Monthly Archives: August 2014

Needed in MD: Truth-in-Campaigning

By Barry Rascovar

Aug. 25, 2014–Do Maryland’s gubernatorial candidates in the November election take voters for fools?

Do they really think they can con the electorate with promises of vast spending programs (Democrat Anthony Brown) eclipsing $1 billion a year or sweeping tax cuts and givebacks (Republican Larry Hogan Jr.) also topping ten figures?

Larry Hogan Jr. (left) and Anthony Brown

Larry Hogan Jr. (left) and Anthony Brown

What’s lacking from each nominee is truth-in-campaigning.

The only thing in doubt is which nominee is being more deceptive with voters.

At the moment, Hogan has the lead, though Brown isn’t far behind.

The Republican nominee for governor pledged at an event at Charlestown Retirement Community in Catonsville to drop all state income taxes on pensions. (He already had said he’d do the same for police pensions and for veterans.)

Cheers from the seniors.

How’s he going to pay for this?

Silence.

Transportation Promises

A few days earlier, Hogan pledged to county officials meeting in Ocean City he would immediately restore $350 million in transportation funding to subdivisions once in office.

Cheers.

Which transportation programs will be stripped of $350 million to make that happen?

Silence.

Brown, of course, felt he had to match – or come close to – Hogan’s outrageousness at the Ocean City meeting. So he told county officials he’d also restore the lost Highway User Revenue – but it would occur gradually.

No Funding Plan

Does Brown have a plan for stripping state transportation programs of $350 million to pay for this fund transfer or for hiking driving fees?

Silence.

Irresponsible might be the kindest way to describe the performance of these two politicians. They keep promising the impossible, as though voters take what they say as gospel.

Any citizen who believes promises of massive tax cuts or giant new spending is living in a fool’s paradise.

Government Spending

It’s not going to happen.

Seniors already receive big tax breaks from Maryland: Their Social Security checks are free of state taxation (but not federal tax).

They also get an extra $1,000 personal exemption on their state income tax return each year.

And if their Social Security amounts to less than $27,800 a year, their other pension income is exempt up to that level.

Lots of bills have been proposed by Republicans and Democrats in recent years to expand these retirement exemptions, but none has gotten out of committee.

Why? The enormous cost involved.

Pulling It Off

With the state of Maryland facing a minimum of $400 million in revenue shortfalls, how is Hogan going to pull off this prestidigitation?

Well, he’ll cut the shreds out of state spending like any good Republican.

But wait a minute – isn’t the vast bulk of state expenses mandated by statute?

Yes, indeed.

So slashing state taxes by a billion or so isn’t realistic – certainly not for a Republican governor in a state where liberal Democrats have a stranglehold on the Maryland legislature.

Tax Cuts

Nor is Brown’s pledge of a countless new program spending any more realistic.

The lieutenant governor, for instance, claims he can pay for $108 million in affordable housing appropriations through budget cuts suggested by state employees.

Is he serious? A hundred million in savings via the suggestion box?

If he’s lucky, these ideas might lead to savings of one-one-hundredth of that amount. Or maybe an optimist might aim for one-tenth of Brown’s wild-guess of what employee-prompted savings would bring in.

Wonderland

It’s all an adventure in fantasy budgeting.

Let’s call it, “Larry and Anthony in Wonderland.”

If a conservative Republican governor like Bob Ehrlich couldn’t rein in state spending by billions of dollars, how is a more moderate Larry Hogan Jr. going to pull that off in a solidly Democratic state?

Bob Ehrlich (left) and Hogan

Bob Ehrlich (left) and Hogan

And if a liberal Democratic governor like Martin O’Malley couldn’t find the means to launch massive new spending initiatives – despite raising taxes over 40 times – how is Anthony Brown going to carry out a far more ambitious agenda?

Neither candidate is leveling with the Maryland public.

The state’s economic recovery remains uneven. State finances are falling short of projections due to federal spending hold-downs and weak job growth.

