Rainy Day Funds: What Counts As Rain?

When it comes to tapping into rainy day funds, how much rain makes a day rainy? What justifies tapping into reserves? That’s the question the Pew Charitable Trusts seeks to address in its latest report, When to Use State Rainy Day Funds.

Despite most states experiencing strong revenue growth from fiscal 2003 to 2007, 22 states made withdrawals from their reserves at least once. Then when the Great Recession took a brutal toll on state coffers from 2008 to 2010, eight states did not tap into the rainy day funds at all.

Flawed withdrawal policies may be to blame, Pew opines. Pew examined 47 states’ withdrawal policies, and found that a significant number of states have unclear policies for when to make withdrawals. Six states, including Maryland, have no policies governing when to make withdrawals at all. Most states – 29 – do not have policies which allow for consideration of revenue or economic fluctuations when tapping into their rainy day funds.

At any given time, a number of considerations may factor into policy makers’ decisions over whether to tap into rainy day funds. The report cites Maryland lawmakers’ fear of a credit downgrade:

Lawmakers often cite their state’s creditworthiness as a reason for not withdrawing from their budget stabilization funds. During the Great Recession, Maryland’s stabilization fund stayed at about 5 percent of general fund revenue. As former Maryland Senator Barbara Hoffman noted, the state uses its Revenue Stabilization Account as more of a fail-safe, in part out of a desire to maintain its credit rating. “We don’t spend it, and that’s one of the reasons we have a triple-A bond rating in this state.”

In Maryland, the Governor may transfer funds from the Revenue Stabilization Account to the general fund “as necessary to support the operation of State government on a temporary basis,” so long as the General Assembly blesses the transfer, and it does not cause the account balance to drop below 5.0 percent of the estimated general fund revenues for that fiscal year.

Rather than focusing on withdrawal policies, Maryland has taken steps this past session to address budgeting around economic volatility by saving more conservatively. On March 31, Governor Larry Hogan signed into law House Bill 503, which codifies an approach recommended by The Department of Budget and Management, the Comptroller, and the Department of Legislative Services in their November 2016 report, Report on Revenue Volatility and Approaches to Reduce Risk to the State Budget.

The new law requires that the Revenue Stabilization Account or the newly established Fiscal Responsibility Fund receive a share of nonwithholding general funds above a cap that is based on the 10-year average nonwithholding revenues’ share of total general funds. Revenues from the Fiscal Responsibility Fund may only be appropriated in the second following fiscal year to PAYGO capital projects for public school construction, public school capital improvement projects, capital projects at public community colleges, and capital projects at four-year public institutions of higher education. The bill also specifies it is the State’s goal that 10.0 percent of estimated general fund revenues in each fiscal year be retained in the Revenue Stabilization Account.

Helpful Links

Pew: When to Use State Rainy Day Funds

Link to the Pew report

Report on Revenue Volatility and Approaches to Reduce Risk to the State Budget

Prior Conduit Street coverage on Maryland’s efforts to address economic volatility

House Bill 503: State Budget – Appropriations – Income Tax Revenue Estimate Cap and Revenue Stabilization Account

DLS 90 Day Report: Education Funding

The Department of Legislative Services (DLS) has released its annual summary of the legislative session, The 90 Day Report – A Review of the 2017 Legislative SessionThe report is divided into 12 parts, each dealing with a major policy area. It also includes information relating to the final operating and capital budgets, including aid to local governments – and a breakdown of aid to each county. 

County level detail of state aid is available here.

DLS lists “Direct Aid” to counties in two groups: Primary and Secondary Education, and all other aid programs. A full breakdown of all programs is available here: Total State Aid to Local Governments (Exhibit A-3.5)

This blog post directs readers to sections of the 90 Day Report which describe the education programs.

From Part L, Education of the Report:

State aid for primary and secondary education increases by $61.1 million in fiscal 2018 to $6.4 billion, 1.0 % more than fiscal 2017 aid. State aid provided directly to the local boards of education increases by $113.6 million, or 2.1%, while retirement aid decreases by $52.5 million, or 6.7%. Fiscal 2017 to 2018 changes in major State education aid programs are shown in Exhibit L-1.

The foundation program totals $3.0 billion in fiscal 2018, an increase of $43.3 million over fiscal 2017, or 1.5%. This increase is attributable to enrollment growth of 0.8% (6,658 full-time equivalent (FTE) students) and a 0.7% increase in the per pupil foundation amount due to inflation. The increase in the per pupil foundation amount brought it from $6,964 per pupil in fiscal 2017 to $7,012 per pupil in fiscal 2018.

Aside from the foundation program, the largest single increase is $21.7 million for Limited English Proficiency.

