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

In this issue…


STATE UPDATES


SENATE LEADERSHIP ANNOUNCEMENTS

On October 24, longtime Maryland Senate President Mike Miller announced that he would not seek reelection as the body’s presiding officer when the General Assembly reconvenes in January 2020. Following a closed-door meeting of the Senate’s Democratic caucus, Miller, who has been battling cancer since last year, told reporters that his health has made it too difficult to keep up the demands required of the leadership role.

Miller will remain President until the start of the next legislative session, when he will return to his role as a senator. He has said that he will focus on spending time in his district and will continue to fight to increase education spending and preserve the Preakness Stakes in Maryland. Miller had already previously announced that he will not seek re-election in 2022.

Senate Democrats decided unanimously to name Senator Bill Ferguson as Miller’s successor. Ferguson is a former teacher from Baltimore who has been a leading voice in support of Kirwan Commission recommendations to increase education funding and revamp Maryland’s public-school system. As Senate President, Ferguson will have a substantial role to play in moving the massive expansion of school spending through the legislature.

Ferguson is the only Democratic candidate for the leadership post. Republicans in the Senate are not expected to oppose his nomination. When asked for comment, Senate Minority Leader J.B. Jennings noted that he and Ferguson were elected to the Senate in the same year and that they have a very strong working relationship.

The Maryland Chamber of Commerce has expressed its gratitude to Senator Miller for his steadfast and enthusiastic service as president of the Maryland Senate. We join with fellow Marylanders to celebrate his historic, 33-year presidency and his many contributions as a legislator and business owner. We wish him the very best as he focuses on his health and look forward to continued collaboration with Senate leaders.


HOGAN APPOINTMENTS TO HOUSE OF DELEGATES

On October 9, Governor Larry Hogan announced the appointments of two individuals to fill vacancies in the Maryland House of Delegates. Following recommendations by the Baltimore County Democratic Central Committee, Hogan nominated Carl Jackson to fill the vacancy in District 8 and Cathi Forbes to the vacant seat in District 42A.

Jackson is an analyst at the University of Maryland School of Social Work. Forbes is a mediation coordinator for the Orphan’s Court for Baltimore County.

The seats had been vacant since early August, when two members of the General Assembly announced their departure to accept posts within the administration of Baltimore County Executive John Olszewski Jr.


KIRWAN COMMISSION UPDATE

Debate and speculation over how to fund the recommendations set forth by the Kirwan Commission continues to unfold as the 2020 Legislative Session looms.

On October 15, members of the Commission’s funding workgroup released proposed formulas to show how the associated price tag would be split between the state and local governments. Under its proposal, by 2030, funding formulas would require the state government to spend $2.8 billion, with an additional $1.2 billion coming from local governments—a total of $4 billion annually.

The below chart outlines the proposed increases for local governments over a 10-year period:

When looking at the chart, it is important to note the following points:

It remains to be seen how state and local governments will pay for the increased spending.

Governor Hogan stated the following after the workgroup released its proposal in October:

Unfortunately, the Kirwan Tax Hike Commission is hellbent on spending billions more than we can afford, and legislators are refusing to come clean about where the money is going to come from. Even after more than three years of meetings, there is still no clear plan whatsoever for how either the state or the counties will pay for this massive price tag.

The full commission will meet on October 30 to discuss the workgroup’s proposal. From there, the panel will roll out recommendations to be considered by the General Assembly during the upcoming Session. The Commission is scheduled to meet again on November 12 before voting on final recommendations on November 21.

Recognizing that funding proposals are still in development, the Maryland Chamber of Commerce continues to stand ready to work with stakeholders to identify solutions. Utilizing input from MDCC members, Chamber staff is currently working on a statement and communications plan that will reflect the business community’s deep and longstanding commitment to education while recognizing that dedicated funding sources that do not unintentionally impede economic growth or create barriers for job creators are needed.

Meanwhile, for the last several months, Strong Schools Maryland has been engaging members of the business community to encourage participation in the group’s Take 10 effort. Because specific funding proposals have not yet been formally unveiled, the Maryland Chamber of Commerce would encourage its members to exercise caution in engaging in this effort before thoroughly and fully understanding how the recommendations put forth by the Kirwan Commission are going to be paid for.


PAID FAMILY AND  MEDICAL LEAVE

On October 16, the General Assembly Joint Committee on Children, Youth and Families held an informational hearing on paid family and medical leave. The hearing was not intended to focus on a specific piece of legislation. Instead, legislators heard from panelists who provided information about progress being made on this issue in other states, as well as from a panel of advocates who shared their views on its importance. An archived webcast of the hearing can be found here:

Other legislators in attendance included: Senator Benson, Senator Carozza, Senator Eckardt, Senator Nathan-Pulliam, Delegate Ebersole.

