Wednesday, May 16, 2012

Tax Increase and Budget Funding Bills Enacted – Session Ends

The House of Delegates gave final approval this morning to legislation increasing state and local taxes by over $300 million and a related budget funding bill that will require local school boards to pay a portion of teacher pension costs. The House and Senate have adjourned their special session, and Governor O’Malley is expected to sign the bills into law next week. Detailed information is available regarding SB 1301 (BRFA bill) and SB 1302 (Tax bill), including copies of the bills, fiscal notes and votes, and special session materials provided by the Department of Legislative Services.

Maryland employers will benefit from some aspects of the enacted legislation, including restored funding for higher education and the Biotechnology Tax Credit.  The Maryland Chamber also supported requiring local school boards to assume a portion of teacher pension costs as a means of containing state expenditures.

However, the following actions taken at the special session will cause Maryland to be a less competitive place to do business:

• Individual Income Tax Increase – Maryland’s top marginal individual income tax rate will increase to 8.95%, equaling the District of Columbia, and widening the tax rate gap with all surrounding states. Combined with a phase-out of personal exemptions, the bill will increase state and local individual income taxes by $278 million in FY 13. Overwhelmingly, business owners pay individual income taxes as sole proprietors, and owners of businesses organized as LLCs and S corporations.


• IWIF Raid – The BRFA bill allows the Governor to transfer $50 million from the Injured Workers’ Insurance Fund to the state general fund in FY 13, and additional unlimited amounts over the next 10 years based on a consultant’s study. The 21,000 Maryland employers that have built substantial reserves in IWIF through their workers compensation premiums will see those reserves siphoned off by the state for other uses.


• Recordation Tax on IDOTs – The cost of to obtain a loan will increase for small businesses as the county recordation tax will be imposed on indemnity mortgage deeds of trust of over $1 million.


• Repeal of Telecom Tax Credit – Maryland telecommunications companies will now have to pay real property taxes at rates 2.5 times all other property owners as a result of the repeal of a tax credit enacted originally in 1997.

For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address).

Tuesday, May 15, 2012

Tax Increase and BRFA Bills Near Passage

Governor O’Malley’s tax increase and BRFA bills sped toward enactment in day two of the General Assembly’s special session, as the bills cleared the Senate by wide margins (27–19 and 33–13) and received preliminary House approval.  Final action on the bills is expected tomorrow at a 10 a.m. House session. 

House action dominated today’s proceedings, with the Ways & Means Committee approving the tax bill (SB 1302) on a vote of 16–4, while the Appropriations Committee approved the BRFA bill (SB 1301) by a 17–8 vote.  The bills were debated on the House floor for over three hours this afternoon as opponents offered 14 amendments – all of which were rejected.  The bills will harm Maryland’s business climate by again increasing individual income tax rates on small business owners and raiding IWIF funds paid by employers. For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address) .

Monday, May 14, 2012

Tax Increase and BRFA Bills Rolling

The first day of the General Assembly’s special session played out according to script with Senate and House committees hearing brief testimony from dozens of witnesses on the tax increase and BRFA bills.  The Senate Budget and Taxation Committee approved the bills on nearly party line votes without any amendments.  The 3-bill package (SB 1301, B 1302, and SB 1303) quickly moved to the Senate floor, where the bills were debated, amendments were resisted, and the bills passed second reading without change.  See my earlier post for links to the bills and our testimony.

Tomorrow the Senate will come in at 10:30 a.m., at which time it is expected to pass the bills on 3rd reading.  The House will convene soon thereafter, assign the bills to the Appropriations and Ways and Means committees for brief hearings and votes, and then consider the bills on second reading. A final vote on the package of bills is expected in the House on Wednesday morning.  For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address).

Update May 15, 12:15 p.m.: On votes of 27-19 and 33-13, the Senate this morning gave final approval respectively to the tax increase (SB 1301) and BRFA (SB 1302) bills.  These bills are damaging by again increasing individual income tax rates on small business owners and raiding IWIF funds paid by employers.  Action now shifts to the House, which is expected to consider the bills in the Ways & Means and Appropriations committees this afternoon and later on the House floor.

