FROM THE HALLS | A Maryland business legislative update | August 2019

In this issue…


MARYLAND CHAMBER SPONSORS MACo SUMMER CONFERENCE

In mid-August, leaders from Maryland’s counties, and other officials from government across the state, visited Ocean City to attend the Maryland Association of Counties 2019 Summer Conference. The theme, “Winds of Change,” focused on the social, economic, and demographic shifts affecting the state’s 24 major jurisdictions. The Maryland Chamber was proud to be a sponsor of the event and appreciated the opportunity hear Governor Hogan speak.

In Governor Hogan’s closing remarks to conference attendees, he focused on several topic areas including: 1) addressing violent crime, 2) education funding, 3) school construction, 4) rural broadband access, and 5) clean and renewable energy.

As it relates to addressing violent crime, the Governor continued his push for proposals to address the issue in Baltimore City. He reiterated his support for legislation to remove repeat violent offenders from the streets.  He called on policymakers to impose tougher sentences for those who are repeat offenders of violent crime.

Drawing the most attention were the Governor’s comments regarding the funding and implementation of programs put forth by the Kirwan Commission.  He stated that he will not support big tax increases to pay for a major education funding plan, and he noted the concern local officials have expressed regarding the associated costs of said plan.  He called the proposals “well-meaning” but “half-baked” and “fiscally irresponsible.” Hogan went on to say that fully funding Kirwan would require a 39% increase in personal income tax, 89% hike in the sales tax and a 535% boost in property taxes, according to his budget office.  This would amount to approximately $6,200 in new taxes for the average Maryland family over the next five years, he said.

On the topic of education, the Governor announced that he will again challenge the General Assembly to pass his school construction plan—a proposal to provide $2 billion in additional dedicated funding to assist counties with school construction.  He went on to say that the $2 billion will fulfill nearly every single local construction request in the state.

Further, the Governor announced an additional $10 million in funding to provide access to high-speed internet in rural communities. That amount is the first installment of what will be $100 million to reach approximately 225,000 Marylanders who currently do not have access to reliable internet service.

Lastly, the Governor touted the executive order he had signed earlier in the week, calling for the establishment of a Governor’s Task Force on Renewable Energy Development and Siting.  He reiterated his commitment to working with local leaders on a balanced approach to solar and wind energy development that minimizes impacts to environmentally sensitive areas in the state.

 


KIRWAN COMMISSION

Recommendations to overhaul Maryland’s education system put forward by the Commission on Innovation and Excellence in Education, nicknamed the Kirwan Commission, continue to generate buzz and speculation both in Annapolis and statewide.  At issue is how the state and Maryland’s counties are going to cover the $3.8 billion price tag associated with its implementation. It is widely thought the debate over Kirwan funding will dominate the 2020 legislative session.

By way of background, the commission has called for increasing teacher pay and providing full-day prekindergarten for low-income 3-and 4-year-olds, among other things.  The total cost of implementing the Kirwan recommendations rounds out at $3.8 billion per year, once all programs are phased-in over a decade.                          

During his closing remarks at the Maryland Association of Counties conference, Governor Hogan referred to the Kirwan commission as “well-meaning,” but “half-baked” and “fiscally irresponsible.”  Further, he warned the audience that a tax increase of $6,200 per family would be needed to pay for the plan. He also stated that his budget office has estimated that the state would need to raise the personal income tax by 39%, the sales tax by 89% or the property tax by 535% to pay for Kirwan.

Despite the Governor’s comments, Democrats vowed to move forward with finding funding for Kirwan’s implementation.  According to Democratic leaders, routine growth in the state budget, through increasing population, higher salaries and housing prices, will add billions to the state’s budget for education over the next decade without any increases in taxes.  Still, Kirwan recommendations will cost approximately 30% more than projected growth can cover.

There have been any number of ideas and proposals floating around relating to covering the funding delta.  Some new revenue sources for the state have been proposed, like sports betting or the legalization of recreational marijuana.  As well, last year, the Supreme Court issued a decision allowing sales tax to be applied to more online transactions, and the comptroller’s office anticipates those collections will be on the rise over time.  It has even been proposed that the state consider extending the professional services tax.

As it relates to the legalization of recreational marijuana specifically, analysts are warning states to be cautious in their estimates for consistent revenue. Recently, the Pew Charitable Trusts released a report concluding that market uncertainties continue to challenge revenue forecasters and policymakers. Pew concluded: “The difficulty in forecasting revenue is compounded by the fact that states have only recently begun to understand the recreational marijuana market: the level of consumer demand for recreational marijuana products, the types of users and how much they might pay for the drug, and competition with the black market. States have learned some lessons but continue to grapple with unknowns. While forecasters and budget staff gain more information, state officials can avoid budget shortfalls and keep program funding stable by being prudent in how they use these new collections. States should be careful to distinguish between marijuana revenue’s short-term growth and long-term sustainability. While these new dollars can fill immediate budget needs, they may prove unreliable for ongoing spending demands. Policymakers should look to other, more familiar sin taxes for lessons on how to manage marijuana tax revenue most effectively.”

The Maryland Chamber of Commerce will continue to monitor the debate over Kirwan funding, and stands ready to work with stakeholders to identify funding solutions that do not unintentionally harm the employer community, which has long-demonstrated its commitment to developing the next generation workforce.

