The Week Ahead

Last week the General Assembly returned to Annapolis and took care of unfinished business.  Over three days the legislature passed a vital revenue bill, passed the Budget Reconciliation and Financing Act of 2012 making the legal changes and fund transfers necessary to fully enact the budget, and shared pension costs with local jurisdictions.  This week will be relatively quiet, by comparison.

Tuesday, May 22nd

• Governor O'Malley will sign the next batch of bills from the 2012 legislative session into law.  The list of bills has not been released yet. 10:30am, Annapolis.

Wednesday, May 23rd

• Board of Public Works (BPW) meets.  This meeting was an important pressure on the legislature prior to the special session last week; the BPW would have had to begin implementing the doomsday budget and cut an additional $70 million from the state's budget at this meeting if the General Assembly had failed to pass a revenue package.  10am in the State House, Annapolis.

Thursday, May 24th

• Economic Development Commission holds a Regional and Economic Diversity Forum.  Space is apparently limited so RSVP if you wish to attend.  10am in Suite 110, 5520 Research Park Drive, Baltimore.

General Assembly moves fast on day one of special session

Yesterday, the Senate Budget and Tax Committee held its hearing on the Budget Reconciliation and Financing Act or BRFA (SB 1301) and the State and Local Revenue and Financing Act (SB 1302). Fiscal notes are available for both bills, as is our testimony in support of the revenue bill. The committee gave a favorable report to SB 1301 and 1302, setting the stage for passage by the Senate.  After rejecting all amendments and an affirmative vote at second reading yesterday, the Senate is poised to pass the bills upon third reading today.

This year, the House of Delegates must wait for the Senate to send it the BRFA and revenue bill before it can act (the chambers alternate taking the lead on the budget; next year the opposite will be true). However, in order to save time and taxpayer money, the House held hearings yesterday on identical House bills. The House Appropriations Committee held a hearing on the BRFA (HB 1801), followed by a hearing on the revenue bill (HB 1802) in the Ways and Means Committee. 

The combination of the compressed three-day schedule for the special session and the legislative rules laid out in Maryland's constitution require some contortions regarding legislative dates.  The constitution requires three readings on three separate days for all bills.  A holdover from the early days of Maryland, reading each bill three times ensured that illiterate legislators had a chance to digest the import of each bill before they voted.

In the modern, more literate General Assembly, bills are rarely read aloud three times. In most cases the legislature interprets other actions as having fulfilled the three readings requirement.  However, the three day rule still applies.

The Senate got around this problem yesterday by adopting a rules exception allowing two readings on the same day.  The House took a more interesting approach as it waits for the Senate bills. Last night the House recessed but did not adjourn, meaning that the legislative date inside the House chamber is still Monday, May 14th.  Once the Senate passes SB 1301 and 1302 (in a Tuesday, May 15th session) and sends them across the hall, the bills will move backwards in (legislative) time as the House moves through their first reading, then adjourns Monday's session. Later on Tuesday the Speaker will then open Tuesday's session and the chamber will proceed with the second reading.  Third reading and passage of the two bills in the House is expected sometime on Wednesday.

The Week Ahead

The General Assembly returns to Annapolis today in a special session to pass budget and revenue legislation eliminating the need for the doomsday budget. On Wednesday the governor outlined what state leaders expect to accomplish over the next three days, but regardless it is going to be a stressful week.

Monday, May 14th

• Senate Budget and Taxation Committee will hold hearings on the Budget Reconciliation and Financing Act (BRFA), the State and Local Revenue and Financing Act, and Qualified Zone Academy Bonds (a federal tax credit program to help local jurisdictions borrow for education spending, excluding new construction). MBTPI has prepared testimony in support of the revenue bill in both chambers. 11am in 3 West, Senate Office Building, Annapolis. 
• House Appropriations Committee will hold a hearing on the BRFA. Testimony is due by 11am today. 1pm in room 120, House Office Building.
• House Ways and Means Committee will hold a hearing on the State and Local Revenue and Financing Act. Testimony is due by noon today. 2pm in room 130, House Office Building.
• We expect the Senate will have its second reading of the BRFA and revenue bills late Monday.

Tuesday, May 15th

• We expect the Senate to vote on the BRFA and revenue bills Tuesday morning.
• We expect the House to begin its consideration of the BRFA and revenue bills late Tuesday.

