The Week Ahead

Last week we blogged about new family employment figures. This week keep an eye out for the release of our fourth State of Working Maryland 2012 video, on paid sick leave.

For the week of April 29nd through May 5th:

• On Monday, April 29th, the Durable Medical Equipment Provider Task Force discusses recommendations to the Board of Pharmacy regarding which prescription devices it should regulate, from 1-3pm in the Metro Executive Building rooms 108-109, 4201 Patterson Avenue, Baltimore.
• Also on Monday, the Alcoholic Beverages Article Review Committee meets to discuss per diem licenses at 5pm in the Judicial Training Room, 2009F Commerce Park Drive, Annapolis.
• On Wednesday, May 1st, the Maryland Underground Facilities Damage Prevention Authority meets at 9am in the Lower Level Conference Room at the One Call Center, 7223 Parkway Drive, Hanover.
• The Bureau of Labor Statistics (BLS) releases metropolitan level employment figures for March. Preliminary data for February showed declining unemployment rates in all Maryland metros, compared to one year prior (the data is not seasonally adjusted and therefore must be examined by comparing February 2013 with February 2012).
• Also on Wednesday, the Board of Public Works meets at 10am in the State House.
• Wednesday afternoon sees a meeting of the Health Services Cost Review Commission at 1pm in room 100 of 4160 Patterson Avenue, Baltimore.
• On Friday, May 3rd, BLS releases national employment figures for April. Preliminary data for March showed a slight decline in the unemployment rate.

Family unemployment down in 2012

The Bureau of Labor Statistics released national data on unemployment within families today. In 2012, the percentage of families with at least one unemployed member was 10.5 percent, down from 11.5 percent one year prior. 80 percent of families had at least one employed member.

As with other employment statistics, unemployment was higher among Black and Hispanic families, at 16.8 percent and 14.5 percent with at least one unemployed member, respectively.

Female headed households also fared worse, with just 72.4 percent having at least one employed member. Married couples fared better at 81.9 percent; and both the husband and wife were employed in 47.4 percent of married-couple families in 2012. Both parents worked in 59 percent of married-couple families with children, likely reflecting the high cost of child care.

The Week Ahead (Earth Day Edition)

Happy Earth Day!

Last week Neil Bergsman appeared in a Public News Service story on the continuing push for paid sick leave. We also blogged about the new 90 Day Report for the 2013 session, and Maryland's 6.6 percent unemployment rate.

For the week of April 22nd through April 28th:

• On Monday, April 22nd, the Task Force to Study the Laws and Policies relating to Representation of Indigent Criminal Defendants by the Office of the Public Defender meets to discuss subcommittee progress at 1pm in room 100 of the House Office Building, Annapolis.
• On Tuesday, April 23rd, MBTPI will co-host our annual Legislative Wrap-Up. For more information and to register for this free event, click here.
• On Thursday, April 25th, the Maryland Medicaid Advisory Committee meets from 1-3pm in a conference room at the Department of Health and Mental Hygiene (DHMH) office at 201 W. Preston Street, Baltimore. 
• The Medicaid Advisory Committee meeting will be immediately followed by a public hearing on the HealthChoice (Medicaid delivery program) waiver renewal for 2013, from 1-3pm in the same room on Preston St.
• On Friday, April 26th, the Maryland Community Health Resources Commission holds a conference call to discuss and approve the Local Health Improvement Coalitions.

MD unemployment 6.6% in March

Maryland's unemployment rate was unchanged last month, holding steady at 6.6 percent, according to just-released Bureau of Labor Statistics (BLS) data on state-level employment figures for March.

While more than 206,000 Marylanders were unemployed, this was the fewest since February 2009, the last time before February this year when the unemployment rate was so low. Of course, as I highlighted in my last post about the national figures, unemployment rates are very different across different sub-populations. Unemployment is likely much higher among minority Marylanders, women, veterans, and young people, to name a few. While BLS does not release monthly figures on these groups at the state level, you can see their preliminary figures for 2012 (PDF). Data on previous years is available about halfway down this page.

Employers located in Maryland added 4,700 jobs in March. Gains were diffusely scattered across multiple industries: construction, manufacturing, financial activities, professional and business services, and education and health. The trade, transportation, and utilities sector lost the most jobs--1,600.

Book review: The 90 Day Report

The 90 Day Report, an indispensable reference published by Maryland's Department of Legislative Services, is now available on line. (Don't be quick to click "print" -- It's 446 pages.)

The book includes sections on the budget, aid to local governments, and on topic areas from agriculture to workers' compensation.

It includes extensive explanations of all the hot topics like death penalty repeal and gun regulations. It also covers most of the obscure topics of great interest to more limited audiences, like elevator inspections and pub breweries.

And ... it's free!

At MBTPI, we make extensive use of this resource year round (and often consult editions from previous years to refresh our aging memories).

If you want to know what happened in the 2013 legislature, this is the book for you.

The Week Ahead (Tax Day Edition)

Happy Tax Day (really)! We're thankful yet again for all the things our federal and state taxes pay for--like education, healthcare, and public safety.

Last week we published a follow up post to our pre-session discussion of the three big bad wolves threatening Maryland's budget. We also blogged about the important non-budget legislation passed in the 2013 session, and on unfinished business.

MBTPI is co-hosting a Legislative Reception next week on Tuesday, April 23rd, to celebrate the end of the 2013 legislative session and we want you to be part of it. Click through to find out more or to register for this free event.

For the week of April 15th through April 21st:

• Our friends at Maryland Hunger Solutions are holding a conference call for organizations interested in or engaged in food stamp outreach from 9:30-10:30am on Wednesday, April 17th. The call will focus on the benefits of joining the Maryland Food Supplement Program State Outreach Plan, including the potential for federal reimbursement for staff time and marketing activities related to these efforts. Click here to register.
• That same morning the Board of Public Works meets at 10am.
• The Interagency Committee on School Construction holds their regular meeting at 9am on Thursday, April 18th in Baltimore. School construction, particularly in Baltimore City, was an important issue in the 2013 session.
• Also on Thursday, the Maryland Health Care Commission meets at 1pm.
• On Friday, April 19th, the Bureau of Labor Statistics releases state-level employment figures for March.

Unfinished Business in the 2013 Session

MBTPI supported a number of proposals which were not successful this year. We plan to continue working on these issues.

iStock.com

Earned Sick Leave

The Maryland Budget and Tax Policy Institute (MBPTI) supported HB 735 and SB698, requiring that employers provide employees with earned sick and safe leave and requiring employers to allow employees to use earned sick and safe leave. The bill would have benefited Maryland’s economy, reduced health care costs, and helped working families provide and care for their members. Earned sick leave is an important public health tool, enabling employees to take care of their health or the health of their children in a timely manner, and protecting coworkers, diners, or other customers from infection.

The cost to Maryland businesses would have been low, amounting to about 25 cents per hour per employee according to the Institute for Women’s Policy Research. More importantly, the business savings – primarily due to reduced turnover but also to increased productivity as a result of less sickness in the workplace, healthier customers, and other effects – completely offset these costs. The experiences of Connecticut and San Francisco show that earned sick leave requirements can be part of a vibrant, growing economy.

Unfortunately, the bill was opposed vigorously by business organizations. The House bill was withdrawn; the Senate bill died in committee. Yet the evidence shows that paid sick leave is not just a humane practice; it is good economic policy. MBTPI will support this legislation in the future.

Life-saving cigarette taxes

MBTPI supported legislation to add $1 per pack to Maryland’s tobacco taxes (HB 683/SB 700). This would have improved Maryland’s health by discouraging smoking, especially among young people. And it would have provided revenue which could be directed to health services. Both House and Senate bills died in committee, though. MBTPI will continue to support this measure on the principles of promoting good health and providing needed revenue.

Reforming corporation taxes

The state corporation tax got a lot of attention this session. Many bills were submitted to reduce the corporation income tax rate. Others proposed reforms to modernize the corporation tax, most notably by requiring “combined reporting” a tax system that prevents multi-state corporate groups from using subsidiaries and affiliates to avoid Maryland corporate income tax.

MBTPI supported a joint strategy of broadening the tax base and lowering the rate. The Institute supported combined reporting and other reforms to discourage corporate tax shifting and to broaden the corporate income tax base. A majority of the states with corporate income taxes have closed these loopholes.

We also supported a reduction in the corporation tax rate from 8.25 percent to 7.5 percent. Lowering the corporate income tax rate to 7.5 percent would put it near the same rate at which most Maryland personal income is taxed (including both state and local income taxes). We believe that this package would protect the revenue base needed to fund public services that are important to the economy, make Maryland’s tax system fairer and more modern, and help local Maryland businesses.

All of the bills to alter the corporation income tax either died in committee or were reported unfavorably. MBTPI continues to support sensible business tax reform.

Protecting resources for schools

MBTPI supported legislation to protect future education funding (HB 1474/SB 958). Over a decade ago, Maryland enacted a groundbreaking set of education finance reforms know as the “Thornton Program.” These reforms were based on a rigorous study of the actual costs in the state’s best-performing schools. They were intended to assure adequate education funding for all students, and to provide the resources necessary to reduce systematic performance gaps between students of different income categories and racial and ethnic groups. During the period of the Great Recession and its aftermath, the state found it necessary to limit the growth in the formula amounts. HB 1474 would have helped to prevent further erosion in Maryland’s commitment to full and fair public school funding. The bill died in committee. MBTPI will be calling on Governor O’Malley to fully fund the inflation increase in school costs in the next budget, and will again support legislation to protect future school funding.

Evidence-based policies

MBTPI supported legislation to promote evidence-based policy outcomes. SB 831 would have established a Committee on State Budget Evidence-Based Policy Options. The Committee would have reported annually on areas of opportunity within the operating budget where the state could benefit from evidence-based policies. This bill also died in committee. Over the summer, we will look at other states that have adopted this practice to gauge its success.

Unlike some states (Texas), Maryland’s legislature meets every year. MBTPI will be keeping track of these issues, and others, and pursuing them further in the 2014 legislative session.

Not the budget: Other legislation of note

The 2013 regular session of the legislature concluded on midnight Monday. During the course of the session, the Maryland Budget and Tax Policy Institute took positions on a variety of bills related to Maryland’s finances and their effects on low-income and other vulnerable Marylanders.

iStock.com

Here is the run-down:

Transportation

The legislature enacted a much-needed transportation bill (House Bill (HB) 1515) that gradually increases taxes on gasoline to replenish the state’s transportation fund, allowing Maryland to improve roads, bridges, transit systems, and bicycle and pedestrian passageways.

MBTPI supported this legislation as a responsible compromise. 

However, there are two concerns we have about the bill. One we discussed in yesterday’s blog. The bill calls for a portion of the sales tax to be diverted from general fund purposes (like education, healthcare, and police) to transportation once Congress allows states to collect taxes on internet and catalog purchases.

The other concern we had is that the gas tax places a disproportionate cost on low-income working families. To address this regressive effect, we supported bills to expand Maryland’s earned income tax credit (HB 845/Senate Bill (SB) 703).  Unfortunately, these bills died in committee.

Homeless Youth

MBTPI supported HB 823/SB 764 to create a task force to find solutions for the growing problem of unaccompanied homeless youth.  The legislature enacted these bills. MBTPI will be following the task force’s work closely. We expect the task force to develop creative and effective initiatives to help these teens and young adults.

Making Welfare to Work Workable

MBTPI supported and the legislature enacted SB 686 to establish an earned income disregard pilot program. Currently, Temporary Cash Assistance (TCA) recipients lose 60 cents in benefits for every dollar they earn when they join the workforce, even though those exiting TCA on average earn less than the federal poverty rate. SB 686 creates a pilot program in a rural county to research the impact of reducing the earned income disregard when recipients initially enter the workforce. The pilot program would ease the transition from TCA to self-sufficiency by disregarding (for the purposes of TCA eligibility) 100 percent of their earned income for the first three months of employment, disregarding 60 percent of their earned income for the following six months, and disregarding 40 percent (the current standard) afterwards. A graduated disregard would help TCA parents succeed when they enter the workforce, encouraging personal responsibility and helping families achieve independence. The pilot program will allow this policy to be tested and evaluated.

Tomorrow we'll look at some of the bills we supported that didn't make it through the legislative process.

Budget Wrap-Up: Red Riding Hood delivers goodies but big bad wolves still lurking

wpclipart.com

At the start of the legislative session, we compared Maryland’s budget situation to the story of Little Red Riding Hood and the Three Big Bad Wolves (okay – we changed things around a bit to make our point).

We said that it should not be too hard for the legislature to enact a balanced budget for the next year. It should be as easy as walking through the woods to deliver a basket of goodies to Grandmother’s house. 

However, we warned there were some risks. In particular, there were three Big Bad Wolves lurking who could endanger the budget before the legislature can deliver the basket in April. The wolves were the federal fiscal cliff, the hungry state transportation fund, and the state’s ongoing “structural deficit."

What happened? Let’s find out.

Governor O’Malley proposed a budget that included no significant revenue increases, no catastrophic cuts, and preserved a fund balance over $1 billion. The legislature made modest amendments and enacted the budget without drama.

What about those wolves?

1. The first wolf was called Cliff: Fiscal Cliff. 

Congress acted early in the year to avert the worst effects of large automatic tax increases on everyone. However, Congress deferred decisions related to automatic spending cuts and the federal debt limit. Deadlocks on these issues, or unsound resolutions of them, could have resulted in serious losses of federal revenue for Maryland and maybe some negative shocks to the state economy, which would also affect the budget. 

Congress allowed the “sequester” cuts to take effect March. This will cut about 5 percent from most domestic programs and about 8 percent from military budgets. The effects on Maryland’s revenue and economy are still uncertain, but will be significant. Late in March, Congress enacted a budget “continuing resolution” that holds spending levels at the sequestered level through September 30, 2013. Congress is in the early stages of negotiating a budget for federal fiscal year 2014, which begins October 1, 2013. Congress also extended the federal debt ceiling until May.

So, there remain ample opportunities for trouble from this wolf. The budget enacted by the legislature leaves balances of over $1 billion as a cushion for the state to manage the ill effects of federal budget problems.

2. The second wolf was the hungry Transportation Trust Fund.  

Maryland needed more funding for roads, transit, and other transportation improvements. The dedicated transportation fund was running low - mostly because its major source - the gas tax - had not been adjusted in 20 years. However, quite a few legislators were skittish about raising gas taxes. The concern was that in seeking a way to feed the transportation wolf without touching the gas tax, the legislature would divert general funds (still under stress and still needed for education, healthcare, public safety, environmental protection, and other important priorities). 

Once Virginia approved a transportation package, Maryland leaders came together on a funding plan for the Old Line State. It will raise gas taxes gradually over a number of years, while providing needed revenues for roads, transit and other transportation improvements.

This wolf may be back, though. The legislature's transportation bill relies on gas tax increases to start with  – the traditional and responsible way to fund the transportation system. However, the bill has one tricky provisions to it: for the final increment of transportation funding, it uses sales tax revenues from internet and catalog sales. Here’s how it works: right now, states cannot legally require out-of-state sellers to collect sales tax on purchases made through websites, phone or mail. But there’s a bill in Congress that would give states that authority. If Congress passes that bill by December 2015, then a 4 percent share of the sales tax (a rough estimate as the sales that will come from internet and catalog sales) goes to the transportation fund. And this is going to be a problem for schools, health providers, police departments and other services that rely on sales tax and other traditional “general fund” revenues. 

3. The third wolf is a familiar one: the state's "structural deficit." 

Even though the budget is balanced through the next 15 months, the state is still taking in less that it's paying out over the course of the year. The difference is called a "structural deficit." The state can balance its budget for the year by using cash from revenue surpluses from previous years. But if there's a structural deficit, that budget cannot be repeated in future years without running into a real deficit.

The structural deficit was $1.7 billion back in 2009. Since then, the legislature and governor have consistently reduced it through a balanced program of spending cuts and new revenues (including gambling proceeds and some moderate tax increases). The state used temporary measures to achieve a positive balance at year end. Maryland did not actually go into "the red" at any time during this period.

The structural deficit for the 2014 budget the legislature just enacted is $174 million – about one tenth the size of the structural deficit at the height of the recession. Budget projections call for the remaining structural deficit to be eliminated by 2017 (and a little bit of good revenue returns could wipe it out earlier).

