“The honeymoon is over” at the State House, said Senate Republican Leader J.B. Jennings. “This session is not going to be the love fest we had last year.”
Republican Gov. Larry Hogan might be surprised to learn that the squabbles he had with the Democrat-controlled legislature represented “a honeymoon.” Legislators saw Hogan’s 2014 election as a shotgun marriage inflicted by the voters because a poor Democratic suitor failed to woo them.
House Speaker Michael Busch, a Democrat, disagreed with Jennings’ assessment that there won’t be another love fest in the 90-day session that begins Jan. 13.
“I don’t know why not,” Busch said. “Hopefully, we’ll be able to work together with the governor to come up with the best solutions for the people of Maryland.”
Hogan and staff have a different view. They see Busch as a continuing obstacle to the administration’s agenda.
Hogan and Busch have continued not very subtle digs at each other. Hogan vetoed a $2 million Maryland Hall for the Arts project in Busch’s Annapolis district, and Busch has led continuing Democratic criticism of Hogan’s failure to release $68 million in school aid. This represents about 1% of what Hogan calls “record” education aid, and Democrats call “a cut” from what was expected and left sitting in the state coffers.
Democrats, whether legislators or members of the Howard County Council who wrote to Hogan recently, have no reasonable expectation that the Republican governor will change his mind. They just want voters to remember Hogan’s record of not fully funding education when he runs again. Hogan has already conceded the issue this year by not vetoing legislation that will force him to spend the full amount.
Spending is likely to continue to be the main issue of contention, as Democrats see a $561 million cash balance ready to fill unmet needs. Hogan foresees not only flat revenues and a potential return of structural deficits, but would like to find a way to reduce some taxes — a key campaign promise.
Yet, there are many potential areas where Hogan and the legislature could find agreement, particularly on policing reform and easing prisoners’ re-entry into society, a topic the Hogan administration has embraced.
House leaders are also considering a package of bills to aid Baltimore City. Hogan may go along with them, as long as they involve innovative approaches to the city’s persistent issues and do more than just throw money at the problems.
A Different Mood
Last year’s session began with a week of celebration — the swearing in of more than 60 new legislators, then a week later of the new governor. This year, the atmosphere will be more serious. The constitution forces the legislature to begin with a fight over the bills the governor has vetoed.
The Internet hotel tax is one issue with business interests on both sides. Currently, if you book a hotel room via a third-party, such as Orbitz or a travel agent, you pay the same price that you would if you booked from the hotel directly. But the Internet sites and the travel agents pay the hotels a discounted price, and then they pay the state and local sales taxes based on that discounted price; they pocket the difference between the discounted price and full price, even though the tax is listed based on the customer’s bill at the full price.
This is how the Internet sites and the agents make their money; the legislature wants them to pay the taxes based on the full price, as do the hotels, with the Marriott Corp. in the lead.
Pressured from businesses on both sides, Hogan said he vetoed the measure because there is a pending lawsuit by Comptroller Peter Franchot to collect the tax from the Internet sites based on the full price. Senate President Mike Miller believes he has the three-fifths majority needed to override the governor’s veto, but the vote was much closer in the House of Delegates. Hogan also vetoed a Howard County version of the bill affecting the local hotel tax.
It is not clear how hard Hogan will fight to sustain his veto, with a powerful interest like Marriott in favor of the bill. The Bethesda-based corporation has already indicated it is looking to build a new headquarters, and Maryland is not its only option.
Hogan also vetoed three pieces of legislation related to criminal justice. One allowed felons to vote after they are released, even if they are still on probation; another would have decriminalized possession of marijuana paraphernalia, which would come after the legislature had already eliminated criminal penalties for possession of small amounts of marijuana.
Another bill blocked by Hogan made it harder for police to seize assets from people who have been arrested or accused of drug trafficking. The governor sided with prosecutors and police who objected to the bill, but lawmakers said the powers to confiscate had been abused by police. The bill passed both houses with veto-proof majorities.
More Experience
Another factor this year is that both the governor, who had never held elected office, and the new legislators have a year of experience under their belts.
“We have a lot of freshmen ready to spread their wings,” Jennings said. Almost half the legislature now knows where the bathrooms are and how a bill gets passed. “They’re going to come out fighting for the issues they care about,” Jennings said.
According to the legislature’s bill drafting office, there are more than 1,200 requests for legislation from members of the House and Senate. Already, 179 bills have been pre-filed, and the administration may request a couple hundred bills of its own, most of which are fine tuning of existing laws by various departments.
This is not necessarily a record number, but it does reflect that the office holders are in the second year of a four-year term.
Typically, there are 2,500 to 2,600 bills introduced. More than half die in committee, and about 700 are eventually enacted, many of those on routine matters that receive overwhelming majorities in both houses.
Joe Getty, the governor’s chief legislative officer, said the Hogan administration hopes to work out some “mandate relief,” changing some of the formulas in law that now drive 81% of the state budget, despite the governor’s supposed control of spending.
“We used to have a very strong executive power over the budget,” Getty said, but that has been eroded by legislative mandates and entitlements, particularly on school aid and health funding.
Affordability Questions
Democratic leaders and the governor laid out their cards on state spending last month.
In straight party line votes, the Spending Affordability Committee, with a heavy majority of Democratic fiscal leaders, voted to spend as much as they could in next year’s state budget. Gov. Larry Hogan’s budget secretary told them that wherever they set the spending ceiling, the governor would ask for less.
“Whatever you do adopt, the governor is going to come in under it,” Budget Secretary David Brinkley told them.
Faced with a likely $561 million surplus this year, and an operating budget in balance for the rest of Hogan’s first term, the legislators wanted to raise spending in the fiscal 2017 budget by 4.85% and fully fund education, health and other programs. The committee also set the limit on new state debt $60 million higher (6%) than the $995 million Hogan had sought.
The revenue picture has improved, “but we’re not out of the woods,” Brinkley said. “We need structural repairs in the out years,” with forecasts that deficits will return in three years.
“Let’s take our time to fix the problems,” Brinkley said.
“The governor has a right to do that,” House Speaker Michael Busch said. “We’re just putting in what we’d like to see.”
The budget ceiling as proposed would fully fund all those programs, plus grant state employees a 2% cost of living raise and step increases based on length of service.
Revenue Picture
The good news on Maryland revenues is that there is no more bad news and some slight growth, leading to calls of “restrained optimism” and “caution” by top state officials.
But the sobering news underlining the on-target revenue projections for this year and next is that they are only growing at 3% to 4% because middle class incomes have been largely flat. Maryland had been used to 5% overall growth in revenues.
“These tepid levels of growth have become our new normal,” said Comptroller Peter Franchot, who chairs the Board of Revenue estimates.
“This is a window into the economic realities facing Maryland families at the moment,” Franchot said. “In essence, non-wage income earners — generally associated with wealthier taxpayers — are doing better than our very modest prior expectations. But actual wage earners, predominantly Maryland’s middle class, are faring worse, with average wage growth standing at a disappointing rate of 2.4%, well below Maryland’s historical standards.”