Wednesday, May 16th

• If all goes according to plan, the legislature will wrap up the special session sometime on Wednesday.
• MBTPI co-hosts our annual Legislative Wrap-Up with Maryland Nonprofits, the Maryland CASH Campaign, Advocates for Children and Youth, Job Opportunities Task Force, and the Maryland Consumer Rights Coalition. This free event will focus on what came out of the 2012 regular session, what is happening with the special session, and our budget briefing.  Lea Gilmore from the Moving Maryland Forward Network will speak, as will representatives from each of the sponsoring organizations. Leading legislators will stop by as available. Lunch is included. You must register for this free event, and the deadline to register is today (Monday) at 4 pm. 10am to 2pm, Senate Office Building, Annapolis.
• To register, download a registration form. Complete your information at the top of the form, write "Legislative Wrap-Up" for 'course name', and May 16 for 'course date', and ignore all payment related fields. Fax the completed form to Maryland Nonprofits at 410-235-2190.
• If you are a Maryland Nonprofits member you can register online.  Scroll down to "Legislative Wrap-Up" and click on Register . 

Friday, May 18th

• Friday is Bike to Work Day.  In an effort to encourage more bicycling, communities across the country sponsor events, pit stops, and support teams for the day.  If you live in the Baltimore region you can find out more here.  If in the DC region, look here. 
• Bureau of Labor Statistics releases state employment figures for April 2012.  Maryland's unemployment rate ticked up slightly in March, to 6.6 percent.  The rate rose because the labor force grew faster than employment (MD added more than 2,000 jobs in March). 

Governor releases details of special session agreement

Governor O'Malley, Senate President Miller, and Speaker Busch held a press conference this morning (video) outlining the agreement they have come to for the special session starting May 14th.

For the most part, the new Budget Reconciliation and Financing Act (BRFA) and revenue bill will follow the template created by the conference committee at the end of the regular session.  Other highlights from the press conference included:

• The session should take three days.
• The special session agreement will include an additional $109 million in cuts.  The majority of the new cuts, $80 million, are actually due to revised estimates of Medicaid costs..  However, there is no explanation yet on where the other $29 million will come from.
• The revenue package will include a tax increase on single filers making more than $100,000 and joint filers making more than $150,000 (the top 16 percent of filers, according to the Governor).  The House and Senate leaders confirmed they are in agreement on this point.
• Sharing education pension costs with counties is part of the deal, phased in over four years.
• Transportation funding is a continuing problem, but will not be addressed this year.  Nor will the "net taxable income" issue (NTI).  NTI is an element of the education funding formula of particular importance to Baltimore City and Prince George's County. The governor said that he plans to do something about NTI in his budget next year.
• The overall FY2013 budget will grow 2.6 percent, but general fund spending will decline $380 million.
• The fund balance at the end of FY 2013 is projected to be $204 million, an improvement over the $155 million balance projected in the conference agreement. This will help protect the state against the possibility of mid-year cuts, and put the state in a better position to balance the next budget.

The governor also said he would send a letter to the speaker and senate president to begin convening a working group on gaming shortly, in anticipation of calling a second special session later this summer.

The (Very Busy) Week Ahead

As the Baltimore Sun so aptly put it, this week the Assembly shifts [its] attention from love to money.  In case you missed it, last week MBTPI testified in support of expanding property tax relief for renters.  This week we are submitting testimony on at least seven bills.


Monday, February 27^th

• Senate Education, Business, and Administration Subcommittee holds budget hearings on the Canal Place Preservation and Development Authority, Workforce Development (DLLR), the University System of Maryland Office, and the UM Center for Environmental Science. 1pm, in 3 West, Miller.
• Senate Health and Human Services Subcommittee holds budget hearings on the State Board of Elections, the Office of Home Energy Programs (DHR), and the Infectious Disease and Environmental Health Administration (DHMH).  1pm in Amoss, Senate Office Building.
• House Education and Economic Development Subcommittee holds budget hearings on the Canal Place Preservation and Development Authority and Funding for Educational Organizations (MSDE).  3pm in room 120, House Office Building.
• House Public Safety and Administration Subcommittee holds budget hearings on the Judiciary, Office of the Attorney General, and the Department of Veterans Affairs.  3pm in room 150, House Office Building.
• House Transportation and the Environment Subcommittee holds budget hearings on the State Highway Administration (MDOT) and the Maryland Transportation Authority.  3pm in room 145, House Office Building.