The County level detail begins with a list of aid provided through primary and secondary education programs. The Primary and Secondary Education section of Part A provides detailed descriptions, history and funding amounts for public school programs, of which there are many:

  • Foundation Program ($3.0 billion),
  • Net Taxable Income Grants ($49.2 million),
  • Declining Enrollment and Tax Increment Financing Grants ($17.6 million),
  • Geographic Cost of Education Index ($139.1 million),
  • Compensatory Education Program ($1.3 billion),
  • public special education programs ($284.9 million),
  • funding for nonpublic special education placements ($123.6 million),
  • regular student transportation services ($250.6 million),
  • special student transportation services ($25.7 million),
  • limited English proficiency grants ($248.7 million),
  • Bridge to Excellence in Public Schools Act Guaranteed Tax Base Program ($50.3 million),
  • Public School Opportunities Enhancement Program ($2.5 million),*
  • Robotics Grant Program ($250,000),*
  • Next Generation Scholars of Maryland Program ($4.7 million),*
  • Early College Innovative Fund ($300,000),*
  • Aging Schools Program ($6.1 million),
  • Judy Hoyer and Head Start Programs ($12.4 million),
  • Infants and Toddlers Program ($10.4 million),
  • Teacher Induction, Retention, and Advancement Pilot Program ($2.1 million),
  • Governor’s Teacher Excellence Award Program ($96,000),
  • Food and Nutrition Services ($11.2 million),
  • Adult Education Programs ($8 million),
  • School-based Health Centers ($2.6 million),
  • Healthy Families/Home Visits Program ($4.6 million),
  • Prekindergarten funding ($8.0 million),
  • Prekindergarten supplemental grants ($10.9 million), and
  • Teachers’ retirement payments ($734.5 million).

*Governor’s proposed budget did not fund these programs, but the General Assembly restored them.

Governor Hogan provided a supplemental budget which provided additional education aid to school systems experiencing declining enrollment, and those providing prekindergarten. From page A-22:

On March 27, 2017, Governor Hogan provided a supplemental budget that included $28.2 million in education aid to provide grants to certain [local education agencies, or] LEAs, all of which was contingent on the enactment of House Bill 684. As directed under the bill, this funding is provided in two parts: (1) enrollment based supplemental grants and (2) prekindergarten supplemental grants.

An LEA is eligible for an enrollment based supplemental grant if it has declining enrollment, as determined by the LEA’s most recent prior three-year moving average FTE exceeding its FTE in the previous school year. In fiscal 2018, the eligible LEAs include Baltimore City and Allegany, Calvert, Carroll, Cecil, Garrett, Harford, Kent, Queen Anne’s, and Talbot counties. The supplemental budget provides $17.2 million for these grants.

An LEA is eligible for a prekindergarten supplemental grant based on it offering a full-day public prekindergarten program for all four-year olds whose parents enroll them. In fiscal 2018, the eligible LEAs include Baltimore City and Garrett, Kent, and Somerset counties. The supplemental budget includes $10.9 million for these grants.

From page A-79 on Teacher Retirement:

House Bill 152 (Ch. 23), the Budget Reconciliation and Financing Act (BRFA) of 2017, repeals the requirement, for fiscal 2018 only, that the Governor include an appropriation to the State Retirement and Pension System trust fund equal to one-half of the amount by which the unappropriated general fund surplus exceeds $10.0 million in the second preceding fiscal year, up to a maximum of $50.0 million. State retirement aid to local jurisdictions is reduced by a total of $37.7 million in fiscal 2018: $35.6 million for public schools; $1.5 million for community colleges; and $0.6 million for libraries. These differences are shown by county in Exhibit A-3.2.

Also, House Bill 1109 (Ch. 5) relieves county boards of education from their fiscal 2017 obligation to pay $19.7 million of their share of the employer normal cost for their employees who are members of the Teachers’ Retirement System or Teachers’ Pension System. This measure, which is accounted for in the budget, effectively increases State retirement aid by $19.7 million in fiscal 2017.

 

Deeper in the Report, DLS further discusses House Bill 1109Exhibit C-1 shows the amount that each local school system is relieved of paying in fiscal 2017.

 

More information on Education funding is available in Part L, Education.

DLS 90 Day Report: Local Aid

The Department of Legislative Services (DLS) has released its annual summary of the legislative session, The 90 Day Report – A Review of the 2017 Legislative SessionThe report is divided into 12 parts, each dealing with a major policy area. It also includes information relating to the final operating and capital budgets, including aid to local governments – and a breakdown of aid to each county. 

County level detail of state aid is available here.

DLS lists “Direct Aid” to counties in two groups: Primary and Secondary Education, and all other aid programs. A full breakdown of all programs is available here: Total State Aid to Local Governments (Exhibit A-3.5)

This blog post directs readers to sections of the 90 Day Report which describe all other aid programs.

Libraries

This item includes the Library Formula and Library Network programs. The Report discusses funding for Local Libraries, including the Library Aid Program, for which the State funds 40 percent and counties fund 60 percent:

The State/local share of the minimum program varies by county depending on local wealth. The per resident amount is set at $15.00 for fiscal 2018 and is scheduled to increase to $16.70 annually, beginning in fiscal 2022. Fiscal 2018 funding totals $37.7 million, a $1.3 million increase compared to fiscal 2017. In addition, Baltimore City will receive $3.0 million to support expanded operations throughout the library system.