Special Session Starts Shortly

The General Assembly returns to Annapolis today for a fast paced special session dedicated to enacting revenue bills that would avoid $512 million in state budget reductions for fiscal year 2013.  The Senate will convene at 10 a.m., followed by the House of Delegates at noon.  The Department of Legislative Services just released a report summarizing the fiscal impact of the Governor’s bills that will be introduced this morning. 

The Maryland Chamber will offer testimony this afternoon on both the Budget Reconciliation and Financing Act (BRFA) and the tax increase bill.  Our testimony will focus on opposing the proposed transfer of over $50 million in IWIF funds to the state general fund and the damaging effects of the proposed tax bill on Maryland employers.

We will post updates during the special session.  For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address).

Update May 14, 1:38 p.m. - The Senate Budget and Taxation Committee approved the BRFA and tax bills with no amendments. It was a party line vote, with the exception of Sen. Edwards voting for the BRFA bill. The bills will move to the Senate floor at 4 p.m. today.

Thursday, May 03, 2012

Special Session Likely to Start May 14

May 4 Update: The Governor made it official today. Special session will begin on May 14.

The General Assembly will likely return to Annapolis May 14 and 15 for a special session dedicated to enacting revenue bills that would avoid $512 million in state budget reductions for fiscal year 2013.  While the session dates are not yet official, consensus for the session among the Governor, Senate President, and House Speaker seems apparent.  We expect to see the following legislation of interest to employers reintroduced in a form close to the conference committee reports that failed on the last night of the 2012 regular session:

• Budget Reconciliation and Financing Act (BRFA) – This bill will make over $300 million of contingent budget reductions and fund transfers, including phasing-in over 4 years a share of teacher pension costs for local school boards.  This bill also contains a $50 million transfer of funds contributed by employers to IWIF to the state general fund.
• State and Local Revenue and Financing Act of 2012 – This bill includes a number of tax increases that collectively would raise $261 million for the state general fund.  The largest revenue increase would result from increased income taxes on individuals with incomes over $100,000 by altering tax brackets and phasing out the personal exemption.  See here for details. Other tax measures in the bill would extend the recordation tax to indemnity mortgage deeds of trust (IDOTs) of over $1 million and repeal an income tax credit for telecommunications companies.

We will post frequent updates as the special session gets underway.  For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address).

Tuesday, April 24, 2012

Leaders Eye Two Special Sessions

Annapolis is abuzz with special session speculation. Here’s a quick update.

Governor Martin O’Malley met with House Speaker Michael Busch and Senate President Thomas V. Mike Miller in Annapolis this morning. No date has been set, but we’re told that they are looking at the week of May 14 for a one or two day session to address budget and tax issues. The Baltimore Sun and Washington Post are reporting that they are also considering a second special session in August to deal with the expansion of gaming.

The budget and tax package to be considered in May is expected to be very similar to the one that was moving through the legislature on the final day of the session (SB 152 and SB 523). The plan would have transferred funds from IWIF, shared teacher pension costs with county school boards, raised taxes, and taken other cost containment measures.

The main tax increase that is expected to be part of the plan is an increase in individual income tax rates for individuals with incomes over $100,000, though the Senate is expected to push a plan to increase the rate for individuals earning more than $75,000.

Issues like the gas tax increase and expansion of sales tax to services are not expected to be part of the special session. We’ll provide further updates as details become available. 

Read More

• Baltimore Sun: Annapolis leaders discuss 2 special sessions
• Washington Post: Maryland looking at two special sessions
• WBAL: Gov. O’Malley: ‘We Had A Good Conversation’
• The Examiner: New Maryland Senate plan would raise income taxes at $75k

Tuesday, April 10, 2012

2012 General Assembly Session Recap

The 2012 Maryland General Assembly session came to a chaotic end last night, with the failure of major tax and revenue bills raising the prospect of significant cuts in the state budget. However, pressure is already building for the Governor to quickly call the General Assembly back into special session to enact a revenue package that would avoid the cuts, and possibly consider other issues.

During the 90-day session the Maryland Chamber took positions on 146 of the 2,580 bills introduced. You can view our session recap here. View all Maryland Chamber bill positions here.