That’s very good news. However, this is one wolf who never goes very far away. As the state’s annual surplus rises and falls, it’s very important to keep an eye on the structural balance. Maryland has worked very hard to restore our finances to long-term balance. Many states across the country are considering precipitous tax cut programs after just one year of favorable revenue performance. Maryland needs to be more responsible than that.

The Week Ahead (Sine Die Edition)

Today is Sine Die, the last day of the 2013 legislative session. It's been a busy session, between passing the budget, raising the gas tax, enacting gun control, and repealing the death penalty, among other issues--but with less drama than last year. Look for our in-depth review of the session on our blog later this week.

Last week we blogged about the legislature missing the budget target date, the supplemental budget introduced by Governor O'Malley, national employment trends in March, and the budget conference committee report.

For the week of April 8th to April 14th:

• Monday being the last day of the 2013 session, the legislature is scheduled to rush through its remaining workload, including bills on: speed cameras, medical marijuana, pit bulls, and driving while using a mobile device.
• The Commission on State Debt, which advises the Board of Public Works on the property tax rate, also meets Monday, April 8th at 2pm in the Treasury Building, Annapolis. 
• The Advisory Council for Alternative Response meets on Tuesday, April 9th at 1pm in the Department of Human Resources, 311 West Saratoga Street, Baltimore. 
• The Bureau of Labor Statistics releases metropolitan level employment figures for February on Wednesday, April 10th. 
• The Health Services Cost Review Commission holds their monthly meeting at 1pm on Wednesday, April 10th at 4160 Patterson Avenue, Baltimore. 
• The Census Bureau releases the 2012 edition of their Annual Survey of State Government Tax Collections on Thursday, April 11th.
• The Maryland Health Insurance Plan Board of Directors holds its monthly meeting at 9am on Thursday, April 11th at 201 E. Baltimore Street, Baltimore.

Conference committee resolves budget differences

A conference committee of delegates and senators has resolved the differences between the two houses’ versions of the budget, just four days prior to the legislative session’s scheduled conclusion.

Even though the two plans were not very different, the legislature allowed the constitutional target date of April 1 to slip by before concluding the budget process. Legislative leaders may have been awaiting the resolution of other legislation (such as the firearm safety act) and a supplemental budget proposal from the governor before finalizing their budget action.

The final budget left intact 98.8 percent of the funding proposed by Governor O’Malley in January.

Key Conference Committee decisions

• One of the major differences between the House and Senate budget plans related to pension contributions and fund balances. The 2011 pension reform law called for the state to make an extra contribution of $300 million to the teachers’ and employees’ pension funds next year.  The Senate cut this to $200 million, and added the savings to the general fund balance, so it could be available if needed to absorb the effects of federal cutbacks.
  

The conference committee accepted the cut to the extra pension contribution, but placed it in the “Dedicated Purpose Account” of the state reserve fund. This way, it could be used by the governor (subject to review by legislative committees) without the need for action by the whole legislature. By using this mechanism, the governor could replace funding for critical services without either waiting for the 2014 legislative session or calling a special session.

Any unused amount would be forwarded to the pension fund after the end of this calendar year.

Counting this addition to the contingent fund  the final amount of balances ($1.16 billion) is close to the amount recommended by the Senate.

• The conference committee accepted most of the items in Governor O’Malley’s proposed supplemental budget, with these exceptions:

The conference committee rejected $432,000 in general funds to cover part of emergency management and National Guard expenditures for the derecho and Hurricane Sandy. The conference committee suggested that the agencies be allocated the funds from the state’s Catastrophic Event Fund. That fund has $1 million available.

The conference committee directed that $300,000 included by the governor for the Towson University men’s baseball team should instead be used as matching funds for an intercollegiate athletics donation incentive program. The program would provide matching funds for Division I schools in the University of Maryland System to support sports to maintain compliance with Title IX requirements.

Next steps

Update: The House and Senate have both approved the conference committee report and passed the budget bill in final form. The budget bill becomes law immediately upon passage by the legislature and does not require the Governor’s signature.