The State also provides funds through the Library Network program to libraries designated as resource centers and regional resource centers.

Community Colleges

This item includes the Community College Formula (Cade), Grants for English as a Second Language (ESOL) Programs, Optional Retirement, Small College Grants, and Other Community College Aid.

The Report discusses community colleges, which receive $235.2 million in fiscal 2018 through the Senator John A. Cade Formula, an increase of $779,600 over fiscal 2017 funding. In addition, the budget includes $4 million for one-time supplemental grants, to be divided among all 16 community colleges based on Cade funding formula-eligible enrollment. Also,

State funding in fiscal 2018 will total $4.1 million for the small college grants and $600,000 for the Allegany/Garrett counties unrestricted grants. Senate Bill 521 (passed) increases unrestricted grants to small colleges by approximately $1.7 million annually, beginning in fiscal 2019. Funding for statewide and regional programs will total $6.4 million. The English as a Second Language Program will receive $5.5 million, nearly level with the prior year.

Health Formula Grant

Local health departments receive $51.1 million, which level-funds the departments at fiscal 2017 levels, and provides an additional $1.6 million for increases in contractual health insurance costs in certain counties.

Transportation

Transportation aid listed in DLS’ county breakdowns includes highway user revenues to both the county and its municipalities, special transportation grants to both the county and its municipalities, elderly /disabled transportation grants, and paratransit grants.

In highway user revenues (HUR), $140.8 million (7.7% of HUR) is distributed to Baltimore City; $27.4 million (1.5%) is distributed to counties; and $7.3 million (0.4%) is distributed to municipalities, for a total of $175.5 million. The budget also provides special transportation grants to counties and municipalities of $38.4 million – $5.5 million for Baltimore City, $12.8 million for counties, and $20.1 million for municipalities. In addition, local governments receive $4.3 million in elderly /disabled transportation grants, and $1.7 million in paratransit grants.

Additional information on local transportation aid is available within the Report here.

Police and Public Safety

Police and public safety aid listed in DLS’ county breakdowns includes aid provided to municipalities, as well as the county.

The State fiscal 2018 budget level funds the police aid formula at the fiscal 2017 level of $73.7 million. In addition, State funding for targeted public safety grants will total $26.6 million in fiscal 2018. The Report details a handful of public safety grant programs available to local governments, including:

  • The Internet Crimes Against Children Task Force Fund, which funds grants for investigating Internet crimes against children ($2 million);
  • The Community Program Fund, which funds local government community and violence intervention programs ($500,000); and
  • The Vehicle Theft Prevention Fund, which enhances the prosecution and adjudication of vehicle theft crimes ($1.9 million).

This item may also include other grants, State’s Attorney’s Grants, and 9-1-1 Grants. 9-1-1 Emergency Systems Grants reimburse counties for improvements and enhancements to their 9-1-1 systems and are funded at $14.4 million.

Fire and Rescue Aid

Fire and rescue aid listed in DLS’ county breakdowns includes aid provided to municipalities, as well as the county. The Senator William H. Amoss Fire, Rescue, and Ambulance Fund, for local and volunteer fire, rescue, and ambulance services, is funded at $15 million.

Recreation and Natural Resources

According to the Report, the local share of Program Open Space (POS) funding changes in fiscal 2018:

Chapter 10 of 2016 altered the local share of POS funding beginning in fiscal 2018. The legislation allocated an additional $11.0 million to local funding for fiscal 2018. In future years, local funding through fiscal 2029 increases overall due to general fund appropriations to the transfer tax special fund (from which the local share of POS receives funding) representing reimbursement for prior transfers from the fund. In fiscal 2018, the POS formula allocates $37.2 million to the counties, which is an increase of $15.5 million over the fiscal 2017 amount. In addition, Baltimore City will receive $3.5 million in special POS funding.

The Report further details Program Open Space funding here.

Also, $7 million is included for the Department of the Environment to provide grants to local governments to provide enhanced nutrient removal at wastewater treatment facilities.

Disparity Grants

Disparity grants were level-funded by the Governor, then partially restored for some counties by the General Assembly. From the Report:

Disparity grants were initiated to address the differences in the abilities of counties to raise revenues from the local income tax, which is one of the larger revenue sources for counties. Counties with per capita local income tax revenues less than 75.0% of the statewide average receive grants, assuming that all counties impose a 2.54% local tax rate. Chapter 487 of 2009 capped each county’s funding under the program at the fiscal 2010 level. Chapter 425 further modified the program in order to provide a floor funding level in conjunction with the fiscal 2010 cap for an eligible county based on the income tax rate of that county. Beginning in fiscal 2014, an eligible county or Baltimore City may receive no more than the amount distributed in fiscal 2010 or a minimum of (1) 20.0% of the total grant if the local income tax rate is at least 2.8% but less than 3.0%; (2) 40.0% of the total grant if the rate is at least 3.0% but less than 3.2%; or (3) 60.0% of the total grant if the rate is set at 3.2%. The fiscal 2017 budget included $136.7 million in disparity grant funding; however, the Board of Public Works reduced total disparity grant funding to $132.8 million for fiscal 2017.

