Investments Come In-House with Pensions Bill

Legislation to create an investment division within the State Retirement Agency has proceeded smoothly through the Maryland Senate. The change would bring Maryland’s System into line with many other state pension systems of similar size, and could save costs in the long term.

On Thursday, March 15, a bill to create an internal investment division within the State Retirement Agency passed the Maryland Senate on what is called “second reader.” After a quiet hearing in the House, the bill passed that chamber with only a few technical amendments, and all signs now indicate that the bill will pass the General Assembly this year.

Additional amendments were described on the floor of the Senate on Thursday by Senator Guy Guzzone, Co-Chair of the Joint Committee on Pensions. The Senate’s amendments would establish an objective criteria committee to assist the State Pension Board in setting compensation for the Chief Investment Officer and positions in the investment division created by the bill.

As described in the fiscal note on the bill, compensation and operating expenses of the investment division are subject to appropriation from the accumulation fund of each system and are not paid by participating employers. Administrative fees, including those paid by county governments who participate in the State system, will continue to be used to support other divisions of the State Retirement Agency.

This legislation marks a major change in the State Retirement Agency, and one that could be prudent financially, resulting in better returns for the System. As described by Senator Guzzone,

“What we are trying to do is help the division perform better in each asset class. So we are giving them some authority to hire and raise salaries, commensurate with the industry. Hopefully that will lead to some success in those areas.”

For more information, see: SB 899 State Retirement and Pension System – Investment Division

$20M TIGER Grant Will Spur Job Growth In Baltimore County

Baltimore County has been awarded a $20 million federal grant for infrastructure improvements and expansion of aging marine facilities at Tradepoint Atlantic. The U.S. Department of Transportation’s Transportation Generating Economic Recovery (TIGER) grant will be matched by private investment from Tradepoint Atlantic, developer of 3,100 acres at Sparrows Point.

According to a press release:

“This public/private infrastructure investment will ignite job creation in Baltimore County and the entire region by speeding up the turnaround of Sparrows Point from a shuttered steelmaking site into a modern hub for global commerce,” said Baltimore County Executive Kevin Kamenetz.

With funding from the TIGER grant, Tradepoint Atlantic will make structural upgrades to the East-West Berth, modernize it for efficient movement of 21st century cargo, strengthen bulkheads, perform maintenance dredging to allow deep water ships access to the marine terminal, and other necessary improvements designed to leverage existing rail and highway systems on the site.

The investments in dredging, a stronger berth, and short line rail track will facilitate efficient and safe loading and unloading, reducing handling costs for shippers using the facility.

The project will expand the region’s bulk handling capability by restoring an obsolete regional marine asset to a state of good repair. The modernization program expands bulk cargo handling capability at Tradepoint Atlantic and does not introduce container cargo handling to the site.

The grant projects will span four years. The TIGER grant is led by the Baltimore County Department of Economic and Workforce Development.

A recent economic impact report projects Tradepoint Atlantic will generate 17,000 jobs in the Baltimore region, plus another 21,000 jobs during construction. Economic impact is projected to top $3 billion when development of the 3,100 acre site is completed in 2025, according to the Sage Policy Group study.

“There are more than 17,000 jobs on the horizon at full development, but jobs already are coming back to Sparrows Point from world class companies including FedEx Ground, Amazon and Under Armour,” added Kamenetz.

Read the full press release for more information.

A Supreme Court Decision Could Shrink Unions’ Power

Last week the United States Supreme Court heard oral arguments in Janus v. American Federation of State, County and Municipal Employees. At stake are agency fees — public sector unions can collect fees for service from employees who refuse to join the union that represents them, which Janus argues is an unconstitutional act of compelled speech.

Mark Janus, an employee of the Illinois Department of Healthcare and Family Services, has about $46 deducted from his paycheck every month to cover the collective-bargaining expenses of AFSCME, the union that represents employees at his state agency. Although Janus is not a union member, by law he receives all the rights and benefits under the contract the union negotiated for workers at his agency.

The union and government employer argue that Janus is trying to be a “free rider,” obtaining the benefits of union representation without paying his fair share of the costs. While some workers may disagree with the union’s goals, many others fully support the union’s goals of higher wages and better benefits but still hope to free-ride by having others rather than themselves pay the union dues.

It’s already possible for public employees to “opt-out” of paying that portion of their dues that fund explicitly political activity. But Janus argues that all dues paid to public sector unions are political because the consequences of collective bargaining in the public sector impact taxes, government debt, budgets and spending priorities. Janus contends that the agenda of public sector unions, including collective bargaining, is inherently political.

