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Message from the President

I know that many of my county colleagues feel the same way that I do this time of year – glad to have wrapped up some of the pivotal issues both in Annapolis during the legislative session, and back home during our own budget deliberations.  It certainly is not an easy time for anyone in county government, as we struggle to make ends meet with our own budgets, and still remain responsive to our constituents.    It’s encouraging, at least, to see that despite tough decisions, so many Maryland counties are still getting awfully high marks from the bond rating agencies for prudent fiscal management.

While attending the Maryland Municipal League conference in June, I was pleased to join Carroll County Commissioner Julia Gouge on a panel discussing municipal/county relationships.  Each of the speakers in that session has held both municipal and county offices, and I thought that discussion was valuable.  I know that I stressed the importance of personal relationships – and was able to reflect on some of those that have made a real difference for me, my town, and my county, over the years.

During our stay on the Lower Shore, Executive Director Michael Sanderson and I were able to visit with six counties’ elected officials, and to hear their issues and updates.  It’s no surprise that fiscal issues were a major topic for just about everyone – both the things that have happened in Annapolis and back home, and what we see around the corner.  I also get a lot from hearing about some local issues or other topics that come up in these conversations. I agree with the advice of my predecessors as MACo President that these reach-outs are time well spent.  I hope to be making more visits in the coming months.  Even though this is a tough year to be creating extra calendar appointments, these meetings offer mutual benefits. I appreciate the counties’ extending their time and attention. 

In June, the MACo Board held its annual spring retreat, visiting Aberdeen and seeing some of the base realignment development projects that are rapidly transforming Harford County’s look and economy.  We also held substantive meetings with policymakers to discuss the “long view” on topics that are sometimes missed in the bill-by-bill review approach.  I am grateful that Secretary John Griffin from the Department of Natural Resources, and Director C. John Sullivan and his colleagues from the State Department of Assessments and Taxation were able to join us for productive discussions.  And I was pleased to have a candid and insightful discussion with several decidedly “county friendly” voices in the Maryland Senate – Senators Barry Glassman, Rich Madaleno, and MACo Past President Jim Robey – who shared insight into the fiscal issues from last session and are still on the table.

In the months ahead, I look forward to seeing many of you both in your county, at the summer conference, or at other MACo events.  Even while it is campaign season for many of us, it remains a valuable time to keep in touch about things that are working well for our counties and our citizens.

Best Regards,

David Craig

President, MACo

Wayne Cooper Resigns

MACo 1st Vice President, Charles County Commission President Wayne Cooper announced his immediate resignation as County Commissioner to the public on July 16 during a live broadcast.  In April, Commissioner Cooper declared he would not be seeking re-election.  In his announcement, he stated that he had been working to “complete several priorities before the end of my term that will continue to strengthen Charles County’s competitive position.”

Commissioner Cooper was in line to be elected and installed as MACo President in January 2011.  He served as the 2010 MACo Legislative Committee Chair. 

MACo members and staff extend their best wishes to Commissioner Cooper and sincere gratitude for his devoted service to the organization.

Contact:  Michele Dinkel

MOE Waivers Granted to Montgomery and Wicomico

The State Board of Education granted maintenance of effort (MOE) waiver requests to both Montgomery and Wicomico Counties in split votes on May 25.  Due to uncertainties regarding the State budget, which was not finalized before the deadline for submitting MOE waiver requests, five counties initially applied for a waiver:  Dorchester, Frederick, Montgomery, Talbot and Wicomico Counties.  However, all but Montgomery and Wicomico subsequently withdrew their waiver requests.

After three county waiver requests were summarily rejected by the State Board of Education (Board) in 2009, MACo chose MOE waiver reform as a 2010 Legislative Initiative.  MACo proposed a host of changes to the process, from requiring the Board to consider certain county budget factors as part of deliberations, to granting a right of appeal to the Administrative Office of the Courts.

The Joint Legislative Work Group to Study State, County, and Municipal Fiscal Relationships, which was charged with making recommendations on the MOE waiver process, adopted a few of MACo’s recommendations and introduced legislation (HB 304/SB 310).  MACo introduced its own legislation and there was also separate legislation to retroactively waive the penalty for 2010 and to shift the MOE penalty onto the counties.  Ultimately, the only legislation that passed was SB 476, which retroactively waived the MOE penalty for 2010 and called for a study about how the MOE penalty should be calculated and assessed.  That report is due December 31, 2010.

The main MOE bill, HB 304/SB 310, failed at the last moment on Sine Die due to lack of time.  However, the co-chairs of the Workgroup asked the State Board to consider the waiver factors proposed, even though the bills had not passed. The Board agreed to do so.

Subsequently, the Board voted 7-5 to grant Montgomery a waiver and 8-4 for Wicomico.  However, the Board made it clear in their opinions that the MOE law is flawed because it places the penalty for failing to meet MOE on the school system rather than the county.  It also raises concerns over how the penalty is calculated and the lack of an inflation adjuster in the MOE formula.  It remains possible that MOE will remain a legislative issue in the 2011 Session.

Contact: Leslie Knapp Jr.

Treasurer Breaks News at MACo:

 AAA Bond Rating Reaffirmed

State Treasurer Nancy Kopp shared good news with the MACo Legislative Committee on July 14.  She had just learned that all three rating houses reaffirmed Maryland’s AAA bond rating.  She said “This is significant. Not only will it allow the State to borrow money for building projects at lower interest rates, it is recognition of good public fiscal management.”  She added, “The rating agencies noted that Maryland has many strengths, a diverse economic base, well-educated labor force and the on-going influx of well-paid BRAC jobs, to name a few.  But they also noted outstanding issues, in particular the unfunded liabilities of the state employees’ and teachers’ pension system and OPEB.”  Acutely aware of these problems, the General Assembly created the Public Employees’ and Retirees’ Benefit Sustainability Commission this past session.

The creation of the Sustainability Commission was a budget compromise to study and make recommendations on all aspects of State-funded benefits and pensions provided to State and public education employees and retirees – including an evaluation of the appropriate levels of contribution for the employer and employee and an evaluation of the Senate’s pension proposal from the session.  Treasurer Kopp said that “many people do not realize that this group is also charged with looking at current State employee health benefits, since both active employees and retirees are part of the same health benefit system.”

Treasurer Kopp believes that appointments to the Commission will be made soon, and the group will begin meeting in August.  She anticipates that the group will meet regularly and that there will be a process for input from interested parties.  An interim report is due December 2010 for consideration during the 2011 General Assembly session, and it is the intent of the General Assembly that recommendations begin to be implemented in fiscal 2013. 

The Treasurer noted that, by its very name, the Commission is focused on sustaining a system of benefits for the public workforce, not on terminating them.  She stated that, regarding funding of teachers’ pensions, she hoped all parties will present to the Commission in an objective manner responding to this question: “How do we assure retirement benefits that will attract and retain a strong teaching workforce, acknowledging the constraints of public budgets?” And she said she hoped that the discussion would be in the context of total compensation – both salary and benefits.  In terms of benefits, she said, “If you are going to share in contributing to the benefits, you should have a say in what the benefit structure looks like.”  She continued by observing that “…all parties have the responsibility of making the public aware of the actual costs of the system and not exaggerate the problem.”

“Remember,” she closed, “the typical state employee salary is between “$47,000 and $48,000 a year, and the typical retirement benefit is $20,000.”

In her comments, she also briefly touched on school construction.  Both the Governor and legislature seem to support continuing a set target, and the Governor promised $1 billion, if reelected.  She said, “School construction is a wonderful thing.”

She also reflected on recent revenue projections, noting “the last couple months have exceeded our projections,” and suggested that despite the still weak economy, that “next year may be a little bit better than we anticipated earlier.”

Contact:  Andrea Mansfield

Preemption Issue Raises Concerns in Slots Case

MACo and several counties became concerned over the long-standing slot machine litigation in Anne Arundel County when the circuit court, as part of its ruling, held that State election law entirely preempted local election provisions.  While MACo continues to take no position on where slots should be located, the circuit court’s finding of “field preemption” could create a potentially sweeping precedent that would erode longstanding county authority to manage their elections in a manner they see fit.

After the Maryland Court of Appeals agreed to hear the case, MACo supported the efforts of concerned counties to file an amicus curiae brief with the Court, arguing against the preemption.  Anne Arundel County submitted the brief, with Baltimore, Harford, Howard, and Montgomery as co-signers.  The brief only discusses the preemption issue.

The Maryland Court of Appeals heard the arguments for Citizens Against Slots at the Mall v. PPE Casino Resorts Maryland, LLC, on July 20, and immediately issued an order overturning a circuit court decision and ordering that a referendum on whether Arundel Mills Mall should be re-zoned for slot machines be placed on Anne Arundel County’s November election ballot.

However, the preemption issue is ancillary to the referendum holding and until the Court releases its opinion on the case, it is not clear how that issue will be addressed.  The order only deals with whether the zoning for slots could be subject to a referendum.  The Court could still decide either way on preemption.

Contact:  Leslie Knapp, Jr.

County Officials Discuss TMDL Concerns

At its July 22 meeting, the BayStat sub-cabinet heard testimony from county elected officials and MACo on the challenges counties face in implementing the new federally mandated total maximum daily load (TMDL) requirements.  Created by the Environmental Protection Agency, TMDLs establish a strict “pollution diet” for the Chesapeake Bay by limiting how much nitrogen, phosphorous, and sediment are allowed to enter the Bay.  Different counties and watersheds will have different TMDL numbers.  All six Bay states (New York, Pennsylvania, Maryland, Delaware, Virginia, and West Virginia) and Washington DC are subject to TMDLs.  States that fail to meet certain pollution reduction milestones could face federal sanctions, including a possible freeze on funding or issuance of federal permits.

Maryland’s ultimate target loads will require a 21 percent nitrogen reduction from wastewater plants, a 25 percent nitrogen and 43 percent phosphorous reduction from urban runoff (such as stormwater), a 25 percent nitrogen reduction and 9 percent phosphorous reduction from agriculture, and a 39 percent nitrogen reduction from septic systems.  If a county realizes a greater reduction in one of these areas, the extra gain may be applied towards another area.  Each state subject to TMDLs is also required to create watershed implementation plans (WIPs) which will serve as a blueprint to realize the TMDL goals.

Harford County Executive and MACo President David Craig testified that 45 percent of Harford County’s watershed is in agriculture and the county has invested its own dollars in maintaining important agriculture positions in soil conservation and sediment control that have been subject to State cuts.  He noted the county also invested $172 million into water and sewer processes.  County Executive Craig also expressed concern over the impact TMDLs would have on growth related to base realignment and closure (BRAC).

Howard County Executive Ken Ulman noted they had 50,000 acres permanently preserved in non-water or sewer areas.  He stressed that education was a key component.  Anne Arundel County Council Member Cathy Vitale stated that Anne Arundel County was aggressively preparing for TMDLs because so much of the county is within the sensitive critical area zones.  She urged that counties be given flexibility in how they choose to meet their TMDL goals.

MACo Associate Director Les Knapp stressed that TMDLs will affect all key sectors of the State, including State government, counties, municipalities, agriculture, and business.  He also stressed the need for local flexibility in meeting TMDL goals, arguing against a “one size fits all” approach.  Mr. Knapp expressed concerned about possible unintended consequences of TMDL on growth and land use efforts.  He also stated the importance having a single TMDL contact person at the State level and having a strong public education and communication outreach.

All three elected officials and MACo stated the need for financial and technical resources in order to meet the TMDL goals.  All agreed that some revenue generation device, whether in the form of a dedicated local transfer tax or some other Statewide fee was necessary. Representatives from the Maryland Association of Municipal Wastewater Agencies and the Maryland Municipal League also testified.