… Chapter 738 of 2016 altered the calculation of the Disparity Grant program for counties with a local income tax rate of 3.2% by increasing the minimum grant amount (funding floor) to 67.5% of the formula calculation in both fiscal 2018 and 2019. However, House Bill 152, modifies the formula by lowering the minimum grant amount (funding floor) from 67.5% to 63.75% of the formula calculation for fiscal 2018. Due to this action, funding for disparity grants will total $138.8 million in fiscal 2018.

Teachers Retirement Supplemental Grant

Grants totalling $27.7 million are distributed annually to nine counties to help offset the impact of sharing teachers’ retirement costs with the counties.

Gaming Impact Aid

From the proceeds generated by video lottery terminals at video lottery facilities in the State, generally 5.5% is distributed to local governments in which a video lottery facility is operating. … In addition, 5.0% of table game revenues are distributed to local jurisdictions where a video lottery facility is located. Gaming impact grants total $91.4 million in fiscal 2018, an increase of $24.6 million, or 36.9%, over fiscal 2017 levels, due to the opening of a casino in Prince George’s County in December 2016.

 

Other Direct Aid

Other direct aid may include aid from other programs such as those listed below, which are described in the Report:

Through the Maryland Forest Service and Maryland Park Service – Payments in Lieu of Taxes (PILOT) Program, counties receive 15 percent of the net revenues derived from their state forest or park land – in fiscal 2018, Forest Service payments to local governments total $282,900 and Park Service payments to local governments total $2.6 million.

The Senior Citizen Activities Center Operating Fund, a grant program through the Department of Aging for senior citizen activities centers, receives $764,000.

The Strategic Demolition Fund provides funding to assist with demolition, land assembly, housing development or redevelopment, and revitalization. Funding is awarded on a competitive basis to local governments and community development organizations. It receives $25.6 million, but $22.1 million is targeted for Baltimore City.

DLS 90 Day Report: Operating Budget

The Department of Legislative Services (DLS) has released its annual summary of the legislative session, The 90 Day Report – A Review of the 2017 Legislative SessionThe report is divided into 12 parts, each dealing with a major policy area. It also includes information relating to the final operating and capital budgets, including aid to local governments – and a breakdown of aid to each county. 

County level detail of state aid is available here.

This blog post provides links from the operating budget section which impact local governments.

DLS reports that State Aid to Local Governments totals $7.5 billion in fiscal 2018. However, $5.7 billion of this aid goes to public schools, $799.4 million to retirement payments, and $273.1 million to community colleges. Of this total, $694.2 million goes to county and municipal governments.

In order to balance the operating budget with revenues coming in under projections, the approved fiscal 2018 budget flat-funded many programs, including those serving counties. From page A-19 of the Report on the Budget Reconciliation and Financing Act, or BRFA of 2017:

The BRFA of 2017 includes several provisions that implement cost control and mandate relief; primarily in fiscal 2018. Specifically, the legislation …. reduces the fiscal 2018 mandated funding level for local jurisdictions under the Core Public Health Services and the State Aid for Police Protection programs to the fiscal 2017 level. ….

Related to the disparity grant, the BRFA of 2017 reduces the minimum grant amount from 67.5% to 63.75% of the disparity grant calculation provided, in fiscal 2018 only, for counties with a tax rate of at least 3.2%.

Related to MDOT, the BRFA of 2017 prohibits, for years beyond the budget request year, the inclusion of transportation grants to local governments in the Consolidated Transportation Program and the withholding or reserving of funds in the Transportation Trust Fund forecast for grants to local governments for roads and highways.

From page A-20, Provisions Affecting Local Government:

The BRFA of 2017 includes a provision that allocates a portion of the admissions and amusement tax revenue accruing to the Special Fund for the Preservation of Cultural Arts to a grant for the Arts Council of Anne Arundel County beginning in fiscal 2019. Related to Baltimore City Public Schools (BCPS), the legislation requires $4.6 million in excess Baltimore City contributions to the Baltimore City Public School Construction Financing Fund to be credited to BCPS to provide a portion of its required contribution in fiscal 2018 instead of the Comptroller intercepting State education aid and expresses the intent that this provision would only apply in fiscal 2018. The legislation requires a quarterly report on the Baltimore City Public School System structural deficit in fiscal 2018, 2019, and 2020. Finally, the legislation authorizes, for fiscal 2018 only, Baltimore City to use its HUR to pay for students to ride MTA buses and prohibits MTA from charging Baltimore City more than a specified amount for this service.

