, and those who don’t.

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Fairness In Revenues, Large and Small

HB 228 and SB 453 would limit governments’ ability to collect late water bills. SB 136 does the same with overdue parking tickets. Local governments always stand up for autonomy — but here, there are broader fairness issues at work, too.

Nearly everyone understands debates over tax policy. Taxes are the main engine behind governmental services, and policymakers have a duty to assess and administer them fairly. MACo and other stakeholders routinely address the legislature in Annapolis to raise concerns with fair application of taxes.

It’s less obvious, but the same debate exists with other government fees, charges, and penalties. These don’t constitute as central a question for governmental revenues as taxes themselves — but two sets of proposals before this year’s General Assembly session show that the policy and equity debates are similarly important.

Parking Tickets – What if they aren’t paid on time?

The first bill is SB 136 – which is currently “on hold” on the Senate floor. The bill deals with parking tickets issues by local governments.

This is a new subject area to most legislators — and for good reason. The state plays virtually no role in parking restrictions and enforcement. This is a purely local function. The elected officials of our state’s counties and towns respond to local needs by setting parking standards, and creating enforcement to back those standards up.

SB 136 adds to the section of state law that (paraphrasing) empowers local governments to manage these programs locally, and creates a new over-arching schema: tickets cannot have an escalation in their fine until at least 30 days.

First – we can acknowledge that nobody likes to receive a parking ticket. But whether the parking rules are driven by pedestrian safety, community concerns, or fair access to congested areas — nearly everyone recognizes that a ticket/fine for violations is the means to ensure compliance. In many places, a parking ticket has a face value due immediately, and then as an incentive for prompt payment, an escalated fine after a certain date. These mechanisms are not unique to parking fines – penalties for late payment are an effective means to keep collections timely and complete.

Under SB 136, local governments would suffer a loss of revenues from the proposed change, in some cases substantial. These revenues are part of what funds the jurisdiction’s costs of staff and technology for the parking enforcement itself. To respond to these community concerns, the county or town will still need to enforce parking — just with less revenue.

So, who pays MORE under SB 136? There’s really only two ways to go here:

  • Other parking violators who pay on time (raise the base ticket fine amount)
  • Local taxpayers who haven’t even violated a thing (raise property taxes)

MACo testified against SB 136 on the central principle that parking is simply a local matter. But Senators considering this bill should also think about the consequence of undermining late fees — higher costs on those who pay on time, or on those who didn’t even break the rules to begin with. That sort of cross-subsidy raises the same policy concerns as an unfair taxation system.

Water Bills – What if they aren’t paid on time?

Beyond fines imposed for violators, governments also impose user fees for specific services. None is more central than providing public water. While in general the charge for delivering water is based on public usage, with community and citizen oversight, there are still policy questions about fairness in their collection. Once again… how should local governments deal with those who don’t pay?

Water is surely different than a parking fine. It’s an essential service, and in many areas water service is considered a precondition for “livability” of a structure. But when a water user fails to pay a utility charge, the government is faced with a fairness conundrum. Just like taxes (and even parking tickets) – the system is best when each user pays his or her fair share.

Basically, public water systems have three main methods to employ to secure payment for their services (in ascending order of seriousness):

  • Finance charges for one or more late payments
  • Water “shutoff” for longer term failure to pay
  • Enforcing the unpaid charges as a property lien, through the possibility of tax sale

To begin, in every public water system the sizable majority of users pay their bill on time. All these enforcement provisions apply to those who fail to do so.

Given the nature of water as a critical public service, legislation has been introduced to limit these enforcement steps:

HB 228/SB 546 would dramatically limit the ability of a government to terminate water service for nonpayment

HB 453 would eliminate a government’s ability to collect a water bill lien through tax sale

In both cases, a well-intentioned idea carries these same cross-subsidy consequences. Water systems are usually set up by governments as “enterprise funds,” meaning they cover their own costs. This “user pays” principle is widely embraced for similar public services.

But if the prospect of losing service… or the potential to see your property face tax sale… is off the table, surely compliance will drop. The state’s largest water system in Baltimore City estimates that without the lien process available they could face some $7 million in reduced payments, as non-payers would no longer be eventually compelled to cover their own share of system costs.

Reduce the consequences for nonpayment, and those costs simply get reassigned to others. This who pay their water bills on time (through higher base rates), or the general taxpayer base (through property taxes). It’s the same fairness issues raised above with parking tickets – though likely on a larger fiscal scale.