Unrealistic?

Both Hogan and Brown are setting up supporters for bitter disappointment. Neither candidate can deliver on their sweeping promises.

At best, the November winner will muddle along pretty much the way Ehrlich and O’Malley did in far more difficult economic times.

Ehrlich moderated state spending growth during his term and left a fat surplus,  but he failed to achieve permanent government downsizing.

O’Malley will leave office in January having raised lots of taxes and raided a variety of funding sources to keep social programs intact during the worst recession in 80 years. He failed, though, to dramatically expand government social services affecting working families.

Brown (left) and Martin O'Malley

Brown (left) and Martin O’Malley

Neither governor proved a miracle worker.

Brown and Hogan aren’t political magicians, either.

It’s time for them to start speaking the truth to Maryland’s electorate.

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MD GOP Nightmare

By Barry Rascovar

August 18, 2014 — Just what the Maryland Republican Party didn’t need — a theocratic, paleo-conservative candidate who has renounced the General Assembly as ungodly and is deeply involved in a group advocating a white, Christian nation of the South.

Worst of all for the Maryland GOP, this 61-year-old, Bible-spouting secessionist with a bizarre view of government is the favorite to win the November election in Anne Arundel County’s Broadneck Peninsula-Severna Park-Arnold councilmanic district.

His name is Michael Peroutka, a smooth-talking, debt-collector attorney. He ran for president of the United States in 2004 on the Constitution Party ballot line. He got 150,000 votes out of 122,000,000 cast (0.1 percent).

Constitution Party logo

Yet in June, he shocked the GOP establishment by winning Anne Arundel’s District 5 council primary by a razor-thin 38 votes.

The Republican nominee for governor, Larry Hogan Jr., disassociated himself from Peroutka. So did the GOP’s nominee for county executive, Del. Steve Schuh. Annapolis Del. Herb McMillan isn’t supporting Peroutka, either, because his views “are the exact opposite of the Republican Party.”

Like the slick lawyer he is, Peroutka is trying to sweet-talk District 5 voters into believing he’s an ordinary conservative who rails against the misnamed “rain tax,” abhors all taxes and demands drastically limited government.

It’s a con.

Peroutka didn’t even belong to the Republican Party until this year.

Peroutka button 2004

He and a Christian Reconstructionist cohort, David Whitney, tried to hijack the District 5 election by seeking to win both the Republican and Democratic primaries.

That would have guaranteed a seat on the County Council for this oddball alliance, which centers around Peroutka’s extreme Christian Institute on the Constitution, which he runs out of his law office in a strip shopping center along Ritchie Highway.

Peroutka is out to re-create the Anne Arundel Republican Party, and eventually the Maryland GOP, in his image. His pseudo-conservative rhetoric masks a deep hatred for the Republican Party of Lincoln, Ronald Reagan and George W. Bush.

Here’s what he said last October about the GOP:

“Anyone, including those who identify with the ‘Tea Party,’ who loves America and desires real reform, would do well to disengage themselves from the Republican Party and their brand of worthless, Godless, unprincipled conservatism.”

Fifth-Column Action

Peroutka isn’t even following his own advice. Instead, he’s infiltrated the “Godless, unprincipled” GOP.

This fifth-column action is part of his campaign to turn the Republican Party into a Christian party that follows Peroutka’s “biblical view of law and government.”

To him, “the function of civil government is to obey God and to enforce God’s law — PERIOD.”

Any other government actions — what he calls “pretended laws” —  are heretical and should be ignored or resisted. No wonder he spoke at a radical Second American Revolution rally last November in Washington. He’s out to dismantle the entire American system of government.

Peroutka at Second American Revolution rally

Peroutka at Second American Revolution rally

How wacky is Peroutka?

He said last year the Maryland General Assemby is “no longer a valid legislative body” and its actions should be disregarded because they violate God’s law.

Of course, Peroutka is the one who decides what’s legitimate and what is “Godless.”

