Tag Archives: Maryland

Heartbreaking Failure of Leadership

By Barry Rascovar

May 4, 2015 — Baltimore deserves better. The citizens of Charm City, black and white, dutifully worked for decades to overcome obstacles of urban decline, including poverty and joblessness, with the goal of creating a thriving neo-urban, multi-racial environment attractive to residents and employers.

Those intent on achieving that dream have suffered a heartbreaking setback.

Failure of Leadership

Baltimore’s younger generation of African Americans decided anger and violence were more important than taking constructive steps toward empowerment.

They seized on a failure of leadership at multiple levels and drove their inflammatory actions, like a spear, through Charm City’s armor.

Partial Responsibility

The roots of this civil unrest will be analyzed for decades.

One obvious flash point could become a bone of contention in the Democratic presidential campaign. Another could dominate next year’s election for mayor.

History may record that both Martin O’Malley and Stephanie Rawlings-Blake, mayors past and present, bear partial responsibility for what went wrong in Baltimore over the last week.

O’Malley, who has set his sights on the U.S. presidency, won election in 1999 to Baltimore’s top position with the courageous support of Rawlings-Blake’s father, Del. Howard “Pete” Rawlings, one of the most influential power brokers in the Maryland General Assembly and a staunch defender of black Baltimore.

The O’Malley mayoral campaign of 1999 centered on the need for tougher police enforcement after eight years of a failed community policing policy under Baltimore’s first elected black mayor, Kurt Schmoke.

Indeed, O’Malley made a name for himself on the Baltimore City Council as a persistent critic of the soft, ineffective policing tactics put in place by Commissioner Thomas Frazier.

Discontent with Violence

Baltimore is a heavily African American city. For a white to win the city’s top elected post speaks volumes about the discontent with the violence and rising crime rate in 1999. Pete Rawlings’ endorsement of O’Malley over two major black contenders proved pivotal.

Martin O’Malley came into office promising a tough law-and-order stance that would deter crime. He initiated a zero-tolerance approach based on New York City’s successful “broken windows” theory — go after petty crimes, such as vandalism or a broken window, and it would prevent more serious criminal action. Young blacks simply congregating on street corners ended up in jail on suspicion of drug dealing.

Over 100,000 arrests were made one year (in a city of 650,000). O’Malley also embraced New York City’s statistical analysis, renamed Citistat, to pinpoint crime hotspots.

The two initiatives led to a dramatic drop in law-breaking. At the time, O’Malley was lauded for his tough stance that seemed to have made Baltimore safer. It also eased the way for his reelection as mayor.

Residue of Anger

But zero-tolerance sowed the seeds of discontent and bitterness among young black men. Much of the fury expressed on the city’s streets last week flowed from those mass-arrest sweeps and the targeting by police of young blacks during the O’Malley years.

His tough-on-crime approach as mayor stands in stark contrast to O’Malley’s current attempt to position himself as the ultra-liberal alternative to Hillary Clinton. Indeed, zero-tolerance policing is the antithesis of what Democratic liberals believe in.

His hard line on law enforcement could well dog O’Malley during presidential campaign debates and interviews.

His successor as mayor, Sheila Dixon, quickly discarded O’Malley’s zero tolerance strategy in favor of a more humanizing law-enforcement tool — increased on-the-street patrols and closer affiliation with community groups.

O-Malley and Rawlings-Blake

Mayors past and present in happier times

Rawlings-Blake has continued that less confrontational approach to policing.

Some now contend the mayor’s permissiveness on that first night of clashes encouraged young blacks to engage in looting, arson and attacks on policemen and firefighters knowing there would be no crackdown.

In hindsight, the mayor’s critics may have a point. But on-the-spot decisions are easily faulted after the fact.

No Rapid Response

Rawlings-Blake will be dogged over the next year and a half by those who point to her failure to go after the miscreants immediately — before the violence got out of hand.

Her mystifying refusal to request help from Gov. Larry Hogan Jr. in the critical hours leading up to the outbreak of lawlessness now looks like a tragic mistake. Her standoffishness from the governor since then defies explanation.

Prior to last week’s upheaval, Rawlings-Blake looked like an easy winner in next year’s mayoral election.

That’s no longer the case — especially with the hero-worshipping status accorded Baltimore’s new state’s attorney, Marilyn Mosby, who rushed to charge six police officers with a kitchen sink of wrondoing.

Winning convictions may prove infinitely harder, though, which could color the public’s perception of Mosby in the months ahead.

Former Mayor Dixon looms as a potential contender, too.

Clearly, Rawlings-Blake has some serious repair work to do politically, once things return to normal in Baltimore, if she hopes to remain in the mayor’s office for another term.