Friday, April 06, 2012

April 23: Small Business Townhall Meeting

The Governor’s Commission on Small Business will hold a town hall meeting on Monday, April 23, at the Weinberg Center for the Arts in Frederick beginning at 10 a.m. The event is a free and open forum for Maryland’s business community.

Attendees will have the opportunity to meet the members of the Small Business Commission, discuss ways for government and business community to promote job creation, and dialogue directly with State Agency leaders and economic development officials. HR Anew President and Chief Executive Officer Deborah Stallings, SPHR
represents the Chamber on the Commission.

Representatives from a number of state agencies are expected to attend, including the Maryland Department of Business and Economic Development, Department of Labor Licensing and Regulation, Department of General Services and more.

You are also invited to submit questions when you register. Learn more and register here.

Wednesday, April 04, 2012

Report Outlines Maryland’s Most Vital Transportation Projects

TRIP, a Washington, DC based national transportation research organization, released a report today that identifies and ranks Maryland’s most needed transportation projects. The projects identified are crucial to improving economic growth and quality of life in Maryland.

“The newly released TRIP economic report is further proof of the need for additional funding to appropriately address Maryland transportation needs,” Maryland Chamber Vice President of Government Affairs Allyson Black said. “Investing in our transportation infrastructure will create jobs, help keep Maryland competitive and enhance mobility and quality of life in the state.”

The most needed transportation improvements in Maryland include projects to build, expand or modernize the state’s highways, bridges and transit systems. According to TRIP, the top ten most needed projects for Maryland’s economic growth are:

1. Widening of I-95/I-495 in Prince Georges and Montgomery Counties

2. Replacing the Governor Nice Bridge in Charles County

3. Widening and bridge rehabilitation and replacement on I-695 in Baltimore

4. Construction of the Purple Line from Bethesda to New Carrolton

5. Widening and Interchanges on MD 5 in Prince George’s County

6. Widening MD 295 from four lanes to six

7. Red Line Light Rail Transitway from Woodlawn to Bayview Medical Center

8. Widening US 29 Northbound

9. Interchange construction at MD 97 and MD 28 in Montgomery County

10.Interchange construction at MD 210 in Prince George’s County

“Investing in these transportation projects will be key to long term economic growth and quality of life in Maryland,” said Will Wilkins, executive director of TRIP. “Private sector jobs will be created in the short term, resulting in infrastructure improvements that the state’s residents, businesses and tourists can use for decease.”

View the entire TRIP study online here.

Thursday, March 29, 2012

Senate Trims Tax Credit Evaluation Bill

The Senate gave preliminary approval to a slimmed down version of legislation requiring the periodic review and evaluation of many state tax credit programs. As originally introduced, SB 739 and HB 764 would have grouped 31 state tax credits into 5-year review cycles, and automatically terminated programs that were not reenacted. The House passed HB 764 last week after removing the automatic tax credit termination provision. 

The Senate further pared down SB 739 by limiting the review to the 8 largest tax credit programs, including the earned income credit, enterprise zone credit, R&D credit and biotech credit, among others. The Senate also specified that for any of the credit programs with an existing sunset date, the review would take place in the year before the sunset. The Maryland Chamber had opposed the bills in their original form, but takes no position on the legislation since the automatic termination provisions have been removed. A little over a week remains to resolve the Senate and House differences on the bills. See our earlier blog posts on this issue here, here and here.  For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address).

Bill Would Shield Union Communications from Disclosure

Legislation (SB 797/HB 1042) is moving rapidly through the Maryland General Assembly that would prohibit a labor organization or an agent of a labor organization from being compelled to disclose information acquired from an employee in the course of the agent’s professional duties.

Currently, a union has the same duty to furnish information as that of an employer. The National Labor Relations Act (NLRA) regulates a union’s duty to furnish information to an employer. In some instances, a union must provide information or documentation to an employer that it receives directly from an employee, even if the employee does not consent to the disclosure. If the union refuses to turn over the information, it violates the NLRA. This bill would contradict current law and prohibit a union from furnishing information or documentation it received directly from an employee in support of his or her grievance to an employer. 

The bill would ultimately attempt to inappropriately elevate a union-employee privilege to one of the oldest privileges known to common law – the attorney-client privilege. 
 
The Senate passed SB 797 by a vote of 34-12. The bill will be heard by the House Judiciary Committee today. The Maryland Chamber opposes this bill, and urges you to contact your legislators and communicate your opposition to this legislation.

Wednesday, March 28, 2012

BRFA Process Has Gotten Out of Hand

The use of Budget Reconciliation and Financing Acts (BRFA) by the Governor and General Assembly during the past 20 years has damaged the transparency of the legislative process and violated the intent of the single subject rule of the Maryland Constitution. The public interest would be better served by returning to the process of passing separate legislation for contingent budget issues.

Although most legislators do not recall an era without BRFA bills, our state managed to have budgets enacted for over 200 years without such a device. The normal budgetary process until the early 1990s was that the Governor would submit a budget, and if the amount of the budget exceeded projected revenues, specified appropriations would be contingent on the enactment of separate legislation. If the separate legislation failed, the contingent appropriations would also fail.

In the early 1990s the Attorney General blessed the process embodied by the BRFA bill, which consolidates in one bill dozens of unrelated issues that are intended to reduce state expenditures or raise revenues necessary to balance the budget. Most legislative sessions of the past decade have seen a BRFA bill, and the bill has grown to large proportions. 

The Budget Reconciliation and Financing Act of 2012 was introduced with 48 pages, and had a 116-page fiscal note (complete with a table of contents).  According to the Department of Legislative Services, the bill encompassed 55 actions: 11 fund balance transfers, 15 general fund enhancements, 1 redirection of dedicated revenues, 11 fund swaps and cost shifts, 5 mandate relief provisions, and 3 other measures. The BRFA bill has grown to include provisions that in some cases have little to do with balancing the budget, but are loaded onto the legislation as a “must pass” bill.

Maryland’s constitution has required since 1851 that “every Law enacted by the General Assembly shall embrace but one subject.” The purpose of this requirement has been to allow legislators to consider each issue independently on its own merits. It also affords the public a greater opportunity to provide meaningful input on each issue pending before the General Assembly.

We respectfully suggest that the BRFA process has gotten out of hand. It is time to return to the good budgetary practices of an earlier era, with separate legislation for contingent budget items.

Today, I joined Del. Addie Eckardt (R-Dist. 37B) before the House Appropriations Committee to support HB 1413, which would propose a constitutional amendment that would require that statutory changes necessary to balance the state budget be enacted through separate legislation for each budget item.

Early Voting Ends Tomorrow

Tomorrow is the last day to take advantage of early voting for the April 3 primary election.

Any registered voter who is qualified to vote in the April 3 Primary Election may vote early. Early voting centers will be open from 10 a.m. to 8 p.m. today and tomorrow.

For more information and to find an early voting center near you, visit http://www.mdearlyvote.com.

Tuesday, March 27, 2012

Health Exchange Bills Pass Senate and House

Yesterday the Maryland Senate and House passed nearly identical 76-page bills to further implement the state Health Benefit Exchange. Although a wide range of stakeholders supported this legislation, which was sponsored by Governor O’Malley, dozens of amendments had been requested regarding the role of brokers, the licensing and certification of Exchange Navigators, and the rules governing the Exchange and private insurance markets.  Administration representatives worked diligently to resolve the concerns. See some of our earlier posts regarding these issues.

The Maryland Chamber also supported the legislation, and was successful in persuading the committees to tighten provisions authorizing the Exchange Board to selectively exclude health insurance carriers from the Exchange after 2016. Before exercising such authority, the Exchange will have to submit a detailed plan to the respective Senate and House committees before a General Assembly session, and wait 90 days before proceeding. This will allow the General Assembly to intervene in the event that the Exchange takes an action that unduly restricts competition.  The bills should pass shortly.  For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address).

Senate Approves R&D Credit Expansion

Yesterday the Senate unanimously approved SB 570, which would triple the funding for the state’s R&D income tax credit. Although authorized funding would increase from $6 million to $18 million for credits certified after this year, provisions of the bill that would have allowed small businesses to receive a refundable credit were deleted from the legislation. 

The program has provided credits reimbursing 284 companies for qualifying research and development costs since the credit was created in 2000.  The Senate bill and the House crossfile (HB 943) await action in the House Ways & Means Committee.  For further information contact Ron Wineholt at .(JavaScript must be enabled to view this email address).