 


EXECUTIVE ORDER ON CLEAN & RENEWABLE ENERGY

On August 14, Governor Hogan signed Executive Order 01.01.2019.09 establishing the Governor’s Task Force on Renewable Energy Development and Siting. Citing his commitment to environmental stewardship, the Governor charged the Task Force with developing consensus-based recommendations regarding the siting of new solar and wind energy projects in Maryland, among other things, and for studying and making recommendations for the following:

The Task Force has been directed to hold publicly announced meetings and, by December 1, 2019, submit an interim report describing its initial work and make preliminary recommendations for legislation in the 2020 legislative session. The Task Force is to submit its final report within one year of the date of the Executive Order.

In his press release announcing the Order, the Governor also expressed his intent to submit the Clean and Renewable Energy Standard (CARES) plan to the General Assembly on the first day of the 2020 legislative session. As you may recall, in May, the Governor outlined his energy strategy to set Maryland on a path to achieve 100% clean electricity by 2040.


RURAL BROADBAND EXPANSION

On August 19, the Hogan Administration announced the availability of nearly $10 million in funding intended to expand rural broadband access to 225,000 Marylanders living in rural communities. In his announcement, the Governor noted that the appropriated $9.9 million is the first installment of a five-year $100 million initiative that will provide affordable and reliable high-speed internet services to rural areas in the state.

The initiative builds upon earlier efforts made by the Office of Rural Broadband, which was created by executive order in 2017, and is housed in the Maryland Department of Housing and Community Development.  It was established to expand broadband capabilities to unserved and underserved areas of the state. It has already successfully implemented several large projects.


MDCC SECOND CHANCE TASK FORCE

Over the course of the last several months, the Maryland Chamber Foundation has been actively engaged in seeking ways to address the challenges faced by the ex-offender community as these individuals prepare for and seek employment post-incarceration. We believe that addressing the issues associated with Second Chance hiring and finding pathways for employment for the previously incarcerated is socially responsible, as well as a workforce development and cost savings opportunity. Following the conclusion of the last legislative session, we convened a group of interested stakeholders, including the business community and justice reform advocates, in order to investigate the proactive steps to be taken to increase employment and reduce recidivism for this vulnerable population. Thus far, our discussions have centered on the following topics: 1) education and training during and post-incarceration, and 2) employer protections and incentives to hire.

To learn more details of the actions of the Second Chance Task Force, click here.


CHANGES IN THE GENERAL ASSEMBLY

In early August, two members of the General Assembly announced that they would be leaving to accept posts within the administration of Baltimore County Executive Johnny Olszewski Jr.

Delegate Eric Bromwell will serve as Baltimore County’s first opioid strategy coordinator.  He has represented the northeastern part of the county since 2003 and has previously co-chaired a General Assembly work group that studied opioid issues.

Delegate Stephen Lafferty will serve as Baltimore County’s chief sustainability officer.  In this position, he will focus on climate change, green energy and development.  He has represented the Towson area since 2007 and has previously served on a number of commissions and work groups related to environmental issues.

Upon their official resignations, the Democratic Party’s county central committee will be tasked with appointing replacements to serve the remaining three years on their current terms.  Those recommendations will be sent to the Governor, who ultimately makes the appointment.


FEDERAL UPDATES | TRADE WAR WITH CHINA

The escalating trade war between the United States and China is already having damaging effects on American consumers and businesses.

In 2018, following its investigation of China’s practices relating to forced technology transfer and intellectual property, the Trump administration began imposing tariffs, which now total approximately $250 billion, on imported Chinese products. Consequently, China has retaliated with a total of $110 billion in tariffs on American-made products.

The Trump tariff timeline has played out as follows:

The Trump administration made it official, as of Wednesday, to levy tariffs, as of September 1, on 15 percent of all goods imported from China not yet subjected to Section 301 tariffs.  The U.S. Trade Representative’s office said in an official notice that collections of a 15 percent tariff will begin at 12:01 a.m. EDT Sunday on over $125 billion of targeted goods from China.  U.S. Customs and Border Protection will also start collecting a 15 percent tariff on Dec. 15 on the remainder of the $300 billion list.

The Administration has maintained that the trade war with China will not hurt American consumers. However, the analysis says otherwise.  According to the U.S. Chamber of Commerce, the trade war will hit American consumers and businesses – including manufacturers, farmers, and technology companies – with higher costs on commonly used products and materials. As a result, it stands to slow the United States’ recent economic resurgence. Tariffs imposed on Chinese goods is the latest in a string of potentially economically crippling trade developments, including already implemented tariffs on steel and aluminum and the proposed tariffs on cars and auto parts.

According to a report by JP Morgan Chase, the tariffs already imposed on China by the Administration are estimated to cost the average American household $600 per year. This will rise to $1,000 when Trump carries through on his plan to levy tariffs on another $300 billion of U.S imports from China. The report goes on to say that the tariffs on China will wipe out most of the benefits households received from the passage and implementation of the Tax Cuts and Jobs Act of 2017. What’s more, according to a study commissioned by the Consumer Technology Association and National Retail Federation, 455,000 American jobs will be put at risk by U.S. tariffs on $150 billion of imports from China and subsequent Chinese retaliation.

What’s next?
This summer, with additional tariffs coming from the U.S., China announced that it would impose tariffs on an additional $75 billion worth of U.S. goods by the end of the year.  In response, President Trump announced that $250 billion in Chinese goods that he had intended to tax at 25 percent starting in September would now be taxed at 30 percent starting on October 1. Further, he announced that another $300 billion in goods being taxed at 10 percent would attract a 15 percent rate. This announcement triggered a drop in U.S. markets and stoked further concerns about the global economy being headed for a recession.

Clearly, the escalating trade war with China will persist in negatively impacting American consumers and businesses. The Maryland Chamber of Commerce will continue to monitor this situation and report relevant updates and information to its membership.


Written by Ashley Duckman, Vice President Government Affairs, Maryland Chamber of Commerce.

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