While a ruling is not expected until later this year, The Washington Post warns that a ruling in favor of Janus could have widespread unintended consequences, even for those who support the plaintiff’s case.

According to The Washington Post,

What the Janus backers (and most commentators) miss is that agency fees are not just compensation for the financial costs of representation, but for the political costs of representing all the members in the bargaining unit and maintaining labor peace. As AFSCME’s attorney pointed out in his oral arguments, the agency fee is routinely traded for a no-strike clause in most union contracts. Should those clauses disappear, employers will have chaos and discord on their hands.

The combination of exclusive union representation, mandatory agency fees, no-strike clauses and “management’s rights” are the foundation of our peculiar labor relations system. No other country structures its labor relations system quite like this. Knock one part out, as the Janus plaintiffs aim to do with agency fees, and the whole system can fall apart. Employers will not like the chaos that this will bring.

The piece argues that if Janus prevails, thousands of contracts that would have to be renegotiated in a climate where an agency fee is no longer a trade for a no-strike pledge, which could lead to significant labor unrest across the country.

The United States Supreme Court has issued several opinions relating to the right of a public sector exclusive representative to collect service fees from nonunion members. In Abood v. Detroit Board of Education, 431 U.S. 209 (1977), the court found that, while an exclusive representative could collect a fee from nonunion members, the fee revenues could not be used to support ideological causes not germane to the organization’s duties as the collective bargaining representative. In another case, the Chicago Teachers Union v. Hudson, 475 U.S. 292 (1986), the court held that, in order to protect nonunion members’ constitutional rights to freedom of speech and association, the union’s collection of agency fees must “include an adequate explanation of the basis for the fee, a reasonably prompt opportunity to challenge the amount of the fee before an impartial decision maker, and an escrow for the amounts reasonably in dispute while such challenges are pending.”

There is no State law that generally allows all local government employees to engage in collective bargaining; rather, it is within the powers of the counties and municipalities in Maryland to pass local laws granting collective bargaining rights to their employees.

Several counties have exercised that authority and have some kind of collective bargaining for employees. Some allow collective bargaining for most rank and file employees. Others allow for collective bargaining for a specific group of individuals, such as police officers, sheriffs, or emergency medical personnel.

The extent to which a county’s code includes collective bargaining measures varies drastically from robust sections in the Montgomery and Prince George’s counties codes to Washington County, which simply states collective bargaining is authorized and strikes are prohibited.

Read the full article for more information.

Conduit Street Podcast: County Collaboration on Tax Reform, Lockbox Redux, Employer Mandates, and Bad Docs

The MACo Legislative Committee formally adopted a statement this week to express its views on broad-based tax reform proposals pending before the General Assembly, designed to react (in various ways) to the recently enacted federal tax reforms. Absent state action, some Maryland taxpayers would see an increase in their state and county tax liability — the potential means to offset these changes sit before the legislature in multiple variations of changes to deductions, exemptions, rates, and brackets — each with distinct distributional effects.

Governor Larry Hogan this week announced a “lockbox” proposal to ensure that taxes on casino revenues set aside for education are used to supplement, not supplant state funding for public schools. Last month, legislature leadership announced a plan to place a constitutional amendment on the November ballot. The ballot question would ask voters to approve of putting a “lockbox” on casino money (around $500M per year), requiring it to be used for education above the amount set by state formulas. The Governor’s proposal would not require a referendum, it would be done through statute.

The House Economic Matters Committee voted down SB 304, Maryland Healthy Working Families Act – Enforcement – Delayed Implementation, which would have delayed implementation of the Maryland Healthy Working Families Act until July 1. The vote was 12-11. The focus now turns to a new wave of employer mandate proposals.

A proposal to strengthen Maryland’s Prescription Drug Monitoring Program is likely to spur a debate over who should have access to the database and under what circumstances. As heroin and opioid deaths continue to skyrocket in Maryland, County Health Officers could play a vital role in sharing vital information and best practices with identified prescribers, and increase awareness and improve intervention efforts in cases of patients who may be doctor shopping.

On the latest episode of the Conduit Street Podcast, Kevin Kinnally and Michael Sanderson break down MACo’s position on broad-based tax reform proposals, discuss the competing education “lockbox” initiatives, examine employer mandate proposals, preview the looming debate on Maryland’s PDMP, and more!

MACo has made the podcast available through both iTunes and Google Play Music by searching Conduit Street Podcast. You can also listen on our Conduit Street blog with a recap and link to the podcast.

Listen here:

If you are having trouble using this media player, listen on our website.