Under the Selected Budgetary Initiatives and Enhancements section, the Report summarizes funding appropriated this session to address Heroin/Opioid Addiction:

The fiscal 2018 allowance, as introduced, contained approximately $13.5 million in funding for programs specifically tied to the heroin and opioid crisis. The majority of this funding is carryover from prior years and is based on the recommendations of the Governor’s Heroin and Opioid Emergency Task Force. New funding appropriated this session, included (1) a $2.0 million deficiency appropriation, which is also included in fiscal 2018, to fund residential treatment services for court-ordered individuals ($1.5 million) and the Opioid Operational Command Center ($0.5 million); and (2) $1.9 million in new special and federal funding for the Prescription Drug Monitoring Program. The General Assembly added language to the budget bill restricting an additional $750,000 for a pilot study regarding management of opioid-related pain medication.

Supplemental Budget No. 2 included another $10.0 million in general funds for additional programming to combat the heroin and opioid epidemic, in response to the Governor’s declaration of a State of Emergency on March 1, 2017. Language included in the supplemental item provided specific purposes for which the funding may be used, authorized the Governor’s Inter-Agency Heroin and Opioid Coordinating Council to distribute the funding, and required the council to report to the General Assembly on a quarterly basis on how the funds have been used. The General Assembly added additional language that restricted the funding decisions based on the provisions of either House Bill 1329/Senate Bill 967 (both passed) and required DHMH to distribute the funds, contingent upon the enactment of those bills.

Additional information is included within the Report on heroin and opioid activity during the 2017 session here and here.

 

 

DLS 90 Day Report: Capital Budget

The Department of Legislative Services (DLS) has released its annual summary of the legislative session, The 90 Day Report – A Review of the 2017 Legislative SessionThe report is divided into 12 parts, each dealing with a major policy area. It also includes information relating to the final operating and capital budgets, including aid to local governments. 

Links to sections on the Capital Budget and relevant portions impacting local governments are provided below.

Capital Budget

From page A-63 on Revenue Bonds for the Biological Nutrient Removal (BNR) Program:

A significant feature of the fiscal 2018 capital budget is a change in the funding mechanism for the Biological Nutrient Removal (BNR) Program. In prior years, grants to local governments for upgrades of wastewater treatment plants to the BNR standard were funded with general obligation bonds. A provision in the BRFA of 2017 authorizes the use of up to $60 million of tax-supported revenue bonds from the Bay Restoration Fund (BRF) to fund BNR projects, while House Bill 384 (passed) permanently expands the allowable uses of the BRF to include BNR projects.

The fiscal 2018 capital budget bill de-authorizes $11 million of GO bonds authorized at the 2016 session for BNR projects and funds these projects and $49 million of new BNR projects from the revenue bond issuance.

The fiscal 2018 capital budget also includes $300 million of planned non-tax supported revenue bond issuances by MDE to further capitalize the Water Quality Revolving-Loan Fund and the Drinking Water Revolving Loan Fund to fund loans to local governments for various water quality and drinking water infrastructure projects. MDE will issue the debt over the next several years as project funding proposals from local governments dictate.

From page A-68:

Community colleges receive $59.6 million in fiscal 2018 GO bonds, or 14.9% of higher education funding. This includes $2.0 million of recycled GO bond funds leftover from prior local community college projects. Community college funding is also matched by $54.3 million in local support in fiscal 2018.

Exhibit L-2, Fiscal 2018 Public School Construction Funding (by Local Education Agency)

From page A-70 on School Construction:

The fiscal 2018 capital budget includes $347.5 million in GO bonds for public school construction. … The General Assembly also added language to the school construction authorization that, for fiscal 2018, IAC shall allocate 100% of the funds available for public school construction projects, including available contingency funds. Under the language, the IAC allocations are not subject to BPW approval and are deemed approved pursuant to State law. IAC made recommendations for 75% of the preliminary school construction allocation for fiscal 2018 in December 2016, which were approved by BPW on January 25, 2017. By March 1, 2017, IAC made recommendations for the allocation of 90% of the school construction allocation in the capital budget (which included the initial 75% approved by BPW). Following enactment of the capital budget bill, IAC will make recommendations for 100% of the funding available for fiscal 2018 school construction projects, and pursuant to this language, the IAC recommendations will be the final allocations not subject to BPW approval.

An additional $62.5 million is funded through the Capital Grant Program for Local School Systems with Significant Enrollment Growth or Relocatable Classrooms established by Chapter 355 of 2015. … In the 2017 session the General Assembly increased the amount authorized for the program by $22.5 million for a total of $62.5 million. … While § 5-313 of the Education Article establishes a funding formula for the eligible counties, the additional $22.5 million is allocated outside of the statutory formula with specific allocations to the participating jurisdictions set forth in the MCCBL of 2017. Significant enrollment growth is defined as having full-time equivalent enrollment growth that exceeds 150% of the statewide average over the past five years, and significant relocatable classrooms means an average of at least 300 relocatable classrooms over the past five years. Currently, Anne Arundel, Baltimore, Howard, Montgomery, and Prince George’s counties are eligible.

Click here for information on school construction funding in Part L, Education.