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In general, MACo consistently advocates for local matters to remain in local hands. The county and municipal officials elected by and accountable to their own communities are in the best position to judge these needs, and to balance these issues of fairness. With the bills referenced above, MACo urges state policymakers to refrain from statewide intrusion — both out of respect for local autonomy, but also to avoid creating fundamental new unfairness in local revenue systems.

DLS Analysts Recommend “Flat Funding” Local Road Funding, Again

The Department of Legislative Services has recommended that the General Assembly eliminate the extra “capital grants” provided in the Governor’s proposed budget, to be distributed to local roads and bridges. They recommend only funding the limited extra amount required to maintain current funding levels.

The DLS analysis of the Department of Transportation, Office of the Secretary includes these recommended reductions:

Baltimore City funding reduced from 5,484,423 to 2,000,000
County Governments reduced from 27,422,115 to 4,000,000
Municipal Governments reduced from 20,109,551 to 19,000,000

The analysis, and the presentation from the staff during the hearing, allude to future recommendations that may work in concert with this funding reduction to address technical concerns raised by DLS.

For further background on this county priority issue, and the DLS objections, see previous Conduit Street coverage: Highway User Revenues – What’s On The Table?

Senators Introduce Over 1,000 Bills

With Monday the effective deadline for bill introductions in the Maryland Senate, a sizable rush of bills were introduced at that working deadline – pushing the total of bills introduced to 1,017. Bills introduced after this deadline will face some administrative hurdles prior to their full consideration, as an encouragement for prompt introduction.

Last year, a record total of 1,173 Senate bills were introduced by the end of the legislative session. Going back to earlier years, it was common for the total number of introductions to be fewer than 1,000.

The latest list of bills introduced are included on Senate Synopsis #20, dated February 7, 2017.

The House’s comparable introduction deadline will be Monday of next week.

Maryland’s Tax Structure Among the Most Stable

A report from the Pew Charitable Trusts ranks Maryland’s state tax system as the third most stable among all fifty states.

The report, assessing the volatility of state revenue sources, was released this week. From the Pew website:

Nationwide, overall state tax revenue had a volatility score of 5.1 for the 20 years ending in fiscal 2015, up slightly from 2014’s score of 5.0. This means that total tax revenue across the states typically fluctuated 5.1 percentage points above or below its overall growth trend. Tax revenue was more volatile than the national benchmark in 30 states and less so in 20 states.

Maryland rated a volatility score of 3.5 on the Pew index – with only South Dakota and Kentucky grading a lower score. That indicates that the Maryland system of revenues is less prone to dramatic fluctuations year to year than that of most other states.

Visit the Pew website for more details, and an interactive map including the report’s findings.

Highway User Revenues – What’s On The Table?

County governments, still feeling the permanent effects of devastating cutbacks to state roadway funding, have made restoring Highway User Revenues a perennial legislative priority.

In this article, we explain the Governor’s proposed funding in the FY 2018 budget, its components, and where it fits into the broader debate about a multi-year restoration back to historic funding levels.

Part 1 – Highway User Revenues, Deep Cuts Linger

Technically, Highway User Revenues (HUR) are not a budget line item, but rather they are a statutory distribution of the transportation revenues themselves. A share of fuel taxes and other transportation revenues, set by state law, is directed to local governments through the HUR formula. The dramatic drop in that funding is illustrated in the Department of Legislative Services’ “Overview of State Aid To Local Governments” below:

In the FY 2018 proposed budget, the Governor does not make any changes to Highway User Revenues per se. The distributions to local governments remain in place — 1.5% across 23 counties, and 0.4% across the municipalities. Because transportation revenues are expected to decline slightly, so will these local distributions (compared to the amount in FY 2017).

Part 2 – Extra Grants, Take One (FY 2016 and onward)

Given the Governor’s commitment to restore local road funding, he introduced a multi-year restoration bill during his first legislative session, in 2015. That bill failed, but the Governor has remained committed to the principle, and in his subsequent budget has introduced extra funding – in the budget, not by statute – to make comparable distributions.

2015-transp-grantsIn 2015, the Governor proposed a supplemental budget, with $25 million in new “transportation grants” to local governments. The essential effect of this extra funding was to keep funding flat for each of the three recipients of HUR (because municipal governments has previously received a special municipal-only grant from other sources, their share of the $25m was the largest). The General Assembly passed the budget with that funding intact – thereby creating a two-tier funding for local roadways, using a combination of Highway User Revenues (by statutory allocation) and Grants (by a budget line item). The grants were designated to be distributed (among municipalities and counties) according to the same formula as HUR, and their use was restricted to the same purposes as HUR funding. While they look different in the budget, these funds are effectively just an additional layer of HUR funding.

Part 3 – Extra Grants, Take Two (proposed for FY 17, and again for FY 18)

After the General Assembly did not pass legislation requiring a phase-in restoration of HUR, the Governor still followed through on his intention to fund incrementally more funds, beginning in FY 2017. The Governor proposed to do so by expanding the extra transportation grants, to effect the first year of the 8-year phase-in proposed in his own bill (HB 484 of 2015). This extra $28 million layer of funding was proposed to be distributed more in keeping with the traditional HUR formula:  $23.7m across 23 counties, $3.5m to Baltimore City, and $1.4m to municipalities.

During the 2016 legislative session, this funding was passed by the full Senate, and passed by the full House. However, in a surprise late-session decision, the conference committee appointed to resolve differences in the budget plan struck the final layer of grant funding — and the $28 million of new funds was struck from the budget, leaving only the “hold harmless” grants to continue for a second year.

fy18-proposed-transp-fundingThe Governor has responded by submitting a FY 2018 budget, once again, with the first installment of the phase-in funded as extra grants. The county-by-county detail on these grants is available online from the Department of Legislative Services.

The debate for the General Assembly, again this year, will primarily be the affordability of the “new capital grants” — the line in the chart at left totaling $28 million. That is the difference between a simple flat-funding budget and the first installment toward a multi-year restoration of local road funding – a top priority for MACo.

Is The Terminology “Capital Grants” A Problem?

At the February 1 meeting of MACo’s Legislative Committee, DLS Director Warren Deschenaux offered his opinion that the term “capital grants” for the extra transportation funding was a misnomer – in budgeting parlance, “capital” refers to buildings and permanent structures – and would not ordinarily include the sort of routine maintenance and repairs that constitute the bulk of local Highway User Revenues spending. This follows on similar concerns raised by the staff analysts during last year’s debate.

A solution exists, though, as recommended by the staff analysts:

To ensure adequate oversight by the General Assembly, it is recommended that language be added to the budget bill making the appropriation of this local transportation aid contingent on enactment of legislation modifying the HUR formula and authorizing transfer of the appropriation to the operating program of the State Highway Administration (SHA) to be distributed pursuant to changes made by that legislation.

In other words – eliminate the special capital grants, and simply add the extra distributions via the original statutory formula distribution of transportation revenues. This could be done for one year only, or in some ongoing basis. By placing the new revenues in the HUR statute, all the assurances and protections of that longstanding program would apply, and the full range of proper uses would be continued. The technical issue has a fairly simply solution – particularly in a year where a budget reconciliation bill is expected to be part of a final fiscal package.

The Road Ahead For The 2017 Session

MACo, the Maryland Municipal League, sympathetic legislators, and many other stakeholders who support the restoration of local roadway funds will focus on:

-retaining the funding level provided in the proposed FY 2018 budget

-pursuing a statutory change to lock in a multi-year restoration of funds back to historic levels

Analysts Propose Cost Shift Onto Local Health Departments

In the February 1 budget hearing for the Department of Health and Mental Hygiene’s Office of the Secretary, analysts from the Department of Legislative Services proposed a $1.6 million cost shift to local health departments to oblige them to absorb costs of contractual employee health insurance.

The narrative from the DLS presentation explains the rationale:

There are two large increases within the DHMH Administration allowance for fiscal 2018. The first is an increase of $1.6 million to cover the cost of health insurance premiums for contractual employees at local health departments. However, this increase is entirely different from how DHMH and the local health departments cover the cost of health insurance premiums for the regular employees at the local health departments. Normally, these costs would be billed to the local health departments through the budget, and it would be up to each local health department to determine how they would come up with the funds to cover these costs, whether through the funds that they receive through the Core Local Health formula or through any other State or local funds that they receive. The Department of Legislative Services recommends that this cost be covered using the same budgeting methodology as for regular local health department employees, and thus recommends reducing these funds.

If approved, this would further reduce effective state funding for health departments (already subject to a funding freeze at last year’s levels in the budget reconciliation bill), and likely be offset with service cutbacks.

Have One-Time School Costs? Here’s Your Roadmap

As counties and school boards start building their FY 2018 budgets, a state deadline for one-time cost approvals approaches. A MACo guide helps county officials navigate the process.

