Monday, January 6, 2014

2014 General Assembly Session Preview

Here’s a list previewing the big issues for the 2014 Maryland General Assembly legislative session.

The Budget
The Governor and the Assembly are required to do only one thing during the session, and that is to pass a balanced budget. 

As we know, the Democratic majority, which controls the government, cannot stop spending.  Since Governor O’Malley took office, the state budget has ballooned by 30 percent or $8 billion.  Yet O’Malley has claimed he cut the budget to the bone—more than any governor in state history.  He’s also increased taxes more than any governor in history—40 increases totaling $9.5 billion.

Thanks to creative book keeping, like raiding dedicated funds like the Transportation Trust Fund ($868 million) and putting $1.4 billion on the state credit card to replace the cash he moved from special funds to the general fund to keep the spending binge going.  O’Malley already asked for and received a $75 million increase in the state’s debt limit—against the recommendation of legislative analysts—while annual debt payments will begin to increase rapidly over the next five years, reaching $557 million in 2019.   State debt payments are made from revenues generated by the state property tax, and because of the spike in debt and a weak real estate market, those revenues will fall short of covering the payments.  Get ready for a property tax hike in next few years.

What a nice parting gift O’Malley has left for the next governor!

The very same spending “affordability” committee, which approved raising the debt limit, also recommended 4 percent budget growth for FY 2015.  However, the state is facing a $580 million budget gap due to lower revenues. 

The Republican minority will once again propose a fiscally sane alternative, and once again they will be ignored.  Expect more cash for debt swaps and accounting gimmicks, as the budgetary can is kicked to the next governor.

Obamacare
O’Malley and Lt. Governor Anthony Brown made a mess of the rollout of the Maryland Health Connection.  The state exchange that was supposed to be “the model” for the rest of the nation turned out to be a shining example of technocratic arrogance. 

O’Malley plans to introduce emergency legislation, which will enroll thousands in the Maryland Health Insurance Program, who thought they obtained insurance through the exchange, but due to the system’s problems, were not covered.

This temporary patch will pass, but the technical glitches and the underlying policy flaws won’t save the exchange from future problems.

Minimum Wage
Democrats nationwide are pushing for an increase in the minimum wage at state and local levels, and with the bungled roll out of the state’s health insurance exchange, this issue could be O’Malley’s swan song.  Plus it helps in a Democratic presidential primary.

Montgomery and Prince George’s Counties recently voted to raise their minimum wage from $7.25 to $11.50 by 2017.   Democratic leadership has expressed a will to increase the state minimum wage, the only sticking point is whether to set a statewide wage floor or allow the counties to set their own.   Democrats point to polling, which overwhelmingly favors raising the minimum wage.  However, when respondents are asked about associated costs of raising the minimum wage, support plummets.

Republicans and business groups will put up a fight and rightly so, because in the end, raising the minimum wage will end up in negative economic ramifications. However, in the end, expect some hike in the minimum wage.

Marijuana Legalization
There are two constituencies pushing to legalize marijuana:  those that want to get high, and those that want the tax revenue.

Delegate Curt Anderson and Sen. Jamie Raskin have introduced a bill to legalize and tax the sale of marijuana, which they say will bring in $100 million in tax revenue.  Democratic gubernatorial candidate Del. Heather Mizeur’s “pot for tots” scheme would legalize marijuana and use the revenue to expand preschool in Maryland, but even her campaign admits the plan falls $156 million short of fully funding the cost her plan.  

Bryan Sears of The Daily Record reported that there are questions about Colorado’s pot revenue estimates.

 “Our overall conclusion was while there is some revenue here, this is not a panacea for fiscal imbalance going forward,” said Phyllis Resnick, lead analyst and author of the report, told the Pew Charitable Trust’s Stateline website. “Our conclusion at the end was there is at least a risk, even with a high revenue number, once you take all this into account, there is not going to be a significant amount left over relative to the size of the (state’s budget) gap,” which is anticipated to be $3 billion to $3.5 billion by 2025.
Any bill to legalize weed must get past Joe Vallario’s House Judiciary Committee, so it may be a few more years before you can buy a bag of Kushern Baker off the shelf in Hyattsville.

Maryland legalized medical marijuana last year, but all manner of regulatory obstacles were, ahem, baked into the legislation making it all but impossible to legally obtain marijuana for medicinal use.

Rain Tax
Maryland’s Storm Water Management Fee or “rain tax” generated much ire after it went into effect last year.  It’s an onerous, unwieldy, and unevenly implemented tax.  Senator Alan Kittleman, who is running for Howard County Executive, pre-filed a bill to repeal the rain tax, but environmental groups will certainly lobby to maintain it or make the fees uniform across the nine jurisdictions that levy the tax. 

Any rain tax reform/repeal legislation that has legs will sure to be a factor in the Republican primary for Anne Arundel County Executive.  Current County Executive, Laura Newman, has made that an issue against her opponent Del. Steve Schuh, who voted for the rain tax in 2012. 


I’ll be discussing these topics and all things 2014 session tonight at 8pm on The Broadside.



2 comments:

dwb said...

Can't tell if my previous comment went through.

The budget deficit is a relatively minor issue compared to unfunded pensions. Unfunded pension liability is 145% of sales and income taxes - to fund pension over 10 years sales and income taxes need to go up 15%. Of course, that's assuming the optimistic 7.5% return on assets.

Also, O'Malley admin issues the manufacturing competitiveness report next month. I doubt the report will mention the fiscal squeeze from high taxes and debt. MD has continued to lose jobs while PA, VA, have seen a small rebound in manufacturing jobs.



Joe King said...

The next gov will do nothing of the kind! They WILL continue to raise taxes and spending.

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