From page A-70 on Aging Schools and Qualified Zone Academy Bond (QZAB) Programs

The capital budget bill provides $6.1 million in GO bonds for the Aging Schools Program allocated as grants to county boards of education as specified in § 5-206 of the Education Article. …

Public school construction funding is further supplemented with $4.823 million of QZABs authorized in House Bill 153. QZABs may be used in schools located in federal Enterprise or Empowerment Zones, or in schools in which 35% of the student population qualifies for FRPM. QZAB funds are distributed to local school systems through competitive grants including grants to the Breakthrough Center and public charter schools.

2017 End of Session Wrap-Up: Highway User Revenues

Below is a brief overview of MACo’s work to restore county roads funding that was cut during the Great Recession.  

Follow links for more coverage on Conduit Street and MACo’s Legislative Database

Highway User Revenues

The General Assembly maintained an additional $8.8 million in additional local transportation aid to be allocated among 23 counties. For more than forty years, local governments have received at least 30 percent of these revenues to fund local roads and bridges – 83 percent of the public road mileage in Maryland. In 2010, the State reduced highway user revenues by 90 percent for most jurisdictions – and local governments have advocated for restored highway user revenues ever since.

Push Icons-WONThe General Assembly’s action this year to provide counties some relief connotes a small step, but marked improvement over prior years. See MACo’s coverage, including a County-by-County Breakdown of Additional Local Transportation Aid

 

This year, as in years past, MACo continued to support legislation that would fully restore highway user revenues to their previous levels. As in recent years, however, the General Assembly did not advance these bills.

Push Icons-NOT IDEALSenate Bill 586/House Bill 1322 “Local Infrastructure Fast Track for Maryland Act,” a MACo initiative for the legislative session, did not pass out of committee in either chamber. Bill Information | MACo Coverage

 

 

Push Icons-NOT IDEALHouse Bill 552, a bill to restore highway user revenues to local governments, ensure that new gas tax revenues resulting from Chapter 429 of 2013 are shared equitably with local governments, and amend the Maryland Constitution to prevent depletion of highway user revenues from local governments in the future did not move out of committee. Bill Information | MACo Testimony

Push Icons-NOT IDEALSenate Bill 161, a bill to phase in restoration of highway user revenues to counties over seven years did not move out of committee. Introducing the bill, its sponsor Senator Steve Waugh expressed the need to “find an affordability trigger” to move the restoration forward – an element that has not been present in other similar proposals in recent years. Bill Information | MACo Coverage

Transportation Funding Decisions

The subject of transportation funding decisions has become a contentious debate between the Governor’s Administration and the General Assembly. MACo tracks this issue as it relates to local roads funding and advocates for the decision process that supports county government efficiency and effectiveness.

Push Icons-WONVoicing concerns about the scorecard legislation passed in 2016, MACo supported House Bill 402/Senate Bill 307 the Governor’s “Road Kill Bill Repeal” – advocating for either repeal or replacement. The General Assembly passed the legislation in an amended form that clarifies that the use of scoring from the statutory system will be purely advisory, while a designated work group convenes to consider refinements to its elements and effects.  Bill Information | MACo Coverage

Click here for a round up of the wrap-ups for all policy areas

Allegany County School System Gets $793K Funding Boost

Allegany County Public Schools officials received good news recently when the Maryland legislature revised its educational funding formula, resulting in an increase of $793,472 for the local school system for the 2017-2018 school year.

According to The Cumberland Times-News,

The funding was discussed Tuesday at the regular meeting of the Allegany County Board of Education at the central office on Washington Street.

The school board had developed a $111.8 million budget for fiscal 2018. The state had been expected to contribute roughly $78.7 million for fiscal 2018 and the county approximately $30.2 million. The increase from the state will bring its total funding to $79.6 million.

The increase in state dollars is a result of considerations given by analysts studying the funding formula of Maryland’s school districts.

The state created the Kirwan Commission in the summer of 2016 to study the funding mechanisms for school districts. The commission is continuing its work and is expected to issue a final report later this year or in early 2018.

“(The increase) recognizes a flaw in the funding formula … that is being talked about … and hopefully will be ameliorated with the work of the Kirwan Commission,” said Cox.

Allegany County has a net loss of 102 students for fiscal 2018. With funding based largely on enrollment numbers, school systems that saw a decline in enrollment one year suffered with fewer funding dollars.

 …

Larry McKenzie, chief financial officer for the school system, said the state decided to look at enrollment over a three-year period instead of one year.

“They went back and looked at three years and took an average of that,” said McKenzie.

“To be honest, it was a surprise to me. The way the formula is, it worked out there were instances that, although we had overall declining enrollment, some of the areas within the formula we received increases … for instance, our special education population increased. So, within the formula itself, there were some changes.”

MACo successfully supported passage HB 684 / SB 1024 – Education – State Grants for Education Aid, legislation that will provide $28.2 million in additional funding for K-12 public schools in Allegany ($793,472), Calvert ($240,000), Carroll ($1.6 million), Cecil ($190,000), Garrett ($456,000), Harford ($356,000), Kent ($215,000), Queen Anne’s ($22,000), Somerset ($455,000), and Talbot ($133,000) Counties, and Baltimore City ($23.7 million).

Useful Links

Article from The Cumberland Times-News

MACo testimony on HB 684

Final FY18 Budget Actions – No Surprises

The General Assembly passed the capital and operating budgets early this session – and the Governor opted not to veto anything before sine die, making the General Assembly Conference Committee’s version final. The budget plan consists of the following bills:

The Joint Chairmen’s Report (JCR), the annual report which lists each action adopted by the General Assembly in the budget, along with explanations, committee narrative, and requests for reports on more information, became available on April 10.

Operating Budget

The General Assembly reduced the Governor’s initial proposed budget of $43.5 billion by a total of $296.7 million, including $165.2 million through amendments to the BRFA. From the Conference Committee Report:

Although the total growth in State spending, excluding reserve fund appropriations, is only 1.5%, the budget expands funding for core State services and priorities including public education, higher education, Medicaid, and human services, restores funding for legislative priorities, while at the same time more than meeting the guidelines established by the Spending Affordability Committee (SAC) in 2016.

The projected general fund balance at the close of fiscal 2018 is $100.2 million, and the Rainy Day Fund balance is $860.3 million – leaving almost $1 billion in cash reserves, in part to help protect against uncertainty based on actions by the federal government. The budget reduces the structural deficit from nearly $400.0 million to $38.0 million. While overall spending increases by 1.5 percent, general fund spending only increases by 0.5 percent.

Education: State support for public schools is almost $6.4 billion. Direct State support for local school systems increases by an estimated $96.4 million, or 1.7 percent. The budget fully funds the Thornton formulas and provides $28.2 million of new funding for grants to school systems experiencing declining enrollment and/or providing full-day pre-kindergarten to their four-year-olds.

State support for Maryland’s public four-year colleges and universities grows by $32.7 million allowing undergraduate tuition rates to increase by a modest 2.0%. Community colleges limiting tuition growth to 2.0% will share $4.0 million in incentive payments.

Transportation: Counties receive an additional $8.8 million in local transportation aid under the passed budget. The General Assembly reduced the Governor’s proposal from $27.4 million to $12.8 million in transportation grants to 23 counties.  This includes $4 million of capital grants which counties have received since fiscal 2016. Baltimore City’s share was increased to $5.5 million, and municipalities’ share was increased to $20.1 million. The county-by-county breakdown is available here.

In addition, in response to concerns expressed by the Department of Legislative Services (DLS) regarding the Maryland Department of Transportation (MDOT)’s programming of local transportation aid, the General Assembly adopted language prohibiting MDOT from programming capital transportation grants to local governments in the Consolidated Transportation Program (CTP) beyond the budget request year.  The new language is intended to address concerns expressed by DLS that the Governor’s “capital grants” are titled incorrectly and programmed inappropriately in out years. The language is available here.

 

Disparity Grant: While the Governor’s budget funded disparity grants at fiscal 2017 levels, the General Assembly rejected that flat funding provision, but also reduced the minimum grant amount from 67.5% to 63.75% of the disparity grant calculation provided in fiscal 2018 only. This reduces the total disparity grant amounts under the statutory formula for fiscal 2018 by $2.4 million. Additionally, the General Assembly restricted funding for disparity grants for jurisdictions receiving an increase until the Maryland State Department of Education certifies that each jurisdiction has increased local spending on public schools above the Maintenance of Effort (MOE). They specified, however, that increased allocations to public schools under this language will not increase MOE requirements in fiscal 2019. The report language is available here.

State Department of Assessments and Taxation (SDAT) Cost Shift: The General Assembly rejected the Governor’s proposal to make counties responsible for nearly all operating costs for the assessment and directorial functions of SDAT – 70 percent in fiscal 2018, and 90 percent for every year thereafter, a hit of about $20 million in out years.

Local Police Aid: The General Assembly adopted the Governor’s proposal to flat fund local police aid at $73.7 million. The county-by-county breakdown is available here.

Local Health DepartmentsThe General Assembly adopted the Governor’s proposal to essentially flat fund local health department aid at $51 million. They did not adopt a DLS recommendation to shift $1.6 million in contractual employee health insurance costs onto local governments. 

County-by-county breakdowns of health department and all local government aid are available here; however, use caution: these FY 2018 numbers represent the Governor’s proposed amounts and not the General Assembly-approved amounts. Therefore, local transportation aid numbers will be higher here than actual approved amounts, and disparity grants and potentially some education aid amounts may be lower.

Capital Budget

The General Assembly passed authorization of $1.089 billion in new State debt – $76 million more than the Governor’s original proposal of $1.013 billion.

School Construction: The General Assembly approved $285 million for public school construction, but added a provision which eliminates the role of the Board of Public Works (BPW) in reviewing the statewide spending plan of the Interagency Committee on School Construction (IAC) – giving the IAC final approval of the plan. Lawmakers added $5 million to the authorization, and restricted it for Baltimore County to replace $5 million withheld by the BPW in fiscal 2017. They also restricted $5 million in contingency funds for air conditioning projects in Baltimore City Public Schools.  Language is available in the JCR here.

Click here for MACo’s compilation of all state budget documents and portions thereof which impact local governments.

Click here for a round up of the 2017 Session wrap-ups for all policy areas

 

County-By-County Shares Of Additional Transportation Aid Released

The Department of Legislative Services (DLS) has released the county-by-county breakdown of the $12.8 million in transportation “capital grants” approved in the fiscal 2018 State budget for 23 counties. The General Assembly reduced the Governor’s original proposal of $27.4 million to $12.8 million, which includes $4 million of capital grants which counties have received since fiscal 2016, and $8.8 million in new grants.

The breakdown is available here.

The State distributes the funds according to the traditional highway user revenue formula, half based upon vehicle registrations and half based upon road mileage.

 

FY18 Transportation Grants

The grants are in addition to “traditional” highway user revenues: the statutory formula created by the State in 1968 through which some motorist revenues are distributed to the State, counties, and municipalities. These funds – some motor vehicle fuel taxes, titling taxes, registration fees and some others – are deposited into the Gasoline and Motor Vehicle Revenue Account, an account within the Transportation Trust Fund, and then 1.5 percent is distributed to 23 counties, 0.4 percent is distributed to municipalities, and 7.7 percent is distributed to Baltimore City.

hur-snapshot
Source: DLS.

For more than forty years, local governments have received at least 30 percent of these revenues to fund local roads and bridges – 83 percent of the public road mileage in Maryland. In 2010, the State reduced highway user revenues by 90 percent for most jurisdictions – and local governments have advocated for restored highway user revenues ever since.

The General Assembly’s action this year to provide counties some relief connotes a small step, but marked improvement over prior years.

Useful Links

County-by-county Breakdown

Operating Budget Finalized: $8.8m in New Highway User, SDAT Cost Shift Dead

Highway User Revenues – What’s On The Table?

Counties Call For A Local Infrastructure Fast Track

 

Hogan Signs Bill to Help Close Baltimore Schools Budget Gap

Governor Larry Hogan signed a bill Monday to give city schools and other jurisdictions with declining enrollment extra money each of the next three years.

The Annapolis bill signing marked the culmination of a months-long negotiation with Democrats to help stave off future funding cuts to struggling school districts. Fostering the compromise “took a lot of work by a lot of people,” the Republican Hogan said.

According to The Baltimore Sun,

Although the law gives all 10 Maryland jurisdictions with declining enrollment more money, the vast majority of the $28.2 million goes to Baltimore. It also comes with several new auditing requirements.

Baltimore Mayor Catherine Pugh said the $23.7 million for city schools this year is “enough for now” to help close what was once a $130 million budget gap for the school system. The mayor included $22 million in her city budget proposal to help the school system.

Pugh, a Democrat, would not rule out having to ask the state for additional money next year, as city schools deal with persistent funding troubles and declining enrollment.

“It’s going to take us at least three years to get to where we need to go,” Pugh said after the bill signing ceremony. “It’s enough for now. It’s enough for this year.”

The other 10 school districts with declining enrollment are: Allegany County, Calvert County, Carroll County, Cecil County, Garrett County, Harford County, Kent County, Queen Anne’s County, Somerset County and Talbot County.

The legislation also doles out money to school systems that provide full-day prekindergarten for 4-year-olds, defraying the expense of that program. Again, Baltimore is the primary beneficiary of that deal.

Since the General Assembly session began in January, lawmakers and Hogan have discussed how to address Baltimore’s funding troubles and Hogan’s decision to strip money from new programs aimed at helping the city. Lawmakers restored money to those programs during the budget process.

Baltimore schools CEO Sonja Santelises, who attended the bill signing, said she had a message for city families: “They advocated. Their voices were heard.”

Santelises also said the school system is “scrubbing our operations” and looking for ways to cut costs, including consolidating schools. She plans to trim $30 million from the central office to help close this year’s shortfall.

The Baltimore City Council — composed entirely of Democrats — also plans to seek more money for schools. Council President Bernard C. “Jack” Young has pledged to find $10 million in the Police Department budget that could be cut and redirected to education.

The three-year deal to help Baltimore is designed to be in place until the state government adopts a new formula for calculating how state aid to schools is distributed. Lawmakers are considering how to make sure all children have access to an equitable education.

Pugh said the current funding formulas benefit wealthy areas. Baltimore has lost millions of dollars in recent years because the formula allocates state aid based in part on a jurisdiction’s property values. Not all new developments in the city pay full taxes, so apparent increases in wealth do not always mean more revenue.

The formula also considers enrollment, which stands at 82,000 students in Baltimore. The district is expected to lose 1,000 students next year.

Useful Links

The Baltimore Sun Article

Previous Conduit Street Coverage: MACo Supports Grant Funding to Offset Declining Enrollment

Previous Conduit Street Coverage: Why Do Five Jurisdictions Lose $45M In Education Funds?