State funding laws intended to encourage education spending, may discourage it by complicating the structure of funding and requiring certain submissions on a timeline that mishmashes with county budget processes.

State “maintenance of effort” laws require a county to provide the same amount of education funding or more on a per-pupil basis each year. Maintenance of effort can discourage additional investment, especially during a faltering economic recovery, when future revenues are uncertain.

A legal provision called nonrecurring costs, however, allow county governments provide one-time school funding for one-time education costs without triggering perpetual mandates.

The hitch is: the deadline for submitting nonrecurring costs is in March – before many counties begin budget negotiations.

Perhaps as a result of this process, on average fewer than eight counties per year take advantage of this education budgeting tool.

Not all education costs are annually recurring per-student costs. One-time education expenses might include costs to:

  • build new computer laboratories;
  • make technology enhancements;
  • start-up new instructional programs; or
  • purchase books for a school library

The mechanism for appropriately excluding these one-time education costs from the maintenance of effort calculation requires special approval. A county must submit an application to exclude certain costs to the State Board for their approval before March 31 of each year.Screenshot 2016-01-18 17.22.16

Data from the Maryland State Department of Education (MSDE) in 2014 revealed that on average fewer than eight counties per year take advantage of this budgeting tool. Learning this, MACo developed Non-Recurring Costs For County School Budgeting: A County Official’s Guide to the Process and Laws Behind the System.

In the Guide, MACo aims to improve the accessibility and use of the nonrecurring cost exclusion, covering:

  • How does a county apply to have nonrecurring costs approved?
  • What categories of costs can be considered as nonrecurring?
  • When does the school board need to agree with the request?
  • What requests have been approved and denied in recent years?

All the submission forms, statutes, regulations, and guideline documents relevant to this process are provided in appendices to the Guide.

For more information, read Non-Recurring Costs For County School Budgeting: A County Official’s Guide to the Process and Laws Behind the System.

MACo: Keep Parking Enforcement a Local Prerogative

MACo Associate Director Barbara Zektick testified before the Senate Judicial Proceedings Committee opposing SB 136 – Vehicle Laws – Parking Violations – Authority of Political Subdivisions. The bill would preclude local governments from any increase in parking fines or penalties until at least 30 days after the parking ticket has been issues.

MACo’s testimony defends parking enforcement as a local matter, and resists the state involvement:

Parking violations can severely compromise quality of life for residents and visitors, and it is an important responsibility of local governments to enforce those laws in a manner that deters behavior without creating undue burden on those responsible for paying citations. This bill diminishes local government authority to determine how to reach that balance in a way that most appropriately serves their unique constituencies. Parking enforcement is by its nature a local issue, and current laws treating it as such should remain unchanged.

Conduit Street readers may follow all of MACo’s testimony and legislation using our free, online Legislative Tracking Database. Search by subject, MACo position, MACo staff member or time of action — and we’ll connect you to the latest action on the bills, the MACo position, and all the latest updates direct from the Maryland General Assembly.

States Pre-Empting Local Govts: National Trend, Surfacing in MD

A Route Fifty article discusses a growing movement among many states – especially those with republican majorities – seeking to pre-empt actions by their local governments.

With the federal government and most states controlled by conservative Republicans this year, Democrats are looking to Democratic cities and counties to stand up for progressive policy.

But they may want to temper their expectations. State lawmakers have blocked city action on a range of economic, environmental and human rights issues, including liberal priorities such as minimum wage increases, in recent years. And the stage looks set for more confrontation between cities and states this year.

In Maryland, even Democratic leaders have engaged in the pre-emption approach, in multiple labor-related areas.

The high profile “Sick and Safe Leave Bill” proposed again this year (HB 1 and SB 230) includes a pre-emption of similar county initiatives – actively curtailing a law in place in Montgomery County, but also precluding action by any other jurisdictions.

More recently, Delegate Davis introduced another far-reaching pre-emption proposal, HB 317, precluding local action on minimum wages.

The Route Fifty article speculates that these inherent conflicts may continue nationwide — but also belie many collaboration opportunities — pointing toward infrastructure as an obvious common ground:

There’s still plenty of room for cities and states to cooperate this year, regardless of political differences, said Bruce Katz, who studies cities at the Brookings Institution, a centrist Washington, D.C., think tank.

“We’re probably spending a little bit too much time talking about the conflict side, and not talking enough about cooperation,” he said.

City and state leaders typically set politics aside to tackle big projects, such as investments in infrastructure, Katz said. They also team up to fight federal policy they don’t like, such as budget cuts.