US adds 88k jobs, but 500k leave the work force

National employment trends were mixed in March, according to data released by the Bureau of Labor Statistics today.

The unemployment rate ticked down one tenth of one percentage point over the last month, to 7.6 percent. Compared to a year ago, the unemployment rate has fallen six tenths of a percentage point.

Minority unemployment rates remain high, but are also improving. Black unemployment was 13.3 percent, down half a percentage point. Hispanic unemployment was 9.2 percent after a similar decline. Teens 16-19 years of age continue to have the highest unemployment rate at 24.2 percent; yet even this group saw their rate drop by almost a full percentage point. Veterans of the second Gulf War also experience high unemployment in the civilian world, with a rate of 9.2 percent.

Employers added 88,000 jobs in March, mostly in the construction, business and professional services, and education and health services sectors. Retail trade lost the most jobs during the month.

More troubling, the labor force participation rate fell two tenths of a percentage point to 63.3 percent as 496,000 Americans stopped working or looking for work.

Supplemental budget includes ... a lot of different things

The Governor sent the legislature a supplemental budget on Monday, April 1, adding $218 million to the proposed budget: about 1/3 of 1 percent. Of this amount, only 1/3 is “general funds,” meaning it is funded with regular tax revenues.

The Governor maintains the balanced budget by recognizing $140 million of the cuts the legislature is expected to make in the original budget.  Even if the legislature approves all of the proposed amounts in the supplemental budget, the budget remains balanced with a cushion of over $1 billion in the state’s Rainy Day Fund plus the year-end general fund balance under either the House of Delegates or the Senate plan.

The supplemental budget includes 101 separate items ranging from a mere $75 to correct a funding formula for limited English proficient education to $83 million in additional federal Medicaid funding. Here are a few highlights (figures reflect the total of all fund sources):

Sequester Reserve

The supplemental budget places $10 million into the “Dedicated Purpose Account” to support critical programs which may be disrupted by federal “sequester” cuts. These funds would be available for release during the fiscal year following review by legislative committees.

Providing for New Legislation

Some of the supplemental budget items relate to costs associated with pending legislation.Gun control, wind energy, and the Baltimore City school building initiative all have items related to them.

Other Initiatives

A $3.3 million initiative is designed to help remedy persistent needs at Maryland’s four historically Black colleges and universities. Other items provide additional funds for low-income local governments, tourism promotion, and the men's baseball team at Towson Unversity.

Normal Operating Needs

Some supplemental items provide funds for normal operating needs of state operations, or cover shortfalls in the existing budget. Disablilty services, police, mental hospitals and juvenile services all get operating funds.

Casino dollars replace state funds for schools

New estimates of casino revenues added $10 million to the Education Trust Fund. This allowed the governor to subtract $10 million in general funds from school aid budgets. This item demonstrates that while the state share of Maryland’s casino revenue is dedicated to local schools, it does not add to the schools’ resources–it merely replaces other state funding.

Assorted Good Causes

The supplemental budget contains funding for many local organizations and projects. Often, these address particular needs and opportunities which legislators or others have brought to the governor’s attention. Some people consider these items "pork." Here is a partial list.

$2.5 million    For the Eastern Family Resource Center in Baltimore County.

$1.35 million For eastside redevelopment projects in Baltimore City.

$500,000         To the Prince George’s County State’s Attorney for violent crime prosecution.

$500,000         To assist non-public schools with textbook purchases.

$366,000         Operating cost assistance for the Hippodrome Arts Center in Baltimore City.

$160,000         For the Civic Justice Corps summer program.

$120,000         For the Historic Annapolis Foundation.

Process

The budget bill is currently referred to a House-Senate conference committee to negotiate differences between the two chambers. The conference committee will also approve, disapprove, or reduce the supplemental budget items. The House Appropriations Committee and Senate Budget and Taxation Committee will review the items, and provide guidance to their respective chambers’ conference committee members. 

The conference committee must complete its work and the House and Senate must approve the conference committee’s report by the last day of the regular legislative session, Monday April 8. Otherwise, the legislature will go into an extended session to complete the budget.

The Department of Legislative Services’ analysis and recommendations are here.

MBTPI's full briefing paper on the supplemental budget is here.