According to him, “It is not the role of civil government to house, feed, clothe, educate or give health care to . . . ANYBODY.” Government, Peroutka says, has no authority to take any role in education or alleviating poverty. Government must enforce only the word of God spelled out in the Bible.

Misleading Appearance

Peroutka doesn’t come across as a madman. He’s got a distinguished mane of white hair, a grandfatherly look and a soothing voice. How could someone so sincere and seemingly erudite promote such nonsense?

Peroutka is a board member of the League of the South, an Alabama group that openly advocates Southern secession and establishment of a white, Christian Reconstructionist society.

According to its website, the League of the South is “a Southern Nationalist organization whose ultimate goal is a free and independent Southern republic.”

At this group’s meeting last fall, Peroutka called “Dixie” the country’s national anthem.

Should Michael Peroutka win in November, he’s sure to use County Council sessions as a platform for bringing his theocratic notions of government into the proceedings. It will be his launching pad for an internal Republican Party revolution.

Just what the Maryland GOP didn’t need.

It already is struggling for relevancy in the state’s largest jurisdictions. Peroutka’s ravings as an elected Republican leader could be the nail in the coffin for the Republican Party’s hopes of winning over independents and conservative-leaning Democrats.

Can He Lose?

Stopping him will be difficult, but not impossible.

District 5 hasn’t elected a Democratic councilman in 24 years. It’s a wealthy, conservative part of the county stretching from Severna Park to the Broadneck Peninsula that ends at the Chesapeake Bay Bridge.

Yet there’s hope in the voter registration numbers: 25,800 Republicans live in the district against 21,100 Democrats and 11,600 independents. Given the GOP leadership defections already announced, Peroutka’s election isn’t a sure thing.

He’s got millions of his own money he can funnel into his campaign, though.

Democratic Foe

He’s also running against a political youngster, Patrick Armstrong, a 31-year-old retail store manager who entered the Democratic primary to prevent Peroutka’s theocratic collaborator, David Whitney, from furtively gaining the nomination.

Armstrong did better than okay in the primary. He trounced Whitney, gaining nearly two-thirds of the Democratic votes in June.

He’s also not, as he put it, “a liberal boogie man. I’m a reasonable person” who grew up in District 5, graduated from Anne Arundel Community College in the district, and lives with his parents in Cape St. Claire.

He’s smart enough to run in this district with a pledge to never vote for a new tax or fee increase but instead “come up with creative ways to find solutions to our problems.”

Being Responsible

Yet he’s also wise enough to recognize that opposing the “rain tax” isn’t going to win over district voters who care deeply about the well-being of the Chesapeake Bay and its tributaries, including the Magothy and Severn rivers that define District 5’s boundaries.

He calls the stormwater-runoff fee “the responsible thing to do.”

With strong backing from state Democratic leaders, Armstrong might give Peroutka all he can handle. But he’s got to get the word out about Peroutka’s dangerous views of government and the U.S. Constitution.

After all, Peroutka is advocating the dismemberment of the United States and turning what’s left into a society ruled by Biblical law.

The problem is that even if Peroutka’s Republican charade is unmasked in time and he loses in November, he will remain the Maryland GOP’s nightmare: In June, he also won for himself a seat on the Anne Arundel Republican Central Committee.

That gives him an opportunity to use the county’s GOP Central Committee as a launching pad for converting Republican governing bodies into advocates for Christian government.

As a central committee member, Peroutka also will attend statewide GOP meetings, where he can poison the well with radical resolutions and speeches meant to Christianize the state party. He’s leading God’s crusade against the Republican infidels.

Ignoring Godless Laws

On top of that, another Peroutka theocratic soulmate, Joe Delimater, was the lone GOP candidate to file for county sheriff.

Delimater will be on the November ballot against the incumbent sheriff, Democrat Ron Bateman, hoping to win the right to wreak havoc on Anne Arundel’s court and criminal justice system by ignoring laws and government orders he believes are Godless.

What a mess for the GOP.

Peroutka & Co. pose a serious challenge to the viability and future of the Maryland Republican Party.

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Sharfstein’s Scarlet Letter

By Barry Rascovar

August 11, 2014 — For a 44-year-old, Josh Sharfstein has accomplished much: Baltimore City health commissioner, Maryland health secretary and chief deputy commissioner at the Federal Drug Administration.

Josh Sharfstein

MD Health Chief Joshua Sharfstein

Yet when Sharfstein leaves his state post at year’s end, his many achievements will be eclipsed by one giant failure: Maryland’s terribly botched health insurance exchange rollout.

This glitch-plagued rollout — the costliest debacle in Maryland state history — was a monumental disaster that should have been foreseen.

There were plenty of warning signs in the year leading up to the Oct. 1, 2013 enrollment opening. The exchange’s computer software immediately crashed — and remained dysfunctional for months.

Standing Tall

To his credit, Sharfstein shouldered the public blame for this immense fiasco. The other chief culprits, Gov. Martin O’Malley and Lt. Gov. Anthony Brown, deflected criticism to protect their political futures.

Even worse, they connived with legislative leaders to cover up the true story by avoiding an in-depth accounting of what went wrong until mid-2015. This intentional lack of transparency and accountability will remain an indelible blot on the O’Malley-Brown administration. It will haunt both of them in the years ahead.

Sharfstein took the fall at legislative hearings. He was the only one connected with this ill-fated project to apologize and take responsibility for a truly screwed-up rollout.

It is ironic this happened on Sharfstein’s watch because he’s known as a hands-on micro-manager who drives underlings crazy with his detail-oriented obsessions.

Loss of Control

This time, though, Sharfstein ran afoul of a bone-headed decision by O’Malley and Brown to set up the new Maryland health exchange as a separate, independent agency — instead of wrapping it neatly into Sharfstein’s health department.

That twist meant huge additional expenses — a separate set of backroom jobs had to be created and filled that could easily have been tacked onto existing services within the health department.

The biggest problem in giving the exchange its independence was loss of control.

MD Healthcare Connection

Sharfstein never gained direct authority over the health exchange because O’Malley set up the new agency outside the health secretary’s purview.

Yes, he co-chaired the oversight board with Brown, but that group served as a rubber-stamp for whatever Rebecca Pearce, the insurance executive hired to run the exchange, suggested. The panel didn’t challenge her assessments — a serious mistake.

Even worse, there were no traditional checks and balances to make sure the pivotal choice of technology contractors didn’t veer off-course (sadly, it did).

Nor were the health department’s seasoned computer experts in position to monitor the exchange’s faltering software development.

The department was left on the outside with no authority to intercede or blow the whistle on the prime contractor’s inept performance and failure to meet deadlines.

Righting the Ship

Sharfstein, a pediatrician whose entire career has been in government and public health, was ill-prepared to act as overseer of a highly complex information-technology project.

But as an experienced manager, and with a wealth of IT expertise available in his department, he probably could have avoided the computer crash that proved so costly.

To his credit, Sharfstein accepted responsibility for the disaster. He worked tirelessly to find a work-around and a fix (the first succeeded, the second didn’t). Now the old exchange system is being junked and a new one that is functioning well in Connecticut is being superimposed — at an enormous cost.

The health secretary will stay on to see if this latest stab at building a health insurance exchange works. He wants to walk away without leaving a health exchange headache on his successor’s desk.

That determination says a lot about Sharfstein’s commitment to righting the ship.

He can take pride in the fact that despite horrendous obstacles, over 400,000 people (mostly Medicaid recipients) signed up for health insurance through the exchange. If the Connecticut software system works in Maryland, that number should grow in Year Two.

Moving to Hopkins

We haven’t heard the last of Josh Sharfstein.