Tuesday, February 28^th

• Senate Budget and Taxation Committee holds budget hearings on the Department of Information Technology, the State Retirement Agency, Maryland Supplemental Retirement Plans, and the Cigarette Restitution Fund.  1pm in 3 West, Senate Office Building.
• House Ways and Means Committee holds hearings on a number of proposed revenue measures beginning at 1pm in the House Office Building, including:
•  HB 784 (SB 249), which would reinstate the 6.25 percent income bracket for millionaires.  MBTPI supports this bill. [UPDATE: This hearing has been postponed to March 6th.] 
•  HB 836 (SB 523) would partially repeal the 1997 Tax Cut, by adding a quarter of a percent to each of the four existing tax brackets (over $3,000 of taxable income).  This bill is intended as an alternative to the Governor’s plan to reduce deductions for upper income taxpayers.  Unlike the governor’s plan this does not generate revenue for the counties.  MBTPI prefers the Governor’s proposal, but would support HB 836/SB 523 over the equivalent amount of damaging budget cuts. 
• HB 764 (SB 739) would require reviews of a wide range of tax credit programs every five years in order for the credits to be continued. MBTPI also supports this measure.   
• House Appropriations Committee holds a hearing on the revenue outlook for counties.  This will be particularly interesting in light of the debate over splitting teacher pension costs between the state and the counties.  1pm in the House Office Building.
• House Economic Matters Committee holds a hearing on the Rental Purchase Agreements Best Practices Act (HB 997/SB 778).  MBTPI supports this bill, which would force rent-to-own businesses to be more transparent with their customers and promote fairer business practices. A fiscal note is available. 1pm in the House Office Building.

Wednesday, February 29^th

• Wednesday will be a long day in the Senate Budget and Taxation Committee. The committee holds a hearing on the Budget Reconciliation and Financing Act (or BRFA, SB 152/HB 87).  The House Appropriations Committee will hold its hearing on the BRFA on Thursday.  MBTPI supports the Governor’s revenue proposals as responsible measures to support vital services.  However, revenue enhancements should be paired with an increase in the refundable state earned income tax credit (HB 331/SB 943). The committee will also hold hearings on:
• Reinstating the millionaire’s tax (SB 249/HB 784).  MBTPI supports this bill. 
• Partially repealing the 1997 tax cut (SB 523, see description for HB836 above).  MBTPI supports this bill.
• A constitutional amendment on the budget process.  SB 837 would allow the legislature to shift funds between budget items, so long as the total amount is not increased, and would give the Governor a ‘line item veto’ on items increased.   This amendment would make Maryland legislators full partners in the budget process. MBTPI supports this bill. 
• A bill to reduce the Board of Public Works (BPW) power to cut appropriations.  SB 838 would limit the BPW to cuts totaling 10 percent of the approved budget, down from 25 percent.  The bill would also require proposed cuts to be presented to the legislative budget committees a week prior to BPW consideration.
• House Health and Human Resources Subcommittee holds budget hearings on the Office of the Chief Medical Examiner (DHMH), the Office of Preparedness and Response (DHMH), and the Department of Housing and Community Development.  1pm in room 150, House Office Building.
• House Public Safety and Administration Subcommittee holds budget hearings on the State Treasurer, the Office of the Public Defender, the Department of Information Technology, the Department of State Police, and the Maryland State Board of Contract Appeals. 1pm in room 120, House Office Building.
• House Transportation and the Environment Subcommittee holds a budget hearing on the Department of the Environment.  1pm in room 145, House Office Building.

