State Budget and Fiscal Issues

State Budget Outlook: The Sky’s Staying Put

Barbara Zektick State Budget and Fiscal Issues, Taxes and Revenues

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

Kirwan Commission Stays True To Form

Kevin Kinnally County News, Education, General Assembly News, News You Can Use, State Budget and Fiscal Issues

The Maryland Commission on Innovation and Excellence in Education held its most recent meeting today in Annapolis. Known as the Kirwan Commission because it is chaired by former University System Chancellor Brit Kirwan, the Commission is charged with reviewing and assessing current education financing formulas and accountability measures.

It was widely anticipated that today’s meeting would focus on education funding, especially because some Commissioners recently expressed concerns over how little time has been spent analyzing proposed funding changes. Instead, staying true to form, the Commission spent the day listening to testimony on broad policy initiatives.

Robert Slavin, Director, Center for Research and Reform in Education, Johns Hopkins University, testified on the importance of intensive, individual programs, such as one-on-one tutoring, for students struggling to achieve proficiency standards. While the Commission seemed to agree on a philosophical level, some Commissioners said the approach was cost prohibitive.

Career and technical education (CTE) continued to be a hot topic of discussion. Commissioners agreed that Maryland’s CTE standard is less rigorous than the standard in top performing systems.

In addition to providing more rigorous CTE programs, the Commission recommends that Maryland implement a communication plan to dispel the notion that CTE programs are only meant for students who do not excel in traditional academic subjects. This communication plan will also inform students and parents that enrolling in a CTE program in no way precludes the ability to attend college.

Montgomery County Councilmember Craig Rice, representing MACo on the Commission, praised efforts to expand CTE programs in Maryland. According to Councilmember Rice:

CTE programs have been very successful in counties, and with a small state investment, these programs can continue to grow. Expanding CTE should rise to the top of our recommendations. A lot of the the recommendations we’re talking about are very expensive, this one isn’t. It’s a no brainer.

Delegate Maggie McIntosh, representing the Maryland House of Delegates on the Commission, expressed frustration with the lack of input from the business community on how to best expand CTE programs, she stated:

The business community worked side by side with the Thornton Commission, but now no one is here on behalf of the business community. We need a renewed dialouge with the business community.

The Commission also heard panel testimony from the Maryland Association of Boards of Education (MABE), the Public School Superintendents’ Association of Maryland (PSSAM), and the Maryland State Education Association (MSEA), among others.

MABE’s presentation included an emphasis on the importance of local boards of education having authority over local education spending. MSEA outlined their top three priorities:

  2. Increased salaries for teachers.
  3. Increased staffing for schools.
  4. Addressing poverty

The Commission’s next meeting will focus on the analysis from Augenblick, Palaich & Associates (APA) and the National Center on Education and the Economy (NCEE). Dr. Kirwan has asked representatives from APA and NCEE to attend the meeting to discuss the methodology for costing out their proposed recommendations.

The 2016 Commission on Innovation and Excellence in Education was created by legislation introduced in the General Assembly. The Commission membership parallels that of the earlier Thornton Commission. MACo is entitled to two representatives on the Commission, under the legislation.

Montgomery County Councilmember Craig Rice, MACo’s Education Subcommittee Chair, and Allegany County Commissioner Bill Valentine, MACo’s Education Subcommittee Vice Chair, represent MACo on the Commission.

The Commission’s next meeting will be held on Wednesday, October 25, 2017; 9:30 am-5:00 pm, at 120 House Office Building (House Appropriations Committee Room), 6 Bladen Street, Annapolis, Maryland.

Click here to view today’s meeting materials.

For more information, contact Kevin Kinnally at MACo.

Gain Easier Access to Local Finance, State Aid Reports on New Website

Robin Clark Eilenberg County Budgets, County News, Education, Intergovernmental Relations, State Budget and Fiscal Issues, Taxes and Revenues

The Department of Legislative Services has re-designed its webpages, providing a more direct route to legislative, budgetary, and other statewide reports.

Screenshot 2017-10-12 12.03.58.png

The Department of Legislative Services develops a number of annual reports on local finances, demographics, and state aid to local governmental entities. The reports may be found through the General Assembly’s webpage, but the Department’s new website now provides a simpler route to them.

Check out the Department of Legislative Service’s Publications page.

Reports provided include 2017 fiscal year information on:

2018 fiscal year information will be released toward the start of the General Assembly Session in December 2017 and January 2018.

 

 

Charles Not Taking Light Rail Cuts Lightly

Barbara Zektick County News, State Budget and Fiscal Issues, Transportation and Public Works

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.

Conduit Street Podcast, Episode #2 – How Would Federal Tax Reform Affect Maryland?

Kevin Kinnally County Budgets, County News, Intergovernmental Relations, NACo and Federal Issues, News You Can Use, State Budget and Fiscal Issues, Taxes and Revenues

Federal tax reform is a hot topic in Washington, and two potential changes could wreak havoc on county finances. Congress is considering eliminating both the deductibility of state and local taxes (SALT) and the tax exemption for municipal bonds to pay for other priorities.

On the latest episode of the Conduit Street Podcast, Kevin Kinnally and Michael Sanderson discuss how the latest tax reform proposal would affect Maryland.

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

Listen here:

Committee Keeps Debt Recommendation Below Traditional Guideposts

Robin Clark Eilenberg County News, State Budget and Fiscal Issues

The State’s Capital Debt Affordability Committee (CDAC) chaired by State Treasurer Nancy Kopp, approved a recommendation during its meeting on September 29th to set the State’s bond authorization at $995 million for the coming year.

The Committee’s voting membership includes the Treasurer, the Secretary of Budget and Management, the Comptroller, a governor’s appointee, and the Secretary of Transportation.

At this meeting, the Committee heard a presentation and analysis of three different debt limit alternatives:

  1. The 2016 CDAC Recommendation of $995 million annually based on the Governor’s capital program
  2. The Spending Affordability Committee recommendation of $1,065 million for FY 2018 plus 1% annual growth
  3. The traditional CDAC approach, which includes 3% annual growth to account for inflation and increased demand for capital funding.

Following the presentation, the Treasurer asked for comments and questions. The Comptroller recommended $995 million as the maximum cap of debt service for fiscal year 2019, and spoke of “the perils of government by credit card.”

Department of Budget and Management Secretary Brinkley made a motion to adopt $995 as the debt limit, noting the last week’s revenue write-down and, with reference to the Comptroller’s remarks, stated that “the bill has come due.” Secretary Brinkley also stated that general fund debt service costs are more than the State’s annual investment in public school construction.

Treasurer Kopp said that she would not support $995 as a debt limit, and that she would support one of the other debt limit alternatives that had been presented to the Committee. She stated that there are “significant unmet infrastructure needs” in Maryland, and described the importance of building and maintaining bridges, roads, and other pieces of critical infrastructure.

The vote to approve the recommendation of $995 million for fiscal year 2019 was 4-1, with Treasurer Kopp voting against.

CDAC, created pursuant to Section 8-104, et seq., of the State Finance and Procurement Article, is required to submit to the Governor and the General Assembly each year an estimate of the maximum amount of new general obligation debt that prudently may be authorized for the next fiscal year. Today’s recommendation will be forwarded on to the Governor and General Assembly for their consideration.

For more information, see the 2017 CDAC Affordability Analysis.

Governor Announces Plans To Widen I-270, I-495, MD 295

Barbara Zektick Finance and Procurement, State Budget and Fiscal Issues, Transportation and Public Works

Today Governor Hogan announced a plan to add four new lanes to I-270, the Capital Beltway (I-495), and the Baltimore-Washington Parkway (MD 295). The anticipated $9 billion “Traffic Relief Plan” for these three major state highways is touted to reduce congestion for millions of drivers.

The MD 295 project involves selling the road to the Maryland Transportation Authority (MdTA), which primarily operates toll facilities and does not generally use any gas tax revenues for its projects. Parts of MD 295 are owned by the U.S. Department of the Interior, and the Governor indicated that he has entered into talks with the Department Secretary about the transfer. Baltimore City also owns the part of MD 295 that runs through the city boundaries, and it is unclear whether MdTA would take over ownership of that portion, as well.

The state plans to widen I-495 and I-270 by entering into a public-private partnership (P3), through which the private entity would design, build, finance, operate, and maintain new lanes on I-495 between the American Legion Bridge and the Woodrow Wilson Bridge and on I-270 between I-495 and I-70.  That project is also anticipated to include express toll lanes. According to the Request for Information (RFI) MDOT released today, MDOT does not intend to use Transportation Trust Fund dollars for these projects, either.

From the Governor’s release:

The first step to build new express toll lanes on MD 295 will begin with the transfer of MD 295 from the U.S. Department of the Interior to the Maryland Transportation Authority. Governor Hogan has already personally started this process during a recent meeting with Interior Secretary Ryan Zinke and has directed MDOT officials to move forward with the transfer negotiations. Following the transfer, the Maryland Transportation Authority would then build, operate, and maintain the new lanes and maintain existing lanes between Baltimore and Washington, D.C. …

In making this announcement today, Governor Hogan has directed MDOT to issue the Request for Information [(RFI)] to the P3 industry and continue the transfer process with the U.S. Department of the Interior.

MDOT issued the RFI today. From the document:

In lieu of an availability payment structure, MDOT is considering offering a toll
concession to developers for added capacity the developers provide to I-495 or I-270.
Under a toll concession for additional capacity, current capacity on I-495 and on I-
270 shall remain free. Only users of the additional capacity would pay user fees. The
desire of MDOT would be that any private agreement not require a financial
contribution directly from the Maryland Transportation Trust Fund and that the
agreement would provide a concession payment to MDOT upon financial close.
Assistance through federal funding resources and programs such as the
Transportation Infrastructure Finance and Innovation Act (TIFIA) would be
supported and pursued.

State Reduces Revenue Estimates by $53 Million

Barbara Zektick County News, State Budget and Fiscal Issues, Taxes and Revenues

The State Board of Revenue Estimates just voted to reduce the State’s revenue projections for fiscal 2018 by $53 million – a .3 percent decrease. Fiscal 2019’s first estimates indicate an estimated reduction of $73.5 million.

9-20-2017-Board-of-Revenue-Estimates

Weak sales tax revenues drove the downward revenue projections, due to sluggish income growth, additional purchasing online and “tepid consumer confidence” resulting from uncertainty about federal actions, according to a statement by the Comptroller’s Office.

From the Comptroller’s prepared statement:

Following a very brief but relatively successful holiday season, sales tax revenue declined this past spring. Over the last several fiscal years, we’ve barely attained 2% growth in sales and use tax revenues. Our prior estimates had generally held that the State would at least see 3% to 3.5% growth. But we know these figures are influenced in large part by the meager income growth that we continue to experience, and the political uncertainties coming out of Washington.

…

We continue to experience the slowest and most tentative economic recovery of our lifetimes. And as I’ve said in the past, I think that it would be imprudent to expect a return to pre-recessionary patterns of economic expansion.

To be prepared for the fiscal uncertainties of the future, I believe fiscal policymakers need to consider this rate of growth in our revenues as the “new normal,” if you will. And I would encourage my fellow state leaders to adopt this approach when making spending and fiscal policy decisions in the months ahead.

The Board also indicated that individual income tax revenue is projected at $9.8 billion, a 4.1 percent increase from the current fiscal year, for fiscal 2019.

 

Gov. Hogan Terminates Funding for Baltimore Crime Panel

Kevin Kinnally County News, Government Liability and Courts, Intergovernmental Relations, State Budget and Fiscal Issues

Governor Larry Hogan on Friday announced he is terminating state funding for the Criminal Justice Coordinating Council, a panel formed in 1999 to tackle issues affecting criminal justice in Baltimore, initially focusing on streamlining the processing of criminal cases by coordinating the efforts of criminal justice system participants. The Council is fully funded through a state grant of about $272,000.

In a letter to the council’s chairman, V. Glenn Fueston Jr., the governor’s designee on the CJCC, says “the inability to deliver solutions in support of the governor’s initiatives forces the termination of the CJCC’s grant.”

According to WBAL,

The letter states that the CJCC mission is not being carried out: “Its goals to reduce violent crime are not being met. Continuing to fund the CJCC is simply not a responsible use of taxpayer dollars.”

The letter states that the funding will instead go to the Mayor’s Office of Criminal Justice — an office, the letter stated, “we are confident will not seek to evade the responsibility of providing the timely and actionable strategies to appropriately respond to this critical issue.”

Read the full article for more information.

Learn All Things Public Finance With MDGFOA

Barbara Zektick County Budgets, Finance and Procurement, Government Liability and Courts, News You Can Use, State Budget and Fiscal Issues, Taxes and Revenues

The Maryland Government Finance Officers Association (MDGFOA) has announced their fall educational offerings.

The MDGFOA Fall Conference takes places on October 27, 2017 at the BWI Marriott in Linthicum. Presentations include:

  • The Latest in Government Fraud, with Adam Lippe, State’s Attorney’s Office, Baltimore County;
  • Continuity of Operations Planning (COOP) Overview, with Eric Oddo, Continuity Program Director, University of Maryland Center for Health and Homeland Security;
  • Maryland’s Fiscal Health, with Eileen Norcross, Senior Research Fellow, Mercatus Center at George Mason University;
  • Maryland Revenue Update, with Andrew M. Schaufele, Director, Bureau of Revenue Estimates;
  • GASB Update and Actuary Insights, with Jennifer Diercksen, First Vice President, Davenport & Company LLC, and David Boomershine, EA, MAAA, FCA, MSPA, President, Boomershine Consulting Group; and
  • Best Practices- Risk-Based Reserve Policy, with Bob Cenname, Deputy Budget Director, City of Baltimore. 

Registration is available on MDGFOA’s website.

In addition, MDGFOA is offering a Review of the Government Accounting, Auditing & Financial Reporting Exam on November 2-3, 2017, and an Intermediate Governmental Accounting Seminar (IGAS) November 8-10, 2017.

logo