He’ll take up residency at Johns’ Hopkins’ Bloomberg School of Public Health as an associate dean with a full workload, but the urge to serve the public could lure him back, especially during a Hillary Clinton presidency.

If that’s the case, he’ll still have to explain what went wrong that led to Maryland’s costly health exchange snafu. It’s a scarlet letter he will wear, whether deserved or not.

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Uber and Out in MD

By Barry Rascovar

August 14, 2014 — Maryland’s Public Service Commission struck a blow for the rule of law this week when it declared the popular app-based, ride-sharing company Uber Technologies isn’t exempt from regulations other companies must follow if they want to transport paying customers.

It is “clear and unambiguous” that Uber is a passenger-carrying, for-profit, public transportation service, according to the PSC.

Uber logo

As such, Uber is not free to make its own rules and ignore Maryland law.

Just because Uber is using innovative Internet technologies to reinvent the taxicab industry doesn’t mean it can arrogantly write its own dictum and thumb its nose at statutes that govern the way other common carriers operate.

Companies like Uber seem to believe that because they are Internet-based, they can run their kingdoms according to their edicts and decrees.

Isn’t the Internet all about unfettered communication and freedom?

Brave, New World

Doesn’t a business based on Internet technologies have the right to do what it pleases, regardless of the consequences or existing statutes?

To follow that logic is to abandon all governance in favor of a libertarian society stripped of legal restraints.

Thankfully, the PSC wasn’t buying Uber’s scary vision of a brave, new fee-for-transport world. If we live in a country ruled by laws, then the laws must be applied across the board.

There’s no doubt Uber offers customers a good deal.

Uber smart phone app

Uber Smart Phone App

But huge dangers lurk as well.

Because Uber doesn’t want to play by the PSC’s rules, it sets its own customer charges. Unlike other cab companies, it applies higher “surge pricing” during busy times. It hasn’t bothered to apply for a common carrier license from the PSC, either.

Uber’s drivers don’t have Maryland passenger-for-hire licenses, which means its drivers haven’t undergone state criminal background checks or driver record checks.

Uber drivers don’t have passenger-for-hire vehicle insurance: If there’s an accident, the driver’s personal auto insurance won’t pay the passenger’s medical bills, or for damages.

No Safety Net?

(Uber claims on its website it has a “commercial insurance policy for rideshare drivers.” But it also claims “all UberBLACK, UberSUV, or uberTAXI rides are provided by commercially licensed and insured partners and drivers. Those transportation providers are covered by commercial insurance policies, in accordance with local and state requirements” — a statement that isn’t true in Maryland.)

Without a government-imposed safety net, passengers take their lives in their hands when they travel with Uber.

“Technology is not a substitute for regulatory oversight,” says Paula Carmody, the Maryland People’s Council, who usually is critical of PSC actions. This time, the official whose job is to look out for consumers applauded the regulatory commissioners. They “got it right.”

Paula Carmody, People's Counsel

Paula Carmody, People’s Counsel

The commissioners also recognized that the Internet riding-sharing revolution is transforming the passenger-for-hire industry. They directed their staff to come up with new regulations within 90 days reflecting evolutionary changes in transport services.

The staff will propose ways to make sure Uber-type companies and drivers have sufficient insurance; that their vehicles are safe and inspected; that drivers are qualified, and that new technologies affecting rates and pick-ups can be applied to all of the state’s taxi-style companies.

Uber, though, continues to act like a spoiled child caught trying to empty the cookie jar.

PSC logo

It railed against the “PSC’s attempt to take choice and competition away from Maryland residents.”

Uber said it will “continue to defend the rights of riders and drivers to have access to the safest, most reliable transportation alternatives on the road.”

“Safest”? Hardly.

The notion that Uber cannot compete if it plays by the state’s rules is buncombe.

What Uber really wants is a built-in advantage over traditional cab and sedan companies. That can only be accomplished by operating outside Maryland law that governs the cab industry.