Thursday, March 1^st

• Senate Education, Business, and Administration Subcommittee holds budget hearings on the University of Maryland-College Park, University of Maryland-Baltimore, and Coppin State University.  1pm in 3 West, Senate Office Building.
• Senate Health and Human Services Subcommittee holds budget hearings on the Department of Housing and Community Development, the Office of the Chief Medical Examiner (DHMH), and the Office of Preparedness and Response (DHMH).  1pm in Amoss, Senate Office Building.
• Senate Public Safety, Transportation, and Environment Subcommittee holds budget hearings on the Office of the Attorney General, the Department of State Police, the Maryland Energy Administration, and the Maryland Automobile Insurance Fund.  1pm in Schweinhaut, Senate Office Building.
• House Appropriations Committee holds its hearing on the BRFA (HB 87/SB 152), which MBTPI supports, along with an increase in the refundable state earned income tax.  See first item in Wednesday above.
• House Environmental Matters Committee holds a hearing on modifications to the Neighborhood and Community Assistance Program (HB 731).  This bill increases the amount of contributions eligible for a 50 percent state tax credit from $2 to $5 million (increasing state costs from $1 to $2.5 million) and allows preference to be given to projects in Neighborhood Conservation Districts designated by the US Department of Housing and Urban Development.  This is a limited but valuable source of funds for community level service programs which MBTPI has traditionally supported. 1pm in the House Office Building.

Friday, March 2^nd

• House Appropriations Committee holds budget hearings on the Department of Juvenile Services and the Governor's Office for Children & Interagency Fund.  1pm in room 120, House Office Building.
• Senate Education, Business, and Administration Subcommittee holds budget hearings on the Department of Business and Economic Development, the Maryland State Board of Contract Appeals, the Maryland Public Broadcasting Commission, and MHEC Scholarship Programs. 1pm in 3 West, Senate Office Building.
• Senate Health and Human Services Subcommittee holds budget hearings on the Maryland Insurance Administration and the Medical Care Programs Administration (DHMH). 1pm in Amoss, Senate Office Building.
• Senate Public Safety, Transportation, and Environment Subcommittee holds budget hearings on the Maryland Transit Administration (MDOT) and the Washington Metropolitan Area Transit Authority. 1pm in Schweinhaut, Senate Office Building.

Details of revenue proposals emerging

We are now getting some details about several of Governor O’Malley’s revenue proposals. 

Sales Tax on Digital Products 

Part of the Budget Reconciliation and Financing Act of 2012 (or BRFA), the governor's proposal would require merchants to collect the state sales tax on purchases of digital products such as music, videos, electronic books, ringtones, and newspapers based on where the purchaser is, regardless of where the merchant is located.  While online purchases of physical goods from out of state merchants are legally subject to tax, they are collected directly from the taxpayer in what amounts to an honor system.  The governor’s proposal would treat digital (i.e. non-physical) goods as equivalent to their physical counterparts and place the burden of collection back on the merchant, but opponents worry about unintended consequences.  In the long run, this is an issue that requires federal action, but Maryland and other states are right to do what they can in the interim.

Flush tax

The flush tax funds the Bay Restoration Fund, which works to reduce pollution from wastewater treatment, and urban and agricultural runoff into the Chesapeake Bay.  Currently, wastewater treatment customers pay $2.50 per month and septic system owners pay $30 per year (the equivalent amount), regardless of how much water they use.  The Task Force on Sustainable Growth and Wastewater Disposal recommended tripling the fee by fiscal year 2015.  The governor’s proposal would double the revenue collected by moving to a consumption based system, charging $0.90 per 1,000 gallons for the first 2,000 gallons per month and $1.25 per 1,000 gallons thereafter.  Septic system users would see their fee double, to $60 per year.  There are some income-based exemptions.  The governor argues that the average fee would double, but some argue that the 2,000 gallon break between the high and low fee is too low.

Motor Fuel Tax and Income Tax

What we don’t have details on yet is the governor’s gas tax proposal.  We do know that it will probably raise the state gas tax between 5 and 15 cents per gallon, spread out over several years.  For the last twenty years, Maryland’s gas tax has been stuck at 23.5 cents per gallon, while fuel efficiency and the cost of infrastructure and maintenance keep rising. Adjusting for inflation, Maryland’s gas tax is now at its lowest level since the early 1980’s. Without an increase, it will soon be at levels not seen since the 1920’s.  The governor has also expressed some interest in indexing the rat e to inflation (it isn’t currently), but it is unclear how likely that is.

It is important to remember that the proposed increases for flush and fuel taxes would be dedicated to their specific purposes. They do not help with the state’s billion-dollar general fund revenue shortfall.  Keep an eye out for our report next week on the proposed changes to income tax deductions and exemptions.