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

Hogan’s Choice

By Barry Rascovar

April 13, 2015 — Has Gov. Larry Hogan Jr. overplayed his hand? We’ll find out today as the Maryland General Assembly tries to wrap up its 2015 session.

Hogan's Choice on budget compromises

Gov. Larry Hogan Jr.

Hogan has two choices: Continue to play hardball with the Democratic legislature and risk losing all of his legislative priorities, or negotiate a settlement that gives everyone partial victory.

The first choice is really the nuclear option.

Hogan already has dug in his heels a couple of times in budget negotiations by demanding full passage of his partisan agenda that Democrats find unacceptable. Meanwhile, he says he won’t give Democrats what they want on education, Medicare and salary adjustments.

Another Ehrlich?

This “my way or the highway” approach is what punctured former Republican Gov. Bob Ehrlich’s balloon and led to four years of bitterness and open warfare between the political parties in Annapolis.

Does Republican Hogan, who was part of the Ehrlich administration, wish to go down that dead-end road again?

He shouldn’t misread the election results. This state remains heavily Democratic, as reflected by the make-up of the General Assembly. For a Republican governor, power-sharing is the only rational road to travel — if you want to make headway on your goals and win reelection.

Today, Hogan must decide if he wants to fight or smoke a peace pipe. It shouldn’t be a difficult call.

Shrinking Budgets

Even if he gives Democrats what they want in the budget, Hogan still has achieved his immediate objective — sharply lowering Maryland’s structural deficit and sending a clear signal that more slimmed-down budgets are coming.

Hogan is in control. But he could lose that advantage if he touches the third rail of Democratic politics in Maryland — aid to education.

A sharp cutback in state education funding for large Democratic subdivisions would be met by howls of protests by parents. It might well lead to teacher layoffs, larger class sizes and bitter anger in those subdivisions.

Why risk hostility that could sabotage cooperation with the Democratic legislature over the next three years and foreclose chances of Hogan gaining Assembly approval of his promised tax cuts?

Negotiating Tactics

So far, the governor has played the budget negotiating game well. He’s kept Democratic leaders off-balance. He’s already moved Democrats in his direction.

Indeed, he made them look foolish on their efforts to strip money from state worker and teacher pension accounts. He’s also won concessions on a handful of bills he wants passed.

If he cuts a deal at this stage and declares victory, Hogan will emerge from the session with incremental successes and few hard feelings on the Democratic side.

That’s not a bad outcome given the fact that most legislative triumphs take more than one session to achieve — and that legislative victories for a Republican governor in Maryland are always difficult.

Of course, compromise won’t please hard-edged  conservative Republicans who will accept nothing less than Democratic capitulation. Hogan would be wise to ignore them and focus on the bigger picture.

He’s got four years to construct a positive list of accomplishments. He’s made a sound start over the past 90 days. He’d be foolish to blow it at this late stage.

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

Fracking Follies in Annapolis

By Barry Rascovar

March 30, 2015 — Shakespeare, as usual, had it right. “Full of sound and fury signifying nothing.” That describes the squabbling in Annapolis over hydraulic fracturing, commonly known as “fracking.”

It is Maryland’s phantom issue.

Environmentalists and do-gooder legislators are panicked that fracking will mean earthquakes, tainted drinking water, dirty air, despoliation of pristine farmland and other biblical plagues. They want to bar this drilling procedure forever in Maryland.

fracking-2

Hydraulic Fracturing

 

Never mind that wide-spread fracking has been going on since 1950. In those 65 years, more than one million wells have been fracked, in which a combination of water, sand and chemicals is pumped under high pressure deep into shale formations. This fractures the rock and sends deposits of oil and/or natural gas gushing to the surface.

Low Oil Prices = No Fracking

There’s only a tiny part of Maryland where hydraulic fracturing into the gas-rich Marcellus Shale formation is viable — in far Western Maryland, i.e., portions of Garrett County and a bit of Allegany County. The number of farmers who might benefit from oil and gas royalties is very small.

Moreover, no oil or gas driller is interested in Maryland any longer. The steep plunge in oil and gas prices makes fracking in the state far too costly now or any time in the foreseeable future.

So the arguments in Annapolis are largely speculative.

Environmentalists continue to spout off about the doom and gloom that will descend on Maryland if fracking is allowed — part of a larger argument by environmental zealots who seek to ban coal and even gas-fired power plants, nuclear power plants, the export of liquified natural gas, as well as wind farms in state parks (they won that fight) and wind farms on the lower Eastern Shore.