The following is a summary of the hearing, provided by the Maryland Chamber:

David Smulski from the Department of Legislative Services provided an overview of the activities of the Task Force and its subsequent report. He noted that the report is 2 years old and the data that was utilized is older than that. The final report is linked here. Smulski went on to discuss the original bill language submitted on this topic in 2016. He noted that in last year’s language, HB 341, the General Assembly incorporated many recommendations of the Task Force and made other additions, such as expanding definitions to add “chronic conditions,” providing no local preemption, outlining kinship care, outlining funding that was to be via an employer/employee split to be determined later by the Maryland Department of Labor.

Delegate Kelly acknowledged that representatives from the Maryland Chamber of Commerce and NFIB were in the room and that we had been engaged on this topic. She expressed a willingness to work with the business community to address concerns as we approach the legislative session.

Federal legislation and policies in other states related to paid family and medical leave were discussed next. The representative from MomsRising provided an overview of her organization, which is a grassroots entity charged with promoting family economic security. She discussed work being done at the federal level–this year, U.S. Representative Rosa DeLauro and Senator Kirsten Gillibrand introduced the FAMILY Act, a bill which would create a national paid family and medical leave program. She went on to highlight that 9 states have adopted paid family and medical leave programs since 2002: California, New Jersey, Rhode Island, New York, the District of Columbia, Washington, Massachusetts, Oregon and Connecticut. She noted that she expects action in other states during upcoming legislative sessions in 2020, including in Colorado and Maryland.

Delegate Ebersole asked how other states had addressed the “ramp up” time needed to build out the fund. Delegate Kelly responded that last year’s draft legislative language calls for one year of ramp-up time before recipients can begin to draw from the fund.

The following organizations provided testimony on the impacts of paid family and medical leave:

Senator Eckardt inquired about the impacts to small businesses as things like sick/safe and $15 minimum wage have layered on top of small businesses over the past several years.

Senator Carozza encouraged continued engagement with the Maryland Chamber of Commerce and NFIB, and recognized the need to weigh the impacts on small businesses.


MARYLAND DRAFT PLAN TO ACHIEVE CLIMATE GOALS

This month, the Maryland Department of the Environment released its plan to reduce greenhouse gas emissions by more than 40% by 2030.

In 2016, Governor Hogan signed into law the Greenhouse Gas Emissions Reduction Act—Reauthorization, and, in doing so, expanded on an original statute to require that Maryland achieve a 40% reduction in greenhouse gas emissions from 2006 levels by 2030. As required by law, the Maryland Department of the Environment was directed to develop a statewide greenhouse gas reduction plan to meet that goal.

Released this month, the draft plan includes more than 100 measures to reduce greenhouse gas emissions economy-wide. Key elements of the plan include:

MDE will undertake a public process to seek comment on the draft plan. Public engagement meetings will be scheduled throughout the state. Comments on the draft plan can be sent to: climate.change@maryland.gov.

On November 15, the Maryland Chamber of Commerce will be facilitating its annual meeting with the Maryland Department of the Environment. Participants will hear from Secretary Ben Grumbles as he identifies the regulatory and legislative priorities of the Department and discusses the specifics of the draft plan. Additional information, including a link to register to participate, can be found here.


MARYLAND DEPARTMENT OF COMMERCE AUDIT – LEGISLATIVE HEARINGS UPDATE

As outlined in September’s legislative update, state auditors released a report finding that the Maryland Department of Commerce is lacking in the oversight needed to verify that businesses receiving certain economic incentives from the state are complying with specified requirements.

Auditors reviewed records dating from July 2014 through December 2017. Through their review, auditors determined that the Department failed to ensure that recipients of incentives complied with state regulations and requirements. The report specifically identified issues related to loans from two programs: One Maryland Tax Credit program and the Biotechnology Investment Tax Credit.

As a result, state legislators held two hearings in October to review the findings of the audit and proposed recommendations.

On October 15, the Senate Budget and Taxation Committee received testimony from the Office of Legislative Audits, as well as Maryland Commerce Secretary Kelly Schulz. An archived webcast of that hearing can be found by clicking here.

On October 29, the Joint Committee on Audit and Evaluation held a hearing to examine several recently released audits, including audits of the Maryland Technology and Development Corporation (TEDCO), Maryland Department of Commerce, and Maryland Department of Health’s Developmental Disabilities Administration.

Presiding over the hearing were joint-chairs Senators Craig Zucker and Delegate Shelly Hettleman. Other legislators in attendance included: Senators Eckardt, Edwards, Hester, Kagan, Peters and Ready, as well as Delegates Arentz, Cassilly, Chang, Haynes, Jackson, Valentino-Smith and Young.

