MD unemployment rate drops

Maryland's unemployment rate fell to 6.4 percent (PDF) in November, according to data released today by the Bureau of Labor Statistics, after stalling at 6.7 percent for the previous two months. This is the lowest unemployment rate Maryland has seen in almost five years.

The state unemployment rate fell in November because the number of employed Marylanders rose by just over 8,800 workers. The number of jobs in Maryland (these are two different measures-some jobs may be held by nonresidents, while some Marylanders may work outside the state) also went up, by roughly the same amount.

While this is welcome news, Maryland's economy still has a long way to go as it slowly recovers from the Great Recession. And the slow recovery is likely to continue: the Board of Revenue Estimates projected recently that job growth will continue to be sluggish in 2014 (PDF), at just 1.5 percent.

Maryland lawmakers will have the opportunity to take action in 2014 on a number of issues that could help working families, whether it's promoting job creation directly, providing supports to help while workers are between jobs, or investing in the things that make our state great (like our natural environment, our schools and hospitals, or the infrastructure that connects us. We'll be watching to see what they do. 

Spending Affordability Committee Recommends Modest Budget Increase, Deficit Reduction

Yesterday, Maryland state lawmakers responsible for advising the Governor and General Assembly on spending levels for the state budget recommended that next year’s spending increase no more than 4 percent, from $37 billion to $38.5 billion. This relatively small budget increase is necessary to support inevitable growth in state spending to meet the needs of residents who, like the state itself, are still recovering from the Great Recession.

Revenue Down in Short Term, Projected Up in Long Term

The Spending Affordability Committee’s decision comes amid decreased revenue projections for the current fiscal year, but increased expectations for fiscal year 2015. The December Board of Revenue Estimates forecast that revenues for the current fiscal year will be $101.1 million less than expected, largely due to an economy that is still growing recovering from the Great Recession and hampered further by federal budget sequestration that kicked in at the beginning of 2013 and resulted in less revenue coming into Maryland, as well as the federal budget shutdown in October and general environment of uncertainty regarding federal spending. However, the December revenue estimates expect the state’s economy to grow and expect that revenue for FY 2015 will be $143.7 million more than initially forecast in September. This includes expectations for improved income and sales tax revenue that will result from the opening of the Amazon distribution center in Baltimore. The recent federal budget deal should reinforce these expectations by removing uncertainty and relieving sequestration cuts.

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Source: Maryland Board of Revenue Estimates

Modest but Necessary Budget Growth

Warren Deschenaux, director of the office of policy analysis in the Department of Legislative Services characterized the projected FY 2015 $361 million structural deficit as “a small hole, certainly compared to what we have seen in the past." As such, while taking action to reduce the state’s budget deficit is imperative, state lawmakers would be wise to do so in a way that does not drastically affect the ability of state programs to meet residents’ needs, and allow the budget to grow during crises as needed. In general, state spending on programs can be expected to increase from year to year as the population grows and particularly in times such as these when needs remain high. During times of normal economic growth, these increases in spending are more than covered by economic growth that leads to rising wages and revenue for the state. This is typically the case for Maryland. However, the 2008 recession caused Maryland lawmakers to reduce spending to respond to the 2008 recession and subsequent slow recovery (some of which was offset by new federal funds in the Recovery Act).

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Source: December 2013 Spending Affordability Committee Report; 90 Day Reports for the 2011, 2012, and 2013 Legislative Sessions

Usually, the Spending Affordability Committee recommends a percentage growth goal for the governor’s budget. However, between FY 2011 and 2013, the committee instead proposed targets to reduce the structural deficit. (The Spending Affordability Committee’s recommendation for 2010 was 0 percent budget growth.) This year, the Spending Affordability Committee returned to form and recommended an increase of no more than 4 percent. This responds to the need to allow spending to rise to meet the needs of state programs while also reducing the structural budget deficit by $125 million. This recommendation is also in line with the expected growth of the Maryland economy during this time. Revenue grew by 4.4 percent between FY 2012 and 2013. Currently, the Department of Legislative Services forecasts FY 2014 revenue to be 2.4 percent more than FY 2013. Not increasing state spending at all, as initially proposed by some lawmakers during yesterday’s Spending Affordability decision meeting, would amount to a cut in support for state programs.

Investment Income Growth Outpacing Earnings

Notably, while the economy is still struggling to recover from the Great Recession, some forms of income have grown faster than others. According to the Board of Revenue Estimates, capital gains income grew by 50 percent in 2012 and by 20 percent in 2013, outpacing the growth of income from wages.

Debt Increase Limited

In November, we discussed the Spending Affordability Committee briefing on Maryland’s Capital Budget, in which the Department of Legislative Services advised lawmakers not to increase Maryland’s borrowing authority by $75 million per year for the next five years, as requested by the O’Malley administration and approved by the Capital Debt Affordability Commission, out of concerns about the increasing costs of debt servicing for the state budget. The committee decided to recommend increasing borrowing authority by $75 million for only one year, out of concerns for the need to fund Maryland’s plans to clean up the Chesapeake Bay without diverting money from other transportation projects or unrelated parts of the state budget. It will be up to the next governor and legislature to decide whether to pursue additional debt authorization or to fund Bay cleanup through some other means.

Though the Spending Affordability Committee’s recommendations are not binding, the Governor and the General Assembly usually take action in line with its advice. Governor O’Malley will release his budget no later than January 15th.  

Federal Budget Deal Fails to Extend Unemployment Benefits for Over 82,000 Marylanders

Over 82,000 Maryland residents will lose their unemployment benefits in 2014 if federal lawmakers do not act to extend them. Last week, federal lawmakers agreed to a two-year budget agreement prior to adjourning for the holiday break, but failed to reach agreement on extending unemployment benefits for those still looking for work amid a sluggish economic recovery.

Maryland, like most other states, provides 26 weeks of temporary unemployment insurance to those that have lost their jobs. At the beginning  of the Great Recession began in 2008, Congress provided unemployed workers with additional benefits through the federal Emergency Unemployment Compensation program. But absent reauthorization, this program will expire at the end of the year. If Congress fails to act, almost 23,000 Maryland residents will lose benefits just after Christmas and another 28,500 will be cut off in the first six months of 2014. Further, absent reauthorization, those that lose their job in the first half of 2014 will see their unemployment benefits expire before the end of the year. In total, 82,600 Maryland residents will lose their unemployment benefits.

While emergency unemployment benefits are intended to phase down as the economy recovers, many are still having trouble finding jobs in a labor market that has yet to fully recover from the great recession. Indeed, there are still 1.5 million fewer jobs available in the national economy than there were prior to the start of the Great Recession six years ago, and almost 3 unemployed citizens for every job opening.

This is a problem, particularly since over 37 percent of those out of work are part of the ‘long-term unemployed,’ or those who have been out of work for six months or longer. According to the Economic Policy Institute, there are three times more long-term unemployed now than there were before the recession. Those who have been out of work for long stretches of time have a particularly hard time finding work, as studies show that employers are less likely to consider them for jobs.

These factors, combined with the unprecedented nature of the current long-term unemployment problem, should compel Congress to act on their behalf. As the Center on Budget and Policy Priorities points out, the long-term unemployment rate is at least twice as high now as when federal lawmakers have allowed emergency unemployment benefit to expire following previous.

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Besides the toll on the unemployed and their families, the failure to extend unemployment benefits has economic impacts as well. If benefits expire, job-seekers will have considerably less money to spend, which will reduce demand in the economy. The result would be a nationwide loss of 240,000 jobs in 2014, according to the Department of Labor. Further, rather than serving as a disincentive to look for work, the National Employment Law Project shows that unemployment insurance, by helping job seekers and their families pay for basic necessities, enables them to actively engage in the job hunt.

While securing a budget deal is an important step, lawmakers must do more to ensure full economic recovery and support citizens still trying to weather the Great Recession.

Check back for more coverage on the budget and its effect on federal workers in Maryland. 

MD Lawmakers Should Support Enforcement of County Minimum Wage Increases

Prince George’s and Montgomery counties recently moved in tandem (and with the District of Columbia) to increase incomes for hardworking residents by raising their minimum wage. State lawmakers should support these efforts by enacting a state-level minimum wage increase and authorizing the state Department of Labor, Licensing, and Regulation to enforce higher county-level minimum wage laws.

In recent weeks, Montgomery and Prince George’s counties have joined the District of Columbia in raising the minimum wage for their low-income residents to $11.50 an hour by 2017. This coordinated effort helps low-income residents increase their earning power in an area characterized by a high cost of living, but is also emblematic of a movement of localities across the country that are making up for the failure of Congress and many state legislatures to help the minimum wage keep pace with increasing costs.

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Source: Economic Policy Institute

Twenty states including DC have minimum wages that are greater than the federal minimum, and cities such as San Francisco, Seattle, San Jose, and Santa Fe have also stepped in to raise wages for their residents.

Maryland state lawmakers should support these efforts in Prince George’s and Montgomery counties. First, the General Assembly should enact a state-wide increase in the minimum wage to help all Maryland residents. As we have written before, doing so would both reduce inequality and support economic growth.

Regardless of whether lawmakers choose to increase the state minimum wage, they could also help support the efforts of Montgomery and Prince George’s counties to ensure that their residents are able to meet the high cost of living in the DC metro area by authorizing the Maryland Department of Labor Licensing, and Regulation (DLRR) to enforce the increased minimum wage laws in these counties.

As discussed by Maryland Reporter, county-level governments in Maryland do not have experience enforcing minimum wage laws, and under current law, DLLR is only authorized to enforce state-level law, which it currently does alongside the federal Department of Labor. To empower DLLR to enforce the greater minimum wage laws in Montgomery and Prince George’s counties, state law must be changed.

The experience of San Francisco shows that proper enforcement is necessary to ensure employers treat their workers fairly and comply with minimum wage laws. After it enacted a citywide minimum wage increase in 2003, San Francisco found it necessary to pass additional legislation enabling its Office of Labor Standards and Enforcement to protect workers and ensure a fair marketplace for employers who abide by the law. Maryland state lawmakers should likewise ensure that the efforts of Montgomery and Prince George’s counties to help their hardworking low-income residents increase their earning power and keep up with increasing prices by authorizing DLLR to enforce these laws.