The Week Ahead

Last week we joined with more than fifty community organizations to send a letter to Governor O'Malley, House Speaker Busch, and Senate President Miller urging them to call legislators back to Annapolis soon to fix the budget fiasco.  You can add your name to the list by signing our petition.  The faith community wrote a similar op-ed in the Baltimore Sun.


Tuesday, May 1st

• Otherwise known as May Day, the traditional labor holiday (interestingly, also officially Loyalty Day, or Law Day, here in the U.S.).  The Occupy movement is planning a number of events, including a rally at McKeldin Square in Baltimore.  Neil Bergsman wrote about his visit to the Occupy Baltimore camp last October.

Wednesday, May 2nd

• Board of Public Works (BPW) holds their biweekly meeting.  The Governor, Comptroller, and Treasurer have a lengthy agenda (summary) including items on remaining grants for FY 2012; a variety of contracts, leases, and licenses; and capital projects (including Project Open Space). 10am
• After the BPW meeting Governor O'Malley will sign several bills into law.  You can watch the bill signing, starting at 2pm.
• Bureau of Labor Statistics (BLS) releases employment figures for metropolitan areas.

Friday, May 4th

• BLS releases national employment figures for April.  U.S. unemployment fell slightly in March, to 8.2%.

Doomsday Budget Update

Members of the Save Our State coalition recently unveiled the “Doomsday Budget Clock,” that counts down the days, hours and minutes until automatic cuts take effect, hurting schools, local police, colleges, and much more. It’s now ticked down to 67 days.

In fact, the need to fix the budget is more urgent than that. Most of Maryland’s local governments need to have their budgets in place by June 1st – 37 days away. Also by that date, the state Board of Public Works will need to approve $150 million in additional state agency cuts. And schools need to know how many teachers and staff they can afford next year before this school year concludes.

This morning, Governor Martin O’Malley, Senate President Mike Miller and House of Delegates Speaker Mike Busch met to discuss the timing and subject matter of a special session. According to press reports, nothing was decided, but there was discussion of scheduling two special sessions – one in May to fix the budget, and another in the summer to consider expansion of gaming.

MBTPI has no position on the Prince George’s casino proposal or table games at the other gaming sites. It’s critical, though, that the legislature meet promptly in special session, fix the budget, restore the “doomsday” cuts, and enact a adequate, sustainable, and fair revenue package.

***

Right after the session, MBTPI prepared a description of the “doomsday budget” cuts as included in the budget bill passed by the legislature just prior to the end of the 90-day regular session.

In a Friday-the 13th letter to state agency heads, state budget secretary T. Eloise Foster stated that “if efforts to resolve the shortfall through a special session are unsuccessful, the Governor will need to seek Board of Public Works approval of approximately $150 million of reductions [to state agency budgets] to implement the doomsday cuts and bring the budget into balance.”

MBTPI has updated our report on doomsday budget cuts to reflect this information.

The Week Ahead

Last week we unveiled our Doomsday Clock on our website and blog, counting down the days left for the legislature to fix Maryland's budget.  Hopefully, the General Assembly moves much sooner than that, as counties, colleges, school districts and other entities reliant on state aid need time to plan their own budgets.  We also blogged the truth about taxes, and analyzed the latest Maryland employment figures.

Monday, April 23rd

• We are releasing an updated and expanded version of our brief on the doomsday budget today. The updates reflect the most recent analysis of the constitutionality of some of the cuts it contains.  We have also added an analysis what will happen to the general fund balance if the doomsday budget goes into effect on July 1st.
• Health Care Reform Delivery Subcommittee of the Health Care Reform Coordinating Commission will hold their regular meeting.  11am at the UMD School of Pharmacy, Baltimore.

Tuesday, April 24th

• The Governor, Speaker of the House, and President of the Senate will meet over breakfast to discuss a compromise revenue package as a preliminary step toward calling a special session.
• Community Services Reimbursement Rate Commission holds their regular bimonthly meeting.  6pm at the Maryland Association of Community Services, 8835 Columbia 100 Parkway, Unit P, Columbia.

 Thursday, April 26th

• Task Force on Industrial Job Creation board meets at the Baltimore Operations office of General Motors.  10am at 10301 Philadelphia Rd, Baltimore.
• Medicaid Advisory Committee meets at the State Center in Baltimore, subject to be announced.  1pm in conference room L-3, 201 W. Preston St., Baltimore.

Employment rises, but so does unemployment

Maryland added more than 2,000 jobs in March, close to the 12 month average for job growth in the state, according to my analysis of figures released today by the Bureau of Labor Statistics. 

However, Maryland's unemployment rate also rose, to 6.6 percent.  This is up one tenth of one percent from February but down half a percent from a year ago.  The unemployment rate rose even though hiring increased because more than 4,000 Marylanders joined or rejoined the labor force. Maryland's unemployment rate continues to be significantly lower than the national rate. The US unemployment rate was last at 6.6 percent in July of 2008.

Employment growth was unevenly distributed across several different industries.  The trade, transportation, and utilities; professional and business services; and leisure and hospitality sectors all saw modest job growth. On the other hand, construction; manufacturing; financial activities; and education and health services all saw modest declines.  Government employment declined the most of any sector, losing 2,700 jobs in March.  Most (2,300) of these public jobs were lost at the state level, according to the Department of Labor, Licensing, and Regulation.

The doomsday budget calls for eliminating at least another 500 state positions, and would doubtless have the effect of forcing many local layoffs as well.  As today's employment numbers demonstrate, such a dramatic cut would have a negative impact on the health of our state economy. 

Happy Tax Day!

Happy Tax Day!

That might seem like an strange thing to say, but around here we're thankful for all the things our taxes do for us.  Whether it's providing a quality education to our children, protecting our communities, building the road and transit systems that connect us, protecting our food supply, preserving the Chesapeake Bay, or providing healthcare, we're thankful for all the things our taxes pay for that make Maryland a great place to live, work, and play.

Unfortunately, taxes get short shrift much of the time.  Often, people don't make the connection between their taxes and the public structures that our tax dollars pay for. Or they buy in to the various myths about taxes that the right has propagated over the last thirty years.

Fact #1: America is one of the least taxed countries in the developed world. 

According to the Organization for Economic Cooperation and Development, only Mexico and Chile pay less in taxes, as a percentage of gross domestic product.

Fact #2: The share of taxes the rich pay is close to their share of the total income - not a lot more.

Actually, when you look at the tax system as a whole (including sales, property, estate, and corporate taxes), our tax system is just barely progressive.

Fact #3: Almost all Americans pay taxes

Again, when looking at the entire tax system, everyone pays something.  Even those who owe no income tax, or due to various anti-poverty programs have a negative tax liability, still pay many other types of taxes (payroll taxes, gas taxes, sales tax, etc.).

Fact #4: Corporations pay only moderate taxes

While the federal corporate tax rate is 35 percent, the effective tax rate for most corporations is far lower.  Citizens for Tax Justice found that the 280 most profitable U.S. corporations sheltered half their profits from taxes, ending up with an effective tax rate of just 18.5 percent.  


Fact #5: Tax cuts can hurt the economy

It ought to be obvious that cutting taxes results in fewer government purchases, declining infrastructure, a weaker social safety net, and layoffs of government workers, reducing overall economic activity, unless you increase deficits.  While low and moderate income households living paycheck to paycheck would be likely to spend any windfall, high income households that already have significant discretionary resources are unlikely to suddenly change their behavior.  And yet somehow it isn't.

The Center for American Progress analyzed the national economy after the 1981 and 2001 tax cuts compared to the 1993 tax increases and found that tax cuts on profits, savings, and the wealthy failed to spur economic growth.

Building a strong economy and creating jobs takes smart investing.  Taxes are how a responsible society pays for those investments.  We can't afford to not invest in Maryland's future.

The Week Ahead

Last Monday the legislative session ended in a train wreck, as the General Assembly failed to pass a revenue package, thus enacting the doomsday budget for the next fiscal year.  Whether or not the governor will call a special session to fix the budget remains to be seen, as the two chambers appear to still be divided.  MBTPI is hopeful that state officials will do the right thing, but the situation remains very unsettled (and unsettling).

Monday, April 16th

•  Monday is Emancipation Day in the District of Columbia, which means that...

Tuesday, April 17th

• ...Tuesday is Tax Day.  As we file our taxes we are thankful for all the important things they pay for like public safety, education, and healthcare.

Wednesday, April 18th

• The Board of Public Works (BPW) meets at 10am in the State House.  The Board - which is made up of the Governor, Comptroller, and Treasurer - may start to discuss responses to the doomsday budget currently in place.  BPW oversees the state's capital budget (except for highway spending) and borrowing expenditures.  It also has the authority to modify the budget in the intersession as necessary, up to 25 percent.
• The Interagency Committee on School Construction meets from 9am to noon in Baltimore City.  8th floor, conference room #1, 200 W. Baltimore Street.

Thursday, April 19th

• Health Care Commission meets at 1pm in room 100 at 4160 Patterson Avenue in Baltimore City.
• Maryland Nonprofits - which MBTPI is a project of - is hosting an open house at our new offices (RSVP).  This is a great chance to meet MBTPI and Maryland Nonprofits staff, and mingle with colleagues from other nonprofits.  The open house is from 4:30pm to 7:30pm, with a presentation about Maryland Nonprofits member benefits at 6pm.    Please note that the Jones Falls Expressway is under construction.  If you are joining us, you should plan on some extra travel time, or consider taking the light rail to the Woodberry station.  Our office (1500 Union Ave, Baltimore City) is an easy five minute walk from the station.

Friday, April 20th

• Bureau of Labor Statistics releases state employment figures for March 2012.  Maryland added almost 3,000 jobs in February, but the unemployment rate remained steady at 6.5 percent as more than 4,600 individuals joined (or rejoined) the labor force.

Evaluating Tax Credits

Tax credits are in the public eye more and more these days, promoted as the way to get state economies back on track and grow jobs. Yet too often credits are not evaluated to see if they deliver on their promise.  Previously I blogged about a series of reports on tax credit evaluation from Good Jobs First.  Now the Pew Center on the States has released a report titled Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth. 

Pew used four criteria to evaluate how well states evaluate tax credits:

• Are the evaluation results built into policy and budget deliberations?
• Are all major tax incentives evaluated regularly?
• Does the evaluation ask and answer the right questions using good data and analysis?
• Does the evaluation draw clear conclusions about the tax credit?

So, how does Maryland fare?  Not well.  Pew found that Maryland failed to meet any of the four criteria for good tax credit oversight.  Maryland thus fell into the category of states trailing behind national trends in evaluating tax credits. 

The General Assembly moved in the right direction this session by passing two bills improving oversight of tax credits.  The Tax Credit Evaluation Act (SB 739/HB 764) establishes a periodic review process for some tax credits, which sets a precedent for evaluating other tax credits in the future.  Senate Bill 1086 (HB 1456) requires taxpayers claiming certain business tax credits to do so electronically, thus making oversight and data analysis easier for the Comptroller's office and others.  MBTPI supported both bills, and both now await the Governor's signature.

Train Wreck

The 2012 legislative session ended last night in a budgetary train wreck.

In the waning hours of Maryland’s 90-day legislative session, House and Senate negotiators had hammered out a deal on a revenue package. However, time ran out without the legislation receiving final approval on the floor of the House and Senate.

The revenue bill was caught behind negotiations regarding expansion of gambling to include table games at existing slot machine locations and a new casino in Prince George’s County. Approval of the revenue package also was delayed by a string of amendments proposed by opponents of a bill to require counties to levy fees for storm water management improvements.

The budget bill did pass into law shortly before the midnight deadline. It contains provisions that enforce additional deep cuts, referred to around Annapolis as “the Doomsday Budget.” It includes cuts to healthcare providers, colleges and universities, public employees and much more.  

To avoid the “doomsday” cuts, the legislature would need to return in a special session before July and enact a tax bill and budget reconciliation legislation. However, in comments after the end of the legislative session, Governor O’Malley did not immediately commit to call such a session into existence.

Maryland needs a balanced budget that protects essential services today and builds Maryland’s educated workforce of the future. The Governor, President and Speaker should commit to scheduling a special session devoted exclusively to completing their work on the budget and revenues. That special session should not take up gambling expansion, transportation revenues, or other matters – important though they may be. The legislature should agree on a revenue package that is fair, adequate to fund the budget without resorting to doomsday cuts, and sustainable to minimize the problem the state faces in future budgets.

The Week Ahead

Today is the last day of the regular session, otherwise known as Sine Die Day.  The legislature has a lot to get through before midnight tonight, not the least of which is passing a balanced budget.  Both chambers passed their version of the budget more than a week ago, and the conference committees have been trying to hammer out a compromise ever since. It should make for an interesting - and long - day in Annapolis. 

If the General Assembly fails to pass a budget, they will go into a special session during which they can only work on the budget.  Tired advocates, lobbyists, and legislators are hoping this doesn't happen.  Either way, we'll know by tomorrow morning.

Impasse?

House and Senate negotiators have reached an apparent impasse over a revenue plan for the state. In Annapolis, there is much talk about the likelihood of an impasse over revenues, and the possibility of an extended session to complete the budget, a special session to enact a revenue increase, and/or a “Doomsday Budget” in the event no compromise ensues.

House Speaker Mike Busch (it is said) has his heels dug in and will not allow House negotiators to discuss revenue plans that add to the bill that passed the house. House leaders assert that there are not sufficient votes on the floor to pass a conference report that contains any more taxes.

Senate President Mike Miller is (said to be) threatening to hold up House-sponsored legislation in the Senate, force an extended session, and even to keep the Senate in session during the Orioles’ opening day game if the conferees do not make progress.

This could be serious, or it could all be posturing and gamesmanship.

The two plans have more similarities than differences. Both versions include budget cuts, progressive revenue measures, and a shift of a portion of the cost of teachers’ retirement to local government budgets.

The House income tax plan affects only taxpayers with incomes over $100,000. The Senate plan affects everyone with over $3000 of taxable income, though for most taxpayers the amount will be $1 per week or less. However the Senate plan generates almost twice as much revenue. That’s important because it will help Maryland maintain school quality, access to health care, and college affordability next year and in the future. Also, the Senate plan leaves a much larger cushion in the state’s general fund for June 2013 – meaning there’s less risk of precipitous mid-year cuts in the event of a revenue drop caused by a worsening of the fragile economy or federal budget cuts.

The House version provides less revenue and a smaller year-end balance. The result could be a $200 million shortfall lurking for the legislature to resolve this time next year. In order to bridge that gap, the state will either need to revisit its options for new taxes, or make more cuts to education, health care, public safety and community services.

If the legislature cannot settle on a budget by the end of the 90-day session (Monday April 9), that triggers an “extended session” of up to 30 days. During the extended session, the legislature may only consider the budget bill (and a bill to provide for the cost of the extended session itself).

That means that the budget reconciliation act, the revenue bill and the capital budget would be left hanging. It is likely that the legislature would reconvene in “special session” shortly after the end of the extended session to handle these items and any other essential business left over from the regular session.

This is a lot of extra days of legislating for 188 senators and delegates who are really planning to be back home on April 10. It’s better to provide adequate, responsible and sustainable revenues for the state now. The conference committee should end their game of chicken and settle on a budget plan.

Governor proposes supplemental budget

On Monday, Governor O’Malley submitted a modest supplemental budget to the legislature. It’s easier to decode the items by looking at the Department of Legislative Services' analysis of the supplemental budget.

The budget adds a net $70 million to the budget. More than half of that amount is covered by additional federal funds ($8 million) or dedicated special revenues ($36 million).

The supplemental budget adds $27 million in general funds. This is a net number. The supplemental budget subtracts $30 million in general funds from Medicaid (making more favorable assumptions about enrollment next year) and $10 million from state employee pharmacy benefit costs (based on a re-bid of the pharmacy contract). So the amount of general fund items added to the budget is close to 27 + 30 + 10 = $67 million.

By MBTPI’s reckoning, $22 million reflects normal operating costs that are now being properly recognized in the budget. Some of the items include overtime in state correctional facilities, the costs of youth assigned to private residential facilities by juvenile courts, and increased energy and utility cost for state buildings and the state police vehicle fleet.

There are 24 items totaling $30 million that MBTPI considers “policy” items:

The $2.2 million item for Healthy Families home visiting programs is one that MBTPI has particularly called on the Governor to restore to the budget.

Another large item in the supplemental budget is $8.4 million and 85 new positions to allow the public defender system to comply with a new court ruling that requires the state to offer arrestees legal representation at bail hearings.

The budget conference committee members will consider the items in the supplemental budget as they complete action on the initial budget.

The Week Ahead

Last week the House and Senate appointed their budget conference committee members. See MBTPI's recommendations for the committees and let them know you support a sustainable state budget here.  

Monday, April 2nd

• 83rd day of the legislative session, the Constitutional target for passing the state budget. If (as now seems likely) the FY 2013 budget is not finalized, the Governor will issue a proclamation extending the session beyond the usual 90 days, during which the legislature could only work on the budget.  This year, that will be a formality. We expect the budget process to conclude before April 9th, the last day of the regular session.

Tuesday, April 3rd

• Primary Elections.  Find your polling place and learn more here.

Wednesday, April 4th

• Second reading of the capital budget in the House (subject to change).

Thursday, April 5th

• Third reading of the capital budget in the House (subject to change). 

Friday, April 6th

• BLS updates the national employment situation.  In February the national unemployment rate was 8.3 percent, unchanged from the month before but down 7/10ths of a percent from February 2011.  Encouragingly, February also saw an increase in employment for the eighth straight month.