House Committee Kills Bill to Delay Implementation of Paid Sick Leave Law

The House Economic Matters Committee voted down SB 304, Maryland Healthy Working Families Act – Enforcement – Delayed Implementation, which would have delayed implementation of the Maryland Healthy Working Families Act until July 1. The vote was 12-11.

The Senate approved the legislation last week, after Senate Finance Chairman and chief sponsor of the Maryland Healthy Working Families Act, Senator Thomas “Mac” Middleton introduced the bill to delay enforcement of the new law. MACo testified in support of the bill.

The General Assembly passed HB 1 last year with veto-proof majorities in both the House and Senate. Governor Hogan vetoed the bill, but the General Assembly overrode the veto in the early days of the 2018 legislative session. The law, which requires employers with 15 or more full-time employees to provide workers with at least five days of sick and safe leave per year, took effect on February 11, 2018— 30 days after the legislature overrode the veto.

The Maryland Healthy Working Families Act requires county governments to provide sick leave to all employees. While county governments generally provide generous benefits, at a much higher rate than the legislation would require, MACo opposed the legislation, raising concerns about the bill’s potential effects on provision of emergency and essential services and with the bill’s broad requirements for providing leave to part-time, seasonal, and contractual employees in the same manner as full-time employees.

MACo has received several requests from county governments regarding the law’s provisions. At the same time, county governments are receiving questions about the law from members of the business community.

By law, the Commissioner of Labor and Industry will carry out this provision. The Governor’s Executive Order of January 15 created the Office of Small Business Regulatory Assistance, which will assist with implementation of the Act.

In the meantime, for general information about the law’s provisions, see this HB 1 – Summary.

For more information, contact Kevin Kinnally at MACo.

Useful Links

Previous Conduit Street Coverage: Senate Passes Bill to Delay Implementation of Paid Sick Leave Law

Previous Conduit Street Coverage: Governor Hogan Vetoes Sick Leave Bill

Previous Conduit Street Coverage: New Proposal Seeks to Delay Enforcement of Sick Leave Law

Previous Conduit Street Coverage: Conduit Street Podcast: 9-1-1 Takes Center Stage, Huge Drop of Bills Introduced, Sick Leave Law Looms, and Senate Changes Afoot

Tax Benefit Mandate Handcuffs Local Jurisdictions

MACo Policy Associate Kevin Kinnally submitted written testimony in opposition to House Bill 540, “Labor and Employment – Pre-Tax Transportation Fringe Benefit – Requirement (Maryland Pre-Tax Commuter Benefit Act), to the House Economic Matters Committee on February 13, 2018.

This legislation would mandate counties to provide a pre-tax benefit for certain workplace transportation costs. While jurisdictions currently have the discretion to administer this benefit, the bill introduced here would force counties to offer the credit without consideration of local budgets or differences in modes of transportation in areas across the state.

From MACo Testimony:

According to the bill’s fiscal note, local income tax revenues would decline by more than $2 million per year. This is exacerbated by the fact that counties do not know yet just how federal tax reform, and the state reaction to it, will affect their revenues.

MACo suggests that consideration be given instead to providing state tax credits, which do not mandate the depletion of resources from all counties for education, public safety, and needed community services. State tax credits also afford a far greater range of effect to encourage employees to avail themselves of the new benefit.

Counties in their dual roles as employers and tax collectors object to proposals that mandate specific employer decisions, and potentially deplete local revenues without input by local elected officials.”

Follow MACo’s advocacy efforts during the 2018 legislative session here.

MACo Resists Bill That Would Upend Effective Local Pay Scales

MACo offered amendments to a bill that would prohibit employers from determining an individual’s salary off of prior wage or pay history. The bill was heard on February 13, 2018 to the House Economic Matters Committee.

While the bill tackles a laudable goal in ensuring wage equality and not perpetuating wage disparities already entrenched through prior salary history, it significantly affects already established and effective wage and salary systems currently being used by local governments.

County and local government generally already perform many of the requirements in this bill  and they have pay scales in place that are specifically tailored to consider internal promotions and transfer of current employees.

From MACo Testimony:

While counties already comply with the majority of requirements outlined in this bill, MACo is concerned that prohibiting county employers from considering current wages in the internal promotion or transfer of current employees is impractical. Therefore, MACo requests the bill be amended to remove local government employers from its effect.

Efforts to promote wage equality should not intrude on public sector employee scales, which appropriately base compensation on experience and past workplace success.”

Follow MACo’s advocacy efforts during the 2018 legislative session here.

Paid Leave Delay Bounces to the House

MACo offered testimony in support of Senate Bill 304, “Maryland Healthy Working Families Act – Enforcement – Delayed Implementation”, on February 13, 2018 before the House Economic Matters Committee.

The bill would delay the enforcement of compliance with the Maryland Healthy Working Families Act for 60 days.

It passed the Senate last week.

From MACo Testimony:

County decision-making is, for obvious purposes, a public and deliberative process. Counties adopting new personnel policies must go through hearings and opportunities for public comment prior to their adoption. This process, by its nature, will take weeks to complete – even for those jurisdictions that had policy re-writes “ready to go” on the day the new state law was adopted by the General Assembly.

SB 304 proposes a reasonable timetable for compliance, and will afford local governments the time to carry out their obligations through the appropriate process.”

Follow MACo’s advocacy efforts during the 2018 legislative session here.


Conduit Street Podcast: 9-1-1 Takes Center Stage, Huge Drop of Bills Introduced, Sick Leave Law Looms, and Senate Changes Afoot

Both county and municipal governments, still feeling the permanent effects of devastating cutbacks to state roadway funding, have made restoring Highway User Revenues a perennial legislative priority.  HB 1569, introduced today, represents a compromise between counties and municipalities, whereby all local governments would have their local share of Highway User Revenues fully restored.

A law requiring employers to provide employees with sick leave will go into effect on Sunday, despite a veto last year from Governor Larry Hogan and a last-ditch effort by the state Senate to delay its implementation. The law requires employers with 15 or more full-time employees to provide workers with at least five days of sick and safe leave per year.

The Commission to Advance Next Generation 9-1-1 (NG911) (SB 285/HB 634), one of MACo’s 2018 Legislative Priorities, had a hearing in the Senate Finance Committee this week. Counties from across the state sent public safety professionals to stress the importance of advancing NG911 in Maryland.

The General Assembly is on pace to introduce more than 4,000 bills in 2018. With “crossover” just five weeks away, legislators are scrambling to meet the deadline.

Senator Ed Kasemeyer, Chairman of the Senate Budget and Taxation Committee, announced he does not intend to seek re-election to another term. His decision would leave yet another member of the powerful fiscal panel uncertain for the next four-year term.

On the latest episode of the Conduit Street Podcast, Kevin Kinnally and Michael Sanderson break down the compromise on Highway User Revenues, discuss the paid sick leave law, recap the NG911 hearing, preview big changes on the horizon for the Maryland Senate, and more!

MACo has made the podcast available through both iTunes and Google Play Music by searching Conduit Street Podcast. You can also listen on our Conduit Street blog with a recap and link to the podcast.

Listen here:

If you are having trouble using this media player, listen on our website.


An Expense Cap Increase for the State Pension Agency

The Pension System Board of Trustees recommends 3 options for changing the cap on the Agency’s administrative expenses and legislative leadership chooses to introduces 1.

The Joint Pension’s Committee Annual Report included information regarding the formula used to calculate the administrative expenses cap for the State Retirement Agency. According to the Report, for the past 14 years, the cap has been calculated incorrectly. The staff recommendation in the Report was to codify the existing practice to permanently increase the level of the cap.

In addition to that potential increase, to alleviate the expected stress of funding increases to the State Retirement Agency’s 2019 operating budget, the State Pension Board offered the Legislature three possible legislative solutions for an additional increase to the cap. The expected stress of funding increases stem from the third phase of the Agency’s technology and operational re-engineering strategy.

The options were stated in the Report as follows:

  • Option A: In keeping with historical precedent with regard to funding information technology projects (Chapter 429 of 1993, Chapter 366 of 1995, and Chapter 157 of 1997), the Legislature could introduce legislation that would provide for a one-time increase to the administrative expense cap through fiscal year 2022 to address the financial needs of these projects. The Board believes that a cap of .26% would accomplish this objective.
  • Option B: The Legislature could introduce legislation that would exempt funding of MPAS-related projects, or possibly even Major Information Technology Development Projects in general, from the Agency’s administrative expense cap.
  • Option C: The Legislature could introduce legislation that would permanently increase the Agency’s administrative expense cap by a certain amount that would be sufficient to cover major information technology projects and other significant expenses that may arise in the future. The Board believes that a cap of .26% would accomplish this objective.

House Bill 1018 / Senate Bill 784 is the legislative introduction of Option A above.

MACo is tracking this legislation on behalf of county governments, about half of which are participating governmental units in the State Pension System.

For more information, read the full Report of the Joint Pensions Committee.