O’Malley Study

The O’Malley administration, never a friend of business-development if it bumped up against the fears of the environmental community, forbid fracking for three years while it conducted a lengthy, in-depth, scientific study.

The results pleased no one: The research showed fracking could be done safely in Maryland, but only under very strict state supervision — the strictest rules in the nation.

Even that hasn’t made environmentalists happy. Nothing short of a permanent ban will satisfy them.

A bill imposing another three-year moratorium — totally meaningless in today’s low-cost energy world — has made it out of the House of Delegates. Prospects in the Senate are less certain. The bill calls for a 36-month study that would largely duplicate the O’Malley administration’s extensive research.

Meanwhile, a Senate bill, sponsored by Sen. Bobby Zirkin of Baltimore County, offers an even more extreme step that kills any possibility of fracking coming to Maryland.

It creates extraordinary legal liability standards, calling fracking “ultrahazardous and abnormally dangerous” and requires a $10 million insurance policy that must be in place for six years after drilling ends.

Few Side Effects

Funny thing: Over the past 65 years, fracking has been conducted without much in the way of negative side effects.

The industry has used fracking over 1 million times and the number of “ultrahazardous” outcomes has been tiny.

“Abnormally dangerous”? It would be hard to make that assertion stand up statistically.

It would be as if the Maryland legislature declared airplane travel “ultrahazardous and abnormally dangerous” due to a few highly publicized crashes — even though the odds of being killed this way are 1 in 30 million.

The fracking follies in Annapolis are a case of populist rhetoric run amuck. It’s a do-gooder attempt to outlaw something that is no longer on the radar screen in Maryland — and won’t be for years or decades to come.

Waste of Energy

Making it impossible for oil and natural gas companies to drill in Maryland — even under exceptionally close state supervision — is the sort of anti-business hostility Gov. Larry Hogan Jr. may not be able to tolerate.

A veto could await either the House bill or the Senate bill.

Still, all of this is academic — an exercise in wasted energy.

As long as oil and gas prices remain depressed, fracking has zero future in Maryland. The legislature has better things to do in its remaining days before its April 13 adjournment.

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Phony ‘Rain Tax’ War

By Barry Rascovar

March 24, 2015 — Opponents, especially Gov. Larry Hogan Jr., deceptively call it the “rain tax.” But the name and the issue are about as phony as a three-dollar bill.

Hogan used his mischaracterization of the stormwater remediation fee to great effect in winning the governorship. “Why they’re even taxing the rain!” he exclaimed in a highly effective TV ad.

Gov. Larry Hogan Jr.

Governor Larry Hogan Jr.

It’s actually a broad user fee based on how much stormwater pollution flows from roofs and parking surfaces — runoff that can cause great harm if it ends up in the Chesapeake Bay.

Hogan turned this into a political anti-tax, anti-government crusade. For him, this unconscionable levy showed the overreach of the O’Malley administration, which taxed anything that moved to fund an ever-growing list of do-gooder social programs.

Hidden Facts

His propaganda pitch worked; now Hogan is governor.

He pledged to eliminate the “rain tax.” but It isn’t working out that way.

Here’s a fact Hogan never told voters: Even if he could eliminate the “rain tax,” that step wouldn’t lower state or county spending by a penny.

Indeed, wiping out the “rain tax” would have zero impact on Hogan’s state budget. Repeat: zero impact.

It would affect some county taxpayers who now are assessed a stormwater remediation fee on their annual property tax bill. They could see their county taxes lowered minimally.

Another Catch

Here’s another catch: In each of the 10 jurisdictions affected by the “rain tax,” eliminating the levy could force county officials to make cuts in other programs like schools and public works.

It would be a lose-lose scenario.

That’s because these counties and Baltimore City are under a federal mandate to reduce polluted stormwater pouring into the bay. With or without the “rain tax,” they are required to continue paying for costly stream restoration and other cleanup efforts.

For example, Baltimore County spends $22 million a year on its remediation work. That money comes from the “rain tax.”

Eliminate the levy and the county still must come up with $22 million for those environmental-protection projects. That’s about the cost of a new elementary school.

In other words, it’s a zero-sum game.

If Hogan were to get his way, county governments would be squeezed to find money for those mandated environmental activities. Other programs financed by the counties would take the hit, be it schools, government-worker pay raises, road repairs or social programs.

Symbolic Reduction

Baltimore County Executive Kevin Kamenetz already has made a symbolic reduction in his county’s stormwater remediation fee, lowering the levy by one-third. He found roughly $8 million of savings in his budget that now will be used for these anti-pollution projects.

Stream restoration

Stream restoration project in Baltimore County

The county’s stormwater remediation work continues unimpeded. In future years, though, it could become increasingly difficult to find that extra money without cutting back in other areas.

 

Miller’s Plan

On the state level, symbolism is the name of the game, too.

Senate President Mike Miller, the most astute political mind in Annapolis, came up with the ideal Democratic response to Republican Hogan’s “no rain tax” demand.

Miller won unanimous Senate approval for his bill that makes the county remediation fee optional.

If Frederick County, Harford County or Carroll County wants to get rid of the fee totally, they are free to do so. But they still have to ante up millions to finance a long list of remediation projects.

That burden remains.

Indeed, Miller’s bill requires those counties to specify their remediation efforts and identify how they will be funded. Failure to do so could lead to a loss of state dollars.

Smarter county officials, who understand the value of spreading the tax burden for these anti-pollution efforts, could continue their fees under Miller’s bill. They won’t have to limit other county programs to make room for mandated remediation projects.

Curious Debate

Whether Miller’s “rain tax” option makes it through the House of Delegates is in doubt. Some Democrats there want to keep the current fee in place, despite the political advantage it gives Hogan and his conservative allies.

It’s one of the more curious debates to grip Annapolis in years.

No state taxes are involved.

No county saves a penny if Hogan gets his way.

The stormwater anti-pollution programs must continue — unless a county wants to get sued by the federal Environmental Protection Agency.

Miller’s compromise bill offers a sensible way out for everyone. That’s why Hogan has thrown his support behind it.

Regardless of the outcome, this phony “rain tax” war will continue. Hogan will milk it for all it is worth — even if the facts aren’t on his side.

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Betraying State Workers

By Barry Rascovar

March 23, 2015 — Once again, the House of Delegate took the easy way out of its budget bind — and in the process stuck it to future state workers, teachers and taxpayers.

The Senate is on a glide path that follows that same flawed approach.

Instead of facing up to its fiduciary pension obligations, Annapolis delegates opted to play games, placing at risk the safety of state retirement programs.

Budget balancing

In the process, the delegates are leaving the next generation of taxpayers a monster-sized unpaid pension bill totaling in the billions.

If Maryland loses its prestigious triple-A bond rating, you’ll know who to blame.

Thanks to the intellectually dishonest proposal by the Department of Legislative Services, the delegates found a way to save $75 million this year to pay for K-12 education and a salary increase for state employees — if the governor goes along with those suggestions.

How It Started

Back in 2011, the state agreed to supplement its annual pension contribution by $300 million a year. This was the quid pro quo for forcing state employees and teachers to contribute more out of their own paychecks to the pension program.

But lawmakers reneged on the bargain, eventually cutting their supplemental payments to $150 million a year — or to zero when times got tough.

Now the House wants to reduce the state’s supplemental payment to just $75 million each year — a far cry from the original $300 million commitment. Meanwhile, state employees and teachers get no relief in their enlarged pension payments.

A major part of the rationale for this irresponsible move by lawmakers is the fast-rising value of the retirement agency’s stock portfolio. Last June 30, the state pension program topped $45.4 billion — a rise of $5.2 billion in just one year.

Its investment return for the fiscal year was a strong 14.4 percent. Fund managers have exceeded their target of 7.7% growth in four of the past five years.

Roller Coaster Ride

Sounds wonderful, doesn’t it?

It certainly entranced the legislature’s budget analysts, who cited the stock market rise as a key factor in recommending that the state slash its supplement payments by 75 percent.

But a funny thing is happening on Wall Street.

In the first 75 days of 2015, stocks ran out of gas. The long rally stalled. Prices are about where they were on Jan. 1.

If Wall Street’s prices fail to rise, or even fall, for the rest of this year, Maryland’s pension managers won’t come anywhere near their 7.7 percent growth target.

The retirement agency’s unfunded liabilities could jump substantially — and the heat will be on state legislators and the governor next year to make up the difference.

Inevitable Downturn 

That’s why the legislature’s quest for immediate gratification is so misguided. This is not the time to monkey around with reduced pension contributions.

When the bulls rule Wall Street, Maryland politicians start thinking they can cut back on the state’s pension appropriations. But that ignores the inevitability of the economic roller coaster. Prosperity only lasts so long.

If lawmakers don’t prepare for the lean years they will put Maryland’s pension program — already nearly $20 billion in the hole — in an even worse bind.

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A Republican MD Senator?

By Barry Rascovar

March 16, 2015 — Did Republican Larry Hogan Jr.’s surprisingly large victory for governor last year blaze the path for a GOP upset in next year’s open seat for the U.S. Senate?

Gov. Larry Hogan Jr.

Gov. Larry Hogan Jr.

Probably not. Then again, politics is a mercurial business. Given the right circumstances, a longshot scenario might come true.

No Hogan Clones

Here’s the problem: The presumptive GOP candidates aren’t following the winning Hogan formula.

They are very much right of center and outspoken in their conservatism. In liberal Maryland, that’s a distinct turn-off for general election voters.

To understand the state GOP’s dilemma, look at the reasons Hogan won:

  • He stuck to a narrow, economic-driven campaign pitch — high taxes, overreaching government and politics as usual — with virtually no details.
  • He ignored bitterly divisive social issues, much to the discomfort of hard-nosed conservatives, and charted a moderate course.
  • He came across as Maryland’s “Happy Warrior” with a winning smile and demeanor.
  • His opponent, Lt. Gov. Anthony Brown, ran a dysfunctional campaign and turned off voters with his arrogance and aura of entitlement. His voters stayed home.

It’s no secret that for a Republican to win statewide in Maryland, the Democrats really have to mess up. Did they ever in 2014.

It is entirely plausible Maryland Democrats once more will eat their own and wind up with a far-left candidate who turns off a large chunk of the state’s moderately liberal electorate.

Right-Wing Believers

That would set the stage for a strong Republican Senate challenge, backed by tens of millions of national GOP donor dollars.

But none of the names being floated are likely to resonate with dissatisfied Democratic voters and independents. They are angry, right-wing true believers who denigrate the kind of middle-road, non-ideological, problem-solving Maryland voters tend to favor.

Consider the individuals being mentioned as possible Senate candidates:

Bob Ehrlich. The former governor would win the primary in a cakewalk, but since he left office he’s moved more and more rightward into knee-jerk, pessimistic anti-Obamaism. His four years as governor disappointed Democrats and Republicans, he lost reelection and his attempt to recapture the office in 2010 proved an embarrassing flop, losing by nearly 15 percentage points. Portraying Ehrlich this time as a moderate Republican would be a stretch.

Andy Harris. The First District congressman is as far right ideologically as you can get and still be elected in Maryland. He can come across as arrogant and stridently sure of himself on just about any issue. A former state senator, Harris’ vocal and energetic conservatism might generate a backlash that results in a heavy Democratic turnout on Election Day. He’s far from an ideal statewide candidate in Maryland. Besides, he’s got a lifetime seat in his House district that he’d have to give up.

Dan Bongino. The almost-congressman nearly upset Democratic Rep. John Delaney in a gerrymandered district that includes Western Maryland and portions of Montgomery County. He lost by less than 3,000 votes. Bongino also ran against U.S. Sen. Ben Cardin in 2012 and got clobbered, winning just a quarter of the votes. He’s charismatic and a former Secret Service agent. But he’s all conservative all the time. He’d have little drawing power outside rural and exurban areas.

Michael Steele. The former lieutenant governor and GOP national chairman doesn’t have much to crow about other than espousing traditional conservative Republican themes. He lost badly when he ran for the Senate in 2006, losing to Cardin by 10 percentage points. He has no base beyond traditional GOP precincts and no credibility in Democratic strongholds.

Kendel Ehrlich. The other half of the Ehrlich team, she considered running for judge in Anne Arundel County and is not bashful about expressing her hard-edged conservative views. She’s never held elective office and has few credentials to promote. She’s much farther to the right in her political thinking than her husband.

That’s hardly an exciting list of GOP contenders. Too many retreads or not-ready-for-prime-time players. None of them fits the winning Hogan mold.

Still, the fate of the GOP primary winner may lie more in the hands of Democratic primary voters. Should Dems select another dud like Anthony Brown last year (or Kathleen Kennedy Townsend in 2002), anything would be possible for Maryland Republicans.

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Reneging on a Promise – Again

By Barry Rascovar

March 2, 2015 — The legislature’s fiscal leaders, in a truly bizarre move, are considering reneging — once again — on a commitment to state workers and the public by pulling the plug on supplemental state contributions to Maryland’s severely underfunded pension program.

It would save $71 million this year, $179 million next year and $233 million the third year. But, over a 25-year span this action would cost taxpayers a staggering $2.5 billion.

This suggestion from the legislature’s own analysts didn’t come out of the blue. The Department of Legislative Services was told by Democratic leaders in the legislature to find mounds of money that could be cut from the budget for later redistribution to their priorities — education and health care.

‘Deja Vu’

The result is an incredible prostitution of DLS’ fiscal stewardship. It is as though these analysts and legislative leaders learned nothing from the pension debacle of the past decade.

If approved, this proposal would be, as Yogi Berra once said, “Deja vu all over again.”

Solving a short-term budget problem would seriously threaten the state’s long-term fiscal viability — and its triple-AA bond rating.

Legislators would be gambling that a booming stock market continues over the next decade without let-up. This would easily erase the need for supplemental pension payments by the state to help close a whopping $19 billion unfunded liability.

But what if economic good times fade? What if — as is almost inevitable — the stock market suffers setbacks during that time?

Irresponsible Plan

Unfunded liabilities in the state worker and teacher pension accounts would soar, just as they did during the recent Great Recession.

It is a foolish and fiscally irresponsible proposal that never should have been presented to the legislature. It could make a bad situation worse and set off alarm bells at bond-rating agencies.

Interestingly, the Hogan administration considered this proposal and rejected it — even though it would have helped close a $1 billion budget gap.

Budget Secretary David Brinkley

Budget Secretary David Brinkley

David Brinkley, Hogan’s budget chief, said the decision was made to honor the state’s commitment to its employees.

In 2011, lawmakers approved reforms that raised employee payments to the pension system, reduced benefits for new workers and committed the state to increasing its annual payments.

Reneging on that agreement would be a terribly crass and unwise step, a slap in the face to state workers and public school teachers. They still must ante up additional paycheck dollars to fortify the pension system.

Moral Obligation

Why should state legislators walk away from their end of the bargain?

“What duty do we have to employees,” said Del. Tony McConkey of Anne Arundel County. “What moral obligation do we have”?

Del. Tony McConkey

Del. Tony McConkey

“A promise made is a promise kept,” noted Del. Mike McKay of Allegheny County.

Indeed.

Short-sighted illogic got Maryland into deep trouble the first time. Will lawmakers be foolish enough to go down that road again?

Glendening Started It

Back in the early 2000s, Gov. Parris Glendening intentionally underfunded state payments to the pension program so he could increase education aid. The legislature not only went along but came up with a flawed accounting gimmick to justify lower payments.

Known as the “corridor funding method,” this scam lets the state cut its pension allocations when times are good and stock market returns are strong.

But when the recession hit in the late-2000s that corridor became a dead end. The state’s pension liabilities skyrocketed. Tough, painful reforms had to be instituted.

Eventually, the state pension board agreed to phase out the corridor funding method that had caused all the trouble.

Walking Away

Now, DLS is proposing that Maryland repeat its actions of the early 2000s, but without calling it “corridor funding.” The state would walk away from its pledge to state workers and teachers and stop its supplemental payments.

Sure, there would be short-term benefits, enabling legislators to allocate more money for other priorities. Over the next 11 years, the state would save $2 billion that could be spread around to worthy programs.

But here’s the catch: In the subsequent 14 years, the state would have to shell out a staggering $4.5 billion in extra payments to make the pension fund whole.

Even worse, that calculation doesn’t consider what happens to the pension fund in the next two or three recessions. After all, economic downturns are inevitable and an integral part of the economic cycle.

Nightmare on State Circle

What a nightmare this could turn into.

As Brinkley told the House Appropriations Committee on Friday, if the pension fund’s earnings performance turns south over the next 10 years, “this will be a disastrous decision.”

The legislature’s fiscal leaders, especially Del. Maggie McIntosh of Baltimore and Sen. Ed Kasemeyer of Howard County, need to think hard about the dire consequences that could ensue by taking such a dangerous step.

They should remember what writer-philosopher George Santayana said:

“Those who cannot remember the past are condemned to repeat it.”

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Sticky Tax Conundrum

By Barry Rascovar

Feb. 23, 2015 — Sometimes a simple, sensible-sounding tax reform runs smack into sticky realities. The result is a puzzle for Maryland legislators trying to do the right thing.

That’s the case this session with bills (SB190, HB209) designed to clarify state law regarding the “taxable price” of discounted hotel rooms sold over the internet by travel websites.

Advocates claim companies like Orbitz and Expedia are ripping off the state by buying blocks of discounted rooms from hotels, re-selling them to Maryland consumers at higher rates but paying state sales tax on the original, lower purchase price.

Expedia logo

If that’s true, we should change Maryland’s tax laws and close this alleged “loophole.”

But it’s a complex situation in which the role of the internet travel companies isn’t transparent. There’s a yawning gulf between what lawmakers believe and what may be the true facts.

Confusion Abounds

Even the legislature’s fiscal analysts seem confused. They aren’t even sure if the proposed reform will result in more tax revenue. Opponents flatly assert the Department of Legislative Services got the facts wrong.

Travel agents maintain they are not purchasing discounted, hotel room blocks and then re-selling them to the public at a higher price. They maintain they aren’t in the room-selling business.

They say they are acting as an intermediary between the hotel and the consumer. The hotel negotiates a discounted room rate with the travel company, which then advertises this discounted rate. When a sale is made, the customer pays the discounted rate to the hotel, plus a service charge or fee that goes to the intermediary.

That extra charge isn’t taxed.Orbitz

The travel agents claim the hotels pay all the room taxes on the discounted, negotiated price. There’s no jacked-up extra room charge to consumers by Orbitz or Expedia other than that service fee.

Murky Issue

If all this is true, legislators need to take a closer look at those tax-reform bills. It may be a case of not understanding the true situation.

But it gets murkier.

The comptroller’s office is suing internet travel agents on much the same grounds. The case is before the Maryland Tax Court. Meanwhile, four counties already have sued the big internet travel sites and settled out of court.

While all this is going on in court, it seems senseless for the General Assembly to further confuse matters in ways that could mess up the current tax case and lead to years and years of new litigation.

There are other problems with the bills.

The measures would impact local travel agents, local tour operators and vacation rental managers. It would impose a new administrative tax burden on many small travel-related businesses.

Double Tax?

It also could wind up as a double tax on these local travel businesses, since they already pay a corporate income tax on their service fees.

Here’s another complication: This would amount to a new tax on services — an area where Maryland has tried not to impose levies. Is this opening the door to a broad application of the state sales tax to all service businesses?

Given the results of the last election, a drive to add more tax levies that will be paid by consumers seems ill-timed and poorly thought through. That’s especially true given the uncertainty about what’s really going on in the discounted hotel room-rate industry.

This is not the first tax squabble where well-meaning lawmakers have run into unexpected obstacles because the issue is poorly understood and hard to simplify.

For years, liberal lawmakers have pushed for a “unitary tax” on out-of-state corporations. The combined-reporting bill runs into insurmountable headwaters each session because it’s not a black-or-white issue. Previous studies show the reform might prove counter-productive and yield little in new revenue over the long haul.

Tread With Care

The best course for legislators on the room-tax issue is to proceed with caution.

Let the comptroller’s court case play out. That will provide additional definition of the “taxable price” of these discounted rooms, which is strongly under dispute.

There’s also need for more legislative study.

How do these internet travel sites really work? Do they jack up discounted room rates or not? Are they true intermediaries between the hotels and consumers, collecting only a service charge?

If the state starts taxing this travel-agent service, shouldn’t it do so uniformly on all business services? Would this be wise tax policy? Would it put Maryland businesses at a competitive disadvantage?

The more we learn about this room-tax issue, the cloudier things get.

With so much room for doubt, legislators would do well to pass on these tax-reform bills until they get a clear picture of what’s at stake and how the discount room-rental industry really works.

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Hogan’s Continuing Campaign

By Barry Rascovar

Feb. 11, 2015 — When is Gov. Larry Hogan Jr. going to stop campaigning and get serious about governing?

He started on the right foot with his “placeholder” budget that lets him tread water till he wraps his arms about the state’s fiscal problems next year.

He followed the same approach with his State of the State address. In most respects, it was a bland, “placeholder” address.

But then he and his speechwriters lost their focus and started waving the Republican Party’s bloody flag during that speech rather than reaching out sensibly to Democrats.

Hogan addresses legislature

Gov. Larry Hogan Jr. addresses MD General Assembly

He said little that was new. There were no rhetorical flourishes. He offered no surprises or initiatives.

Instead, he reverted to campaign mode, re-hashing his partisan themes and denigrating the prior Democratic administration.

Everything Gov. Martin O’Malley did was placed in the negative. Larry Hogan and the Republicans are here to save Maryland!

No wonder Republicans applauded and Democrats responded with silence and growing anger.

Taxes are too high. We’re overregulated,. We need to get government off our backs. We’re anti-business. Maryland is in trouble. It’s headed in the wrong direction.

Sure, Maryland is beautiful. It’s citizens are hard working. But we’ve got to “get Maryland back on track.” Clearly Hogan thinks he knows how to do it.

Economic Turnaround

He pledged to turn Maryland’s economy around.

Who is he kidding?

Maryland is at the mercy of large, macro-economic trends and developments. He’s promising more than he can deliver.

Limited Role

Like any governor, Hogan can only nibble around the edges to make Maryland’s economy stronger and create jobs.

He is fortunate the national economy continues to show steady improvement. If that continues, Hogan will be the beneficiary. But he can’t claim he helped cause it.

His State of the State Address laid out a number of steps he wants to take in his first year, but few are realistic or achievable. They are far too partisan.

The worst aspect of his speech was the overwrought refrain about the dreadfully misnamed “rain tax.”

What an evil! Why, it’s almost sinful to ask counties to raise funds to prevent stormwater runoff from polluting the Chesapeake Bay and its tributaries.

Demanding an end to the “rain tax” is good Republican red meat.

The fact that the tax is pretty much voluntary already is irrelevant to Hogan. He’s in this fight for long-term political gain. He’s using this gambit to undercut Democrats.

He’s also making enemies in the General Assembly — powerful enemies he will need as friends in short order.

Democrats’ Response

There was few references to bridge-building in Hogan’s speech, or in the press conference he called to introduce his “rain tax” abolition bill. He was using tired campaign rhetoric.

No wonder Democratic leaders responded with coolness, followed by sharp criticism.

Then they delayed approval of his Cabinet appointments.

The battle lines are hardening far earlier than anticipated, and Hogan is to blame.

The new governor’s State of the State address was so short on specifics as to make it a useless document for determining how he intends to find common ground with the dominant political party in the General Assembly.

His “rain tax” remarks this week added fuel to the fire.

Hogan -- State of the State Hogan can win most of his budget fights with the legislature, but he is a sure loser on all other legislative matters if he doesn’t stop his partisan rants. He needs to figure out where he and House Speaker Mike Busch and Senate President Mike Miller are in agreement.

Delivering a budget that necessarily tightened the state’s purse strings was bound to cause ill will and anger. Hogan has done little since then to bridge the gap with Democrats.

In his State of the State address, Hogan pledged to “create an environment of trust and cooperation, one in which the best ideas rise to the top based upon their merit, regardless of which side of the political debate they come from.”

A week later, that remark seems a mere platitude.

Until Hogan drops the partisan politicking, his legislative agenda is dead in the water.

He’s got to start acting like a governor, not a candidate.

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Hogan’s Era of Good Feeling

By Barry Rascovar

Jan. 21, 2015 — At least for a brief moment, Gov. Larry Hogan Jr.’s Era of Good Feeling ruled Annapolis.

Hogan Inauguration

We’ll soon learn if his strong message of bipartisan harmony and mutual respect can survive the harsh reality of Hogan’s first, greatly diminished budget, which he’ll release Thursday.

Hogan’s inaugural, with snow flakes falling faster and faster as the event progressed, struck all the right chords.

“Dignity, respect and camaraderie” is what we expect from our public servants, said Jim Brady, who presided over the outdoor ceremonies on the State House steps and also ran Hogan’s transition team.

“Focus on things that unite us” and “work across party lines,” was how Lt. Gov. Boyd Rutherford put it.

“Compromise and consensus are not dirty words,” emphasized New Jersey Gov. Chris Christie, who introduced the new Maryland governor and championed Hogan’s election.

Hogan’s Themes

“A rebirth of our spirit and common purposes,” is how the 62nd governor of the Free State expressed it. No more “wedge politics and petty rhetoric.” A “new beginning.” A “sense of optimism.” “Limitless possibilities.” “An environment of trust and cooperation” where ideas are acted upon “based on merit.”

All the right words. It was a typical inaugural, full of positives and good wishes.

Hogan came across as he always does: a down-to-earth fellow who wants to run government with the focus on efficiency and effectiveness, not political ideology. He repeatedly used the term “common sense” to describe how he will govern.

He quoted a Democrat (John F. Kennedy) and a Republican (Abraham Lincoln) to stress the need for a new approach in political Annapolis that sets aside differences and finds “middle ground.”

A Little Red Meat

There were a few digs sprinkled among the words of comity, especially when Hogan spoke of “rebuilding the forgotten middle class” and getting government “off our backs and out of our pockets” — red-meat Republican applause lines straight from his campaign monologue.

Once the celebrations are over late tonight, the real work begins. It won’t be pretty and it won’t be met with unified applause.

Hogan promised to set Maryland on a different course, one that re-shapes the bloated state budget in ways Democrats are likely to resist.

The Inauguration Scene

The Inauguration Scene

There is growing agreement even on the Democratic side that Maryland has been living beyond its means, that spending on programs is expanding faster than the tax receipts coming in.

But will lawmakers stand by idly as cuts are made to education and health care? Are they willing to forego mass transit lines? These are the kinds of questions intentionally left out of inaugural speeches.

Putting Maryland on a more sustainable fiscal footing is an admirable goal that could help Hogan meet his pledge to lower taxes. Yet it will be difficult to achieve in the short term and possibly even in the long term unless Hogan gets  a boost from the national economy.

On another front, Hogan can take early, unilateral steps to cut red-tape and bