Happy New Year - A Look Back at Fiscal 2013

At midnight Sunday, June 30, Maryland will conclude fiscal year 2013 and start 2014.

The old fiscal year, 2013, was the budget that was rescued from a legislative train wreck in the 2012 legislative session.

Maryland was formulating that budget in fall and winter of 2011. The state faced a looming, billion-dollar shortfall. Expenditure levels had already been cut $1.6 billion below the cost of “current services” as they existed before the Great Recession. The $4 billion in assistance from the federal Recovery Act was drying up.

After a “steady diet of cuts” for the previous four years, Governor O’Malley proposed a “balanced approach” to balancing the budget. It included revenues from a modest income tax increase, a multi-year shift of teacher pension cost from state to local budgets, and significant restraints on expenditures - Especially in Medicaid and state agency operations.

The legislature agreed to a budget plan very similar to the governors. They agreed to and amended the governor’s pension reform legislation, that transferred teacher pension costs to local governments more gradually.  On the final day of the session, Senators and Delegates were rushing to agree on a compromise revenue package. They did reach an agreement of a $300 million income tax package that raised tax rates slightly on the 20 percent of households with the highest incomes.

But, the bills to transfer the pension costs, raise tax rates, and transfer some $150 million in special funds did not come to a vote before the end of the 90-day session. Instead, a $500 million package of cuts, known colloquially as the “Doomsday Budget,” was slated to go into effect. Education programs would have taken the brunt of these cuts, but other functions from health care to business development would also have been slashed.

Here is where Maryland showed more maturity than our national government. Maryland’s political leaders did not allow the Doomsday Budget to stand. They met in special session before the new fiscal year began, and they took the tough votes to approve revenue plans and the other legislation needed to balance the budget.

The fiscal year we are completing was based on a balanced approach to balancing the budget. 

Even though the regular legislative session ended in a deadlock, leaders came together to implement a responsible compromise. Maryland has been able to maintain our funding for education, health care, and other investments in our people, families and communities better than states that have relied exclusively on budget cutting. 

In addition, the compromise budget approved in the 2012 special session set the stage for much less dramatic budget deliberations in the 2013 legislative session. Maryland’s finances remain challenging, but the gap between revenues and the cost of current services is considerably narrower.

Next week, we’ll review the status of the new fiscal year 2014 budget just starting. 

In a few weeks (likely early September), Comptroller Franchot will report on the fiscal year close-out, and we’ll get our first chance to assess Maryland’s financial posture going into fiscal 2015.

So, have a happy fiscal New Year. And however you choose to celebrate, please do it safely.

The Week Ahead

Last Monday MBTPI took a trip to Salisbury, where Neil presented to the Community Foundation on the effects of sequestration on the Eastern Shore. Also last week, we blogged about the implications of the proposed (and subsequently failed) farm bill legislation on the state. We also wrote about the audit of the District of Columbia's earned sick leave legislation and how it has not harmed business activity in the District.

State unemployment figures for May were released on Friday. Last month, 6.7 percent of working Marylanders were unemployed. This was up two tenths of a percentage point from the previous month. 

Sunday June 30 is the last day of Fiscal Year 2013 for Maryland state and local governments. MBTPI urges everyone to celebrate safely.

For the week of June 24th through June 30th:

• On Monday, June 24th, the Alcoholic Beverages Article Review Committee meets to review special venue licenses at 5pm in the Judiciary Training Room at 2009F Commerce Park Drive in Annapolis.On Friday, June 28th at 10am, BLS will publish its report on the multifactor productivity trends for 2012.
• On Tuesday, June 25th, the Maryland Community Health Resources Commission is hosting a public forum with the Maryland Health Benefit Exchange and the Department of Health and Mental Hygiene for safety net providers, MCOs, and commercial carriers from 10am to noon at the UMBC Tech Center Lobby at 1450 South Rolling Road in Baltimore.
• Also at 10am on Tuesday, the Maryland Venture Fund Authority will have a conference call to update on InvestMaryland investments and to decide on their next steps for investing. The number and conference code can be found here.
• Later on Tuesday, the Video Lottery Facility Location Commission convenes at 1pm in the Commission Room of the Maryland Lottery and Gaming Control Agency at 1800 Washington Blvd., Suite 330 in Baltimore. They will update on agency activities and review proposals for a Prince George's County casino.
• Additionally, Maryland Hunger Solutions will be hosting an open house on Tuesday evening from 4pm-7pm at 2002 Clipper Park Road, Suite 310 in Baltimore. For more information on the event and how to RSVP, please visit their homepage.
• Finally on Tuesday, the State Commission on Criminal Sentencing will review and evaluate state sentencing guidelines and policies at 4:30pm in the Miller West I Senate Office Building on 11 Bladen Street in Annapolis.
• On Wednesday, June 26th, the Maryland Community Health Resources Commission (MCHRC) will meet at 2pm in room 240 of the House Office Building on 6 Bladen Street in Annapolis, where several Local Health Improvement Coalition applicants will present to the MCHRC board.
• On Thursday, June 27th at 10am, the Bureau of Labor Statistics (BLS) will release its county employment and wage figures for the fourth quarter of 2012. 
• Also on Thursday, the Maryland Medicaid Advisory Committee meets from 1pm to 3pm in conference room L-3 at 201 W. Preston Street in Baltimore.

Paid Sick Leave Hasn't Harmed D.C. Businesses

MBTPI strongly supports legislative proposals requiring employers to provide workers with earned sick and safe leave. This critical public health tool allows employees to attend to health needs for themselves or their children, thus protecting coworkers, classmates, and business customers from communicable illness. Overall, earned sick leave would lower health care costs and improve workplace well-being and productivity. According to a report by the Institute for Women's Policy Research (IWPR), if a law guaranteeing workers this right were to pass in Maryland, health care expenses in the state would fall by $41 million annually, with roughly half the savings returning to taxpayers.

Unfortunately, the Maryland Earned Sick and Safe Leave Act (House Bill 735/Senate Bill 703), which would have allowed workers to earn a minimum of one hour of paid sick leave per 30 hours on the clock, failed in committee last session. Critics of the bill claimed the law would impose too great a burden to small businesses, though the IWPR report disputed that and a large majority of Marylanders supported the bill according to independent polling.

While initiatives have been introduced in several states in the past few years, Connecticut remains the only state to have passed such legislation (it did so through a close vote in 2012), but several cities, including San Francisco and Washington D.C., have had such requirements for over half a decade.

Effective in May of 2008, the District of Columbia's Accrued Sick and Safe Leave Act mandates that employers offer one hour of paid leave to workers for every 37 to 87 hours worked (depending on the size of the company) to workers that have been employed at that firm for at least one consecutive 12 year period.

For the first time since its enactment, the D.C. Auditor has now studied the economic impact of the law on the private sector. The report, which was released Wednesday, includes the results of a survey sent to 800 D.C. businesses that asked owners if paid sick leave would lead them to move their firm out of the District, to which over 87 percent responded in the negative. The audit further found that this new law did not discourage new businesses from forming in the District, and 91 percent of employers in the District complied with the law's requirement of posting the notice of sick leave rights within the workplace.

This provides strong evidence that sick leave laws do not create excessive burdens on small business, which advocates can point to in this coming session should related bills be reintroduced.

Farm Bill advances in the Senate

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Maryland may not come first to mind when Americans think of farms, but with 12,800 farms and over 2 million acres of farmland, agriculture is a major industry in the Free State. According to the New York Times, over $89 million of taxpayer support went to the $2 billion sector in 2012, making agriculture was the state's most heavily subsidized industry. The vast majority of that aid came from federal programs delivered via legislation popularly known as "the farm bill."

However, this law substantively deals more with nutrition assistance for the nation's low-income families than it provides in direct subsidies to agriculture, and it is in the former category where the legislature seeks the most spending cuts.

The Senate passed its version of the Agriculture Reform, Food, and Jobs Act of 2013 last week, which received votes of support from both Maryland Senators Cardin and Mikulski. This 1,150 page omnibus bill seeks to replace the farm legislation that expired in 2012 and if passed by the House will qualify and authorize spending for the nation’s major food and agriculture-related programs. These include the Supplemental Nutrition Assistance Program (SNAP—AKA food stamps), the Emergency Food Assistance Program, Federal Corp Insurance, the Conservation Reserve Program, Community Food Project grants, the Emergency Food Assistance Program, support programs for commodities, and many others.

Source: Washington Post

Highlights from the Senate bill:

SNAP: Funding for food stamps will decrease by $4.1 billion over the next decade. Also, an amendment from Senator David Vitter (R-LA) permanently disqualifies anyone ever convicted of violent crime from ever receiving SNAP benefits.

Direct Payments to Farmers: The bill immediately eliminates these $5 billion of annual automatic subsidies to farmers that supported specific categories of crops, regardless of harvest yields or market prices. 

Crop Insurance: Support for federal crop insurance increases by 5 percent. The bill reduces subsidies for farms with adjusted gross income over $750,000 from 60 percent support to 15 percent.

Conservation Programs: Spending is cut by $5 billion by consolidating the current 23 conservation initiatives into 13 programs and by reducing the maximum eligible acreage.

According to data analyzed by the Environmental Working Group, Maryland farmers received $25.5 million last year in crop insurance premium subsidies and claimed $27.7 million in indemnities under the insurance program. Over $19 million in commodities support went to state farmers, as did nearly $11 million in conservation program payments and about $3.7 million in disaster relief aid.

Few of the agriculture provision of the Senate bill are politically controversial on the Hill. However, the SNAP provision in the Senate bill may come under fire when the act is considered for approval in the House. That chamber passed its own bill in May that cut the nutrition support program for low-income Americans by a far more aggressive $20.5 billion. The House bill also removes the categorical eligibility feature of the program, which according to the Center on Budget and Policy Priorities (CBPP) permitted states to extend SNAP benefits to households (mainly comprised of low-wage workers and the elderly) that have greater gross incomes/assets than allowed under the program but whose disposable incomes put them below the poverty line. This dispute between the House and Senate over food stamps killed the farm bill resolution process last year.

The number of Marylanders depending on SNAP for nutritional support has grown greatly over the recession, more than doubling according to figures from the Department of Agriculture. Currently, over 12 percent of state residents rely on the program for food, and the proportion continues rising. Pew reports that the average Marylander participant in the program received between $115 and $130 per month in food assistance last year. 

Recent USDA data shows that one in eight Maryland households struggle with hunger. Cuts to SNAP will only drive this figure upward, further increasing food insecurity in the state.

Are MD students able to repay their college loans?

Maryland college students in most parts of the state have lower student loan delinquency rates than the national average, according to new data from the Federal Reserve. However, some counties have much higher delinquency rates - up to 25 percent or more.

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The current issue of the Federal Reserve Bank of Richmond’s 5^th District Footprint publication focuses on the rates of student loan delinquency (the number of student loans that are at least 30 days late) as of March 2013 for the region comprised of Maryland, North and South Carolina, Virginia, Washington D.C., and West Virginia. The study finds that delinquency rates in most of the region’s counties differed little from the national norm, but for those counties with higher rates, nearly all had median household incomes below national and state median levels, as well as higher than average rates of poverty and unemployment for its college graduates. Nationally, the rate of student loan delinquency is currently 11.8 percent (up 2.3 percent from last year), with the average student holding $24,755 in this difficult to discharge form of debt.

The issue of student loans is especially salient now because if Congress does not act to prevent it, the interest rate on subsidized Stafford student loans will double on July 1st, rising to 6.8 percent. According to a report recently released by the Maryland Public Interest Research Group, the average Maryland student graduates with over $24,000 in debt, and this rate increase would cost Maryland students over $95,469,000, amounting to roughly $900 per student, per loan. This hurts students from lower-income families, as only students from families with incomes less than $50,000 are eligible for these subsidized Stafford loans.

Graduation, Education, and Sequestration

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With all of the June graduations around Maryland, it's a good time to think about our investments in children and their education.

The American Prospect recently issued a special report that examines the effects of the economic downturn and America’s budgetary reactions on the nation’s youth. In its first article, “The Children of the Great Collapse,” Jared Bernstein looks primarily at the national effects of sequestration on low-income children and families, with additional commentary about how further cuts in Paul Ryan’s budget proposal could make matters worse. Bernstein explains that while the helpful stimulus of the Recovery Act prevented millions of children from slipping into poverty during the height of the Great Recession, now that the apparent crisis period is over and this aid to individuals and states has long been spent, working-class Americans may actually suffer worse now in the period of “economic recovery,” as wages and opportunities stagnate.

The emerging effects of sequestration and other Congressional budget fights push attainment of the American Dream farther away for low-income citizens by reducing the possibilities that come from a robust education system. Funds for public schooling have declined for the very beginning of a poor child's education up through the college level. The sequester’s automatic spending reductions cut roughly five percent of federal funding for Head Start. That may not sound severe, but the National Education Association estimates this will reduce access to public preschool programs for roughly 50,000 American children. Over 13,000 Maryland children took part in the program last year, and in most counties, over 90 percent of children eligible for the program were enrolled. This blind budget cutting will reduce access to early education for low-income families and will leave many children unprepared to start their education.

Local K-12 education also feels the pain of these budgetary contractions since, as Bernstein points out, federal aid to local schools makes up over eight percent of the sequestered federal dollars. Much of this money would have targeted schools in low-income communities. As for higher education funding for low-income young adults, if the Ryan Budget became law, funding for the Pell Grants that help millions of college students afford higher education would be frozen at current levels, while tuition around the country rises.

All this comes as Maryland has made progress in educational achievement among its low-income students, according to Education Sector, a nonprofit, nonpartisan think tank on education policy. The organization’s recent special report studied students’ scores on the National Assessment of Educational Progress tests between 1995 and 2009. It shows that Maryland has made more progress than any other state in improving achievement in reading and math scores of free-and-reduced-price-lunch eligible fourth and eighth grade students. The state raised scores of its economically disadvantaged students on average by more than 50 points. That is nearly twice the national average for improvement. It indicates that these Maryland students have attained an increase in nearly two additional years of learning. 

Cuts to school aid risk derailing the state’s trajectory in this area.

Sequester supporters in Washington argue that this austerity move helps reduce “government waste” and will result in a leaner, more efficient government. Local critics of government stewardship of public funds point to Baltimore City’s school system, which has been in the news recently after a federal audit uncovered some extravagant and unnecessary spending. 

Of course, in both good and bad economic climates, school system officials need to use the public dollars they are allocated wisely and responsibly. And of course when they do not, they must be held accountable. However, despite these sensational findings, evidence shows that our public school dollars are improving teaching and learning in classrooms around the state, and we are getting results that will help Maryland’s economy, communities, and families for a generation to come. We’re getting a great return on our investment in education. Now is not the time to divest in our future.

Week Ahead

Last week we blogged about Maryland's economic growth in 2012.

Also last week, the Tax Foundation released a study that named Maryland the most generous state, based on percentage of state taxpayers claiming charitable deductions on their 2012 returns.Over forty percent of Marylanders took this deduction last year, with a median charitable donation of $2,969 and an aggregate state contribution of nearly $4 billion. (Note that MBTPI and others have  shown that the Tax Foundation's Business Tax Climate and "Tax Freedom Day" studies are not a good guide to states' tax policies. This data from the the Tax Foundation on charitable deductions is okay).

Additionally, the Bureau of Labor Statistics (BLS) released its monthly employment figures last Friday, showing the nation's private sector added 178,000 jobs in May. Workforce participation and unemployment both grew by 0.1 percent last month as more people sought work.

For the week of June 10th through June 16th:

• On Monday, June 10th, the Maryland Community Health Resources Commission is hosting a public forum with the Maryland Health Benefit Exchange and the Department of Health and Mental Hygiene for safety net providers, MCOs, and commercial carriers from 1pm to 3pm at the Todd Performing Arts Center Lobby at 1000 College Circle in Wye Mills.
• On Tuesday, June 11th, the Maryland Commission on Cybersecurity Innovation Excellence meets to report on its activities at 9am in the University of Maryland University College's Salon A at 3501 University Boulevard East in Adelphi.
• Also on Tuesday, the Advisory Council for Alternative Response holds its monthly meeting at 1pm in the Department of Human Resources building's room 1044 at 311 West Saratoga Street in Baltimore.
• On Wednesday, June 12th, Board of Public Works has a general meeting at 1pm in the Governor's Reception Room on the second floor of the State House in Annapolis.
• Also on Wednesday, the Maryland Community Health Resources Commission hosts another public forum with the Maryland Health Benefit Exchange and the Department of Health and Mental Hygiene for safety net providers, MCOs, and commercial carriers from 10am to noon at the Howard County Health Department at 7180 Columbia Gateway Drive in Columbia.
• On Thursday, June 13th, the Maryland Health Insurance Plan Board of Directors meets at 9am in 1 Calvert Plaza's suite 630 at 201  E. Baltimore Street in Baltimore.
• Also on Thursday at 9am, the Interagency Committee on School Construction holds its regular meeting in Conference Room 1 on the 8th floor of the Grasmick Education Building at 200 W. Baltimore Street in Baltimore.

Economic growth in Maryland is about average

US Bur. of Economic Analysis

The US Department of Commerce has released state-by-state data for gross domestic product in 2012. Maryland's GDP grew 2.4 percent for the year, ranking 15th among the states, and posting the fastest growth in Maryland's region. The US average was 2.5 percent - essentially equal to Maryland's growth rate. (For those keeping track of bragging rights, Maryland's growth rate exceeded Delaware's, D.C.'s, Pennsylvania's, and Virginia's).

Although it is good to record an increase, these rates are well below the GDP increases that accompany a normal economic recovery.

The sectors that contributed most to Maryland's GDP growth were real estate, and finance and insurance, followed by government.

GDP is the broadest of the traditional economic indicators. It measures the final value of all goods and services produced. GDP is criticized because it measures only outputs that can be measured in the market.It does not factor in costs and benefits related to things like environmental quality, crime, and social cohesion. Maryland is on of a growing number of states and countries using a "genuine progress indicator" to supplement GDP as a more comprehensive measure of overall well-being.

Week Ahead

Last week we blogged about the effects so far of sequestration on the state and its budget. Also last week, the League of American Cyclists named Maryland the 11th most bike friendly state, and Entrepreneur called Maryland the best state to start a business. 

This week's activity involves many meetings on health finance.

For the week of June 3rd through June 9th:

• On Monday, June 3rd, the task force to study the laws and policies relating to representation of indigent criminal defendants by the Office of the Public Defender will provide updates on the subcommittee's progress at 1pm in Room 100 of the House Office Building in Annapolis.
• On Tuesday, June 4^th, the State Advisory Council on Hereditary and Congenital Disorders meets from 6pm to 8pm in Room L-1 of the O’Connor Building in Baltimore.

• On Wednesday, June 5th, the Maryland Underground Facilities Damage Prevention Authority meets at 9am in the Lower Level Conference Room at One Call Center on 7223 Parkway Drive in Hannover.

• Later on Wednesday, the Health Services Cost Review Committee has its monthly meeting at 1pm in Room 100 at 4160 Patterson Avenue in Baltimore.

• On Thursday, June 6th, the Senate Budget and Taxation Committee’s joint briefing with the Senate Finance Committee to discuss recent proceedings of the Health Services Cost Review Commission begins at 9am at 3 West in the Miller Senate Office Building in Annapolis.

• Also on Thursday, the Vehicle Theft Prevention Council meets at 10am to discuss and vote on grant applications for fiscal year 2014 in Room 259 at the Loyola College Graduate Center on 8890 McGaw Road in Columbia.

• Also at 10am on Thursday, the Maryland Community Health Resources Commission, the Maryland Health Benefit Exchange, and the Department of Health and Mental Hygiene host a forum for regional safety net providers, MCOs, and commercial carriers in the Militia Room of the Waldorf Jaycees Community Center at 3090 Crain Highway in Waldorf.

• Later on Thursday, the Legislative Policy Committee will hold a briefing by the Maryland Joint Prison Task Force and the Department of Public Safety and Correctional Services regarding public safety and the Baltimore City Detention Center at 1pm in the Joint Hearing Room of the Legislative Services Building at 90 State Circle in Annapolis.
• On Friday, June 7th, the Bureau of Labor Statistics will release its national employment figures for May.