Level Playing Field

Uber has opened the door for other companies to benefit from technology innovations it has brought to passenger-for-hire car service. That’s what the PSC wants to see in its new regulations.

In other states, Uber is getting its way. It can continue its outlaw-status with minimal state interference.

Not in Maryland, where Uber is being asked to recognize the importance of regulatory laws designed to ensure public safety.

That’s what government is supposed to do — even in an anarchic Internet Age.

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No MD Pension Panic This Year

By Barry Rascovar

August 4, 2014–Good news from the Maryland state retirement agency: investment earnings over the past year ending June 30 rose a strong 14.37 percent.

Maryland retirement agency logo

Don’t get too excited: The agency is still digging out of a deep financial hole caused by the Great Recession, poor decisions by former governors and legislators and poor advice from the agency’s consultant.

The retirement fund’s health, though, is showing solid improvement.

Positive Signs

Since the depths of the Great Recession, the value of its assets have risen over one-third, now topping $45.4 billion — a boost of over $5 billion in the past year alone.

Equally important, reforms to the system have kicked in: Increased employee payments, tighter eligibility rules, contributions from counties for teacher pensions and phasing out the ill-conceived Corridor Funding Methodology that let politicians reduce state payments while ignoring the retirement fund’s deterioration.

Combined, all this has kept the retirement fund on track to return to 80 percent of full funding by 2025 as planned. The corner may have been turned.

Index Fund Debate

Critics, especially conservatives and Republicans, continue to complain about fees paid to money managers — $273.8 million in fiscal year 2013 — rather than dumping all the state’s stock and bond investments into passive, low-fee index funds.

But the state agency recouped its payments to professional financial advisers many times over during the past two years with total gains of nearly 25 percent.

Moreover, fund managers already have shifted more of their assets into index funds: 63 percent of domestic equity investments are in these passive accounts; 47 percent of international equities are held in index funds, too.

Recent strong returns could well persist in upcoming annual reports as the nation’s economy finally starts to gain steam and enters a robust growth phase. It’s a good time to be a pension fund manager.

Two-Way Economic Cycle

But there will be dips and plunges along the way. There always are. Economic cycles flow in two directions — up some years, down in others.

To prepare for the down years and slower long-term growth, the state’s pension fund managers continue to re-channel investments into safer, less volatile financial instruments. The goal is long-term, stable growth, not flashy, short-term gains (or losses).

Some states get a bigger annual investment return than Maryland by placing riskier bets. But they are using retirement fund money for these gambles, which in some cases have backfired quite badly.

Long-Term Results Count

Still, we shouldn’t place too much importance in these annual profit-or-loss statements from government pension funds.

Everyone with stock portfolios knows the short-term picture can look terribly bleak (for example, last Thursday’s and Friday’s steep plunge in the Dow-Jones Average). But over the long haul — a decade or more — historic patterns are quite positive.

That’s what counts — the long-range results for pension funds. Harsh critiques of a fund’s 12-month performance can be misleading.

False Assumptions

Placing too much emphasis on the unfunded actuarial liability also can lead to false conclusions.

Yes, Maryland’s unfunded IOUs topped $19 billion as of last year. But there’s plenty of money in the retirement plan to write pension checks to 132,000 retirees and beneficiaries for years and decades to come.

Meanwhile, reforms taken over the past three years will continue narrowing the gap between what goes into the fund and what is drawn out to pay pensioners each year.

Eliminating the Deficit

The saving grace is that Maryland only pays out a fraction of the pension fund’s assets each year. Most of the 192,000 active participants in the program won’t start collecting retirement checks for another 20 or 30 years.

There’s plenty of time to gradually eliminate the unfunded liability.

That’s the stated objective of the retirement agency’s trustees.

They’ve made substantial progress in the last few years. If the nation’s economy continues on an upward trend, the agency’s financial picture could brighten faster than expected.

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Barry Rascovar’s blog is www.politcalmaryland.com. He can be reached via brascovar@hotmail.com