Senate Passes County-friendly Budget

The Senate passed SB 185, the Budget Bill, and SB 187, the Budget Reconciliation and Financing Act of 2018 (“BRFA”) – both with good news for Maryland counties.

As proposed by the Governor, the budget included shifting nearly all costs of the State Department of Assessments and Taxation (SDAT)’s assessment and directorial functions to counties, forevermore. The Senate struck this language from the BRFA.

The Governor’s original proposal also included flat funding local health departments at the previous year’s levels. The Senate cut that language, too– instead increasing the funding according to the formula in existing law.

The Senate has also approved all funds included in the original budget for local roads funding: $178.1 million in highway user revenues, in addition to $53.7 million in additional local transportation grants. This includes a full $27.8 million to 23 counties, which is $15 million more than the Senate approved last year.

The applicable House Appropriations subcommittees have also recommended retaining all local roads funding in the budget, scrapping any language to shift additional SDAT costs to counties, and increasing local health department funding. The full committee considers the budget bills on Friday.

The Road Ahead Looks Clear For County Transportation Funding

The Senate Budget & Taxation Committee has voted to pass Senate Bill 516 with amendments to reflect its cross file, House Bill 807 – paving the way for counties to receive twice as much in highway user revenues as they did in fiscal 2018, for the next six years. The bill now goes to the full Senate for a vote.

The House passed HB 807 with amendments which ensure that counties receive 3.2 percent of highway user revenues for fiscal years 2020 through 2024 – about twice as much as the 1.5 percent they received in fiscal 2018 (independently of the capital grants).

The full Senate passed the budget bill on Thursday morning, without cutting any funds to counties for highway user revenues and capital grants. The budget includes $178.1 million in highway user revenues, in addition to $53.7 million in additional local transportation grants. This is approximately 8 percent more than last year, which included $175.5 million in highway user revenues and $38.4 million in additional grants.

Last year, 23 counties ultimately received $12.8 million in grant money, after the legislature cut counties’ portion from the Governor’s proposed $27.4 million. This year, the Governor is proposing $27.8 million to those counties – and the full Senate has approved all of those funds.

In addition, the House Appropriations Transportation Subcommittee decided to recommend full funding of the grants – a good sign. The full committee will make decisions on the budget on Friday. Then, the budget will go to the Conference Committee, which makes final decisions on fiscal 2019 funding.

MACo Leadership Rallies For Unified Roads Funding Deal

At the hearing for SB 516, Transportation – Highway User Revenues – Distribution on Wednesday, MACo leadership testified to support the bill restoring highway user revenues to municipalities, requesting amendment to make the bill reflect the compromise reflected in its cross file, HB 807.

HB 807 was amended to provide 5 years of enhanced funding for local roads and bridges. For FY 2020 through 2024, the bill would increase the county share of highway user revenues from 1.5% to 3.2%, with additional funding also supporting Baltimore City and municipal government.

See previous Conduit Street coverage for further information.

At the hearing, MACo President and Anne Arundel Council Member Jerry Walker joined Frederick County Executive Jan Gardner; MACo Secretary; Harford County Executive Barry Glassman, MACo Second Vice President; Talbot Council Member Laura Price, MACo Board Member; and Michael Sanderson, Executive Director, MACo to support local roads funding.

Council Member Walker testified:

For the first time in many years, the House has taken an important step towards restoring roads funding to local governments. …. We are here today to request that you do the same – and pass that bill, as amended, when it crosses over, or amend this bill to reflect that compromise.

The average Marylander does not know, or care, which government jurisdiction is responsible for the roads, pipes, bike lanes and cables that serve them. They just want them to work. They need us, together, to make them work, because they can’t do that without us.

Together, we need to stop kicking the can down the road on our infrastructure needs. We hope that, together, this year, we can all buy into a way to begin addressing this.

County Executive Gardner told the Committee:

MACo is here today in unified support of the agreement reached in the House to begin providing highway user revenues back to local governments.