The Office of Legislative Audits presented the following conclusion about their review of the Department of Commerce:

DOC should establish adequate procedures and processes for verifying compliance with critical requirements established in law, in regulation, and/or by written agreement, for participation in its financing programs and incentives. Critical requirements to be independently verified include requirements for creating and maintaining a specified number of jobs, providing for matching funds, using State funds for acceptable purposes and verifying lender claims for payment.
With respect to small, minority and women-owned businesses, DOC should establish an effective process for ensuring:
-fund manager agreements include details regarding all critical loan processing procedures,
-fund manager compensation was proper, and
-data reported by fund managers regarding efforts to meet program goals were accurate.
DOC should establish effective controls over its purchasing and disbursement transactions and the assignment of system access capabilities for disbursements processed through the State’s automated accounting system.

In her written testimony, Secretary Schulz provided a chart outlining each of the audits’ 9 findings and provided an update on corrective action status, where appropriate. Overall, the Secretary maintained that the audit was conducted over one year ago, and many of its findings were in the process of being addressed upon its release. She acknowledged that the Department needed to improve its compliance capabilities and has done so by ensuring that it has properly trained staff with defined roles within the agency.

As it relates to the One Maryland program, the Secretary explained that the existing regulations provide more specificity than the law, and that by statute the Secretary may waive regulatory requirements if an applicant meets eligibility standards. In the instances called out by the audit report, applicants did, in fact, meet eligibility standards, and as a result, the Secretary utilized the right to issue a waiver on regulatory requirements. Secretary Schulz acknowledged that the Department failed to properly execute a waiver in this instance. As a result, the Department has implemented a waiver policy for the One Maryland tax credit that requires the waiver to be in writing, include a justification for the waiver, and be signed by the Secretary.

Documents and testimony provided at the Joint Audit and Evaluation Committee hearing can be found by clicking here. They include:

Prior to the hearings this month, some legislators were calling for serious changes and/or elimination of some of Maryland’s tax credit programs. During the hearing, legislators asked questions about whether the Department has access to updated technology, adequate staff resources, and a process for recapturing tax credits awarded that no longer comply with specified regulations.

In advance of the 2020 legislative session, Delegate Julie Palakovich Carr (D-Rockville) has begun drafting a “series of reforms” that relate to the audit and prior reports. Proposed bills include a deeper, more comprehensive audit reviewing all tax credits to determine if businesses are following through with job creation and investment; sun-setting of certain tax credits; and legislation addressing issues related to state incentives for businesses located in the opportunity zones created by the federal Tax Cuts and Jobs Act of 2017.

The Maryland Chamber of Commerce is closely monitoring these efforts and looks forward to working with all stakeholders to ensure that Maryland remains a competitive place to do business.


FEDERAL UPDATES


IN MEMORY OF CONGRESSMAN ELIJAH CUMMINGS

As reported in the August newsletter, the U.S. has been locked in an escalating trade war with China since March 2019 when the Trump Administration first imposed tariff hikes on Chinese goods.

To date, both sides have held 12 rounds of talks but have failed to reach a deal as China continues to resist the Trump Administration’s demand for a verification mechanism to supervise Beijing’s promise to protect intellectual property rights, technology transfer and provide access to American goods in Chinese markets. The two countries are scheduled to meet for the next round of trade talks in Washington, D.C., in October. Trump has delayed the most recent planned tariff hike on $250 billion of Chinese goods until October 1st in a gesture of goodwill ahead of China’s 70th year of National Day celebrations.

Still, there is a tremendous amount of unrest and uncertainty as it relates to the ongoing trade dispute and its impact to the U.S. economy. Recognizing this uncertainty, alongside fear of a looming recession, the Federal Reserve lowered its benchmark interest rate last week by a quarter-point and expressed an openness to more easing in the future. Officials at the Fed believe that this cut, the second in two months, will help the U.S. economy withstand the uncertainty caused by the escalating trade situation with China.

As the U.S.-China trade war continues to unfold, the Maryland Chamber of Commerce will monitor the situation and provide relevant updates to its membership.


UPDATE: U.S. TRADE WAR WITH CHINA

The Maryland Chamber of Commerce continues to monitor the trade situation with China that began earlier this year when the Trump administration first imposed tariff hikes on Chinese goods.

In early October, the U.S. and China reached a tentative trade deal being characterized as “phase one.” Chinese officials have confirmed that the two parties are close to finalizing the deal, and Presidents Donald Trump and Xi Jinping are expected to sign it soon.

The tentative deal includes a pause in tariff escalation, but not an end to tariffs. The U.S. has agreed to forgo an increase to 30% in the tariffs collected on $250 billion of Chinese imports. This is in exchange for China’s resumed purchasing of U.S. agricultural products like soybeans and pork. As well, the Chinese have made possible commitments to buy more American commercial aircraft and natural gas. However, the existing 25% tariffs have not been eliminated, nor has the threat that another $160 billion in goods, including popular consumer items like smartphones and toys, would be hit on December 15. In addition, the deal would include concessions on intellectual property, currency commitments, dispute resolution mechanism, and lifting of equity caps on foreign ownership of financial services firms.

The phase-one draft does not outline a final plan for peace. Many tariffs will remain in place, which means higher costs for businesses and consumers and continued uncertainty in the global economy.


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

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