Subsequent to the BayStat meeting, the State has announced it is forming a WIP Stakeholder Advisory Committee.  Participants will include key stakeholder groups such as MACo, MML, Chesapeake Bay Foundation, Maryland Farm Bureau, homebuilders, realtors, electric utilities, the poultry industry, and others.  The Committee will provide comments on WIP drafts, WIP implementation, public outreach, best practices, necessary resources, and reporting.

Contact: Leslie Knapp Jr.

Governor Pledges $1 Billion in School Construction Funding

Governor Martin O’Malley has pledged to provide $1 billion in school construction funding if re-elected.  The promise would essentially continue the Governor’s support of the 2004 recommendations of the Task Force to Study Public School Facilities.

The Task Force, convened in 2002, was chaired by State Treasurer Nancy Kopp.  Among the duties of the Task Force was the evaluation and review of the State’s school construction program.  The Task Force issued an interim report in 2002 and a final report in 2004.

In its final report, the Task Force found that there was a crisis in school construction, noting that the cost of upgrading existing schools to minimum standards was $3.85 billion in 2003 dollars.  The Task Force recommended making school construction a priority and set a State school construction spending goal of $250 million annually through FY 2013.

MACo supported the findings of the Task Force. Maintaining a high level of school construction funding has been a MACo Legislative Initiative since 2005.  For every dollar the State spends on school construction, counties contribute roughly two dollars of local funding.  While funding requests are down from a peak of $894 million in FY 2008, school construction needs remain high, with $722 million in requests for FY 2011.

Contact: Leslie Knapp Jr.

June Income Tax Distributions Greater Than Expected

The Office of the Comptroller has released details of the June distributions of county income taxes.  According to the electronic message, “The June distribution totals $707.5 million, an increase of 4.5% over last year’s distribution.”  It has three separate income tax components:

•  the tentative final distribution for tax year 2009

•  the projected April/May withholding and estimated tax receipts for tax year 2010

•  the estimated unallocated distribution for tax year 2009 and the reconciliation for the unallocated distribution for tax year 2006

The final distribution also includes the final installments of the disparity grant for FY 2010, which is up 5.1%.

The electronic message also provided an explanation of the distribution.

This distribution represents the first reconciling distribution for tax year 2009 returns, reflecting returns processed and posted to the tax system by early June.  At $18.3 million, this distribution is 69.9% above that of last June, despite a 2% overall reduction in the number of returns received as of the same date last year.  In addition, this distribution reflects a reduction of approximately $3.6 million for administrative costs related to the implementation of MITS.  To date, the MITS project has resulted in approximately $55.9 million in additional collections for FY 2009 and FY 2010 that may not have otherwise occurred.

Reconciling distributions can be volatile, as they depend on the prior tax year’s pattern of collections, the current tax year’s distributions, and returns for the current year received by the cutoff date. A modest recovery in 2009 resulted in a significant increase in the distribution compared to 2008.

If you have questions regarding the June 29 distribution, please contact George Freyman of the Revenue Administration Division, at 410-260-7455.

Contact:  Andrea Mansfield

Cardin Chesapeake Bay Bill Amended

U.S. Senator Benjamin Cardin’s Chesapeake Bay legislation, S. 1816, which includes a funding component for local government stormwater renovation projects, was approved in Senate Committee on June 30 after it was amended to remove provisions codifying total maximum daily load targets (TMDLs) and address concerns from the agricultural community.  The agricultural amendments prohibit the Environmental Protection Agency (EPA) from imposing further restrictions on farmers if EPA has to take over a State program for failing to meet its TMDL goals.

Even with the amendments, it is unclear if the bill has sufficient support to pass.  Maryland Representative Elijah Cummings has introduced companion legislation in the House, HR 3852.  Congressman Cummings’ bill remains in a House subcommittee.

A session on the EPA’s TMDL goals for counties is scheduled for the MACo Summer Conference on Wednesday, August 18. 

Contact: Leslie Knapp Jr.