My county contains 1,950 miles of roads, or 4,194 lane miles. Eighteen percent of those miles are maintained by the State. Sixteen percent are maintained by municipalities.

Frederick County maintains all of the rest of the roads. That’s 1,300 miles of roads. We maintain 67 percent of the road miles within our borders, and 62 percent of the lane miles.

County Executive Glassman stressed the importance of taking a meaningful step forward on this important issue now. Council Member Price provided perspective from a smaller county, which has been unable to back fill lost funding with other revenues.

HB 807 has passed Third Reader in the House and is anticipated to be heard by the Budget & Taxation Committee in the Senate.

Senate Committee Rejects SDAT Cost Shift, Maintains Local Health Funding

During its operating budget decision meeting on March 8, the Senate Budget and Taxation Committee rejected two proposals in SB 187, the Budget Reconciliation and Financing Act of 2018 (“BRFA”) that would have compromised county finances. The full Senate is expected to take up these budget decisions early next week.

As introduced, the BRFA would have shifted 90 percent of costs for certain State Department of Assessments and Taxation (SDAT) functions onto the counties. The bill proposes shifting nearly all costs for SDAT’s property assessment, information technology and Office of the Director costs. Currently, counties fund 50 percent of assessment and information technology functions. The cost shift would have placed an additional $20 million on the backs of county budgets.

The Department of Legislative Services recommended against the proposal, insinuating it was unwise.

In addition, the BRFA proposed level funding the core public health funding to local health departments. However, the Committee voted to “leave the door open” on increasing this funding according to the inflation-based formula – providing an additional $890,793 to local health departments.

On March 6, the Senate Budget and Taxation Health and Human Services Subcommittee voted these actions, and the full committee approved them two days later. The House will take actions on these items, with final determinations made by the Conference Committee, which will be appointed by both chambers.

Revenue Estimates Board Updates Projections – by $434 Million

The state’s Board of Revenue Estimates updated its revenue projections for fiscal 2019 – increasing its projection by $433.6 million as a result of federal tax reform. It also decreased its projections for fiscal 2018 by $39.4 million.

Comptroller Peter Franchot indicated the following in a statement:

These new estimates are heavily influenced by the Tax Cuts and Jobs Act passed by Congress and signed into law by President Trump. While I am optimistic about this considerable increase in the General Fund, I want to offer a note of caution, as there are two stories to tell.

First and foremost, our revenue estimating team reports a 34 percent growth in our fourth quarter estimated payments, which was highly unusual. This is three times what we would normally witness. Attempting to determine if this was an intentional taxpayer strategy to pay tax bills in full in an effort to receive a vast federal refund before that option is gone — or something else entirely — remains to be seen.

Another concern with the new tax code is what I call Sticker Shock. While the potential federal refund may be tantalizing, citizens used to getting a state refund might not get one or may end up owing money. For those living paycheck to paycheck, this could be devastating.

In addition, this overall revenue windfall is masking another economic reality: reductions to both withholding by $30 million and sales tax by $15 million annually. Serving as a reminder that Maryland is still feeling the long tentacles of the Great Recession pulling down our economy. This is a true-up to our underlying wage and retail sales tax base that are small in the grand scheme of things, but reflective of lethargic wage growth and subdued consumer spending.

Highway User Bill in the Fast Lane – “Deal” Locks in 5yr Funding Increase

A House Committee has amended and is advancing HB 807, legislation to increase state funding for locally-maintained roads and bridges. The five-year plan would set new, higher levels of funding for county and municipal roadways beginning in FY 2020. Signs point to the bill marking a negotiated “deal” including legislative leaders from both chambers, clearing its path to passage this session.

Both MACo and MML have made restoring Highway User Revenues a top priority for years, as recession-driven cuts left local governments with a fraction of historic funding levels of state transportation revenues.

The amended version of HB 807 would roughly double the funding for county governments in each year — to approximately $58 million each year. The funding would be designated as “capital transportation grants” rather than simple statutory distributions (the effect of this terminology change on local governments is unclear, but may be negligible). The new funding level for counties would represent 3.2% of the funds from the Highway User Revenues, coming from taxes on motor fuels, vehicles, and other transportation-related sources — an increase from 1.5% today (through a combination of traditional HUR and capital grants).

The municipal share would be adjusted to 2.0% of the total, and the share for Baltimore City (which has the unique responsibility of maintaining nearly all state roads within its boundaries) is adjusted to 8.3%.

In the days ahead, the House floor debate and public discussion on the legislation may reshape the debate over local road funding for the future. Conduit Street will continue to follow this top priority local issue.

The Big Build Schools Bill Is (Almost) Here

Legislation based on the recommendations of the 21st School Facilities Commission will be introduced in the General Assembly on March 1. A summary, but not the text of the bill, is available as of this writing.

UPDATE: The text of the bill is now available.

The Knott Commission legislation that many have been awaiting is almost here. HB1783 21st Century School Facilities Act, sponsored by Delegate Jones, Chair of the Capital Budget Subcommittee of the House Appropriations Committee is listed on the synopsis of bills to be introduced on March 1.

According to the summary on the General Assembly website, the bill deals with:

  • Altering the requirements for awarding contracts to bidders for school buildings;
  • requiring the Interagency Committee on School Construction to conduct a certain facility assessment;
  • specifying the process for the review and approval of public school construction projects;
  • establishing the Local Share of School Construction Costs Revolving Loan Fund to provide loans to local governments to forward fund the local share of school construction costs;
  • declaring the intent of the General Assembly regarding funding for school construction; etc.

MACo has heard that the bill will be a major piece of legislation, and that it will include some component of all 30+ recommendations of the Knott Commission.

Preliminary analysis of the Department of Legislative Services finds the legislation to be a “local government mandate.” In this context, that may mean that either county governments or another local entity, such as school boards, are directly affected by the legislation.

MACo has been awaiting this legislation along with other school construction stakeholders. County governments share responsibility for financing K-12 school construction with the State, whose funding depends on statutory formulas and regulations.

MACo advocates efforts to promote the smartest and most effective funding for modern schools, and urges State policymakers to retain the State’s strong commitment to this top funding priority. In addition, MACo supports reasonable school construction improvements including alternative financing, public-private partnerships, and innovative models of school construction and design.

Legislative Analysts: Shifting SDAT Costs To Counties Unwise

At today’s hearing on SB 187, the Budget Reconciliation and Financing Act of 2018 (“BRFA”), Department of Legislative Services (DLS) analysts recommended striking the provision which would shift 90 percent of costs for certain State Department of Assessments and Taxation (SDAT) functions onto the counties – concurring with MACo’s suggested amendment to delete this provision from the BRFA.

As introduced, the bill would shift nearly all costs for SDAT’s property assessment, information technology and Office of the Director costs onto the counties. Currently, counties fund 50 percent of assessment and information technology functions. The cost shift would have placed an additional $20 million on the backs of county budgets.

From the DLS analysis on SDAT’s operating budget:

The Department of Legislative Services (DLS) recommended against this proposal when it was offered in 2017. While it is true that local jurisdictions are the primary recipients of revenue based on the work of SDAT, this does not necessarily mean that it is wise to place the cost burden on those local governments. The State and its citizens benefit from the uniformity in procedures and valuations produced by SDAT as well as the unity of the appeals process. Assessors from all jurisdictions benefit from having greater access to support and other resources that may not be available to them otherwise.

As long as budget decisions for SDAT are made at the State level, it is prudent to require the State to pay a large share of these costs to maintain an incentive to make wise budget decisions. While there is no evidence that the current administration of SDAT or DBM would be less careful in their fiscal stewardship if more funding comes from local governments, there is still a risk going forward of creating a large area of expenditure in the budget that the appropriators do not have to fund. DLS recommends that the current 50-50 cost share for assessment expenses be maintained and that the provision increasing the local cost share to 90% be stricken from the BRFA of 2018.

MACo President Jerry Walker (Council Vice Chair, Anne Arundel County) testified:

This not only imposes a $20 million cost burden onto Maryland counties. It also threatens the objectivity and transparency of a good government system that has served our state well for decades. It’s important – and unique to Maryland – to have property assessment functions managed and funded by a jurisdiction that does not directly, meaningfully benefit from the size of those assessments.

It keeps the fox out of the henhouse.

By having counties – the biggest beneficiary of those assessments – fund their work, it places that objectivity into question.

MACo Legislative Committee Member Michael Mallinoff, Charles County Administrator, testified:

I cannot do my job to make sure our taxpayer dollars serve them effectively if my county doesn’t have any oversight for the programs they pay for. Shifting the costs for SDAT onto the counties would eliminate any incentive for the State Administration to make wise budget and management decisions.

Regardless of what decisions they make or how much they spend, they will always receive a blank check from our constituents. This is not a move in the direction of good government, transparency, or accountability.

Read MACo’s testimony here.

What’s Up With All These Highway User Bills?

Perhaps local governments are making progress moving the needle, or maybe it’s LIFT4MD logojust because it’s an election year – but the 2018 session has experienced an inundation of bills seeking to restore highway user revenues to local governments.

MACo’s key legislative initiative bill is the Local Infrastructure Fast Track for Maryland Act – a consensus bill seeking to restore highway user revenues for counties and municipalities according to a phased-in schedule that the Administration can get behind.

But, there are quite a number of other bills out there, too – and all them have their own schedules for restoration and targeted beneficiaries.

Bill Counties Municipalities Baltimore City House Sponsor Senate Sponsor
HB 807/ SB 516 none fully restored, 2 yrs partially restored, 2 yrs Del. Beidle Sen. Madaleno
HB 854 / SB 154 fully restored, 4 yrs fully restored, 4 yrs fully restored, 4 yrs Del. K. Young Sen. Manno
HB 1405/ SB 605 fully restored, 8 yrs none none Del. Beitzel Sen. Edwards
HB 1569 fully restored, 8 yrs fully restored, 2 yrs fully restored, 8 yrs Del. Beidle  
SB 901 fully restored, 7 yrs fully restored, 7 yrs fully restored, 7 yrs   Sen. King
SB 223 partially restored if certain conditions met; 7 yrs partially restored if certain conditions met; 7 yrs restored 2x if certain conditions met; 7 yrs   Sen. Waugh

Primers on Highway User Revenues

Counties Call For A Local Infrastructure Fast Track

Highway User Revenues – What’s On The Table?

Join MACo In Calling For A Local Infrastructure Fast Track

LIFT4MD logoA perennial MACo initiative, counties have called for the return of their fair share of transportation-sourced revenues to fund their roadwork for years. This year, MACo’s initiative calls for a Local Infrastructure Fast Track – a #LIFT4MD – to bring local governments back their historic 30 percent share of transportation revenues from the State’s Transportation Trust Fund. It also calls for an assessment of the state of local infrastructure in Maryland, and for the State to share any additional federal infrastructure funds with counties and municipalities.

MACo originally planned to seek restoration of highway user revenues to all local governments in 7 years – and that is how Senate Bill 901 looks in its present form. After discussing the topic with a myriad of stakeholders, MACo decided instead to introduce a consensus bill, with terms appealing to not only counties, but municipalities and the Administration. Therefore, House Bill 1569, as introduced, restores highway user revenues to counties and Baltimore City in eight years, and municipalities in two years. MACo is working with Senate Sponsor Nancy King to amend SB 901 to reflect its cross file.

The hearings on MACo’s Local Infrastructure Fast Track for Maryland Act are scheduled for Wednesday, March 7 at 1 pm in the Senate Budget and Taxation Committee and Friday, March 9 at 1 pm in the House Environment and Transportation and Appropriation Committees.

MACo calls on representatives from all levels of county governments to join us for these hearings to show your support – it’s time to find a way to give local infrastructure a LIFT. 

And, don’t forget to post about your support on social media using the hashtag, #LIFT4MD.

For more information, contact MACo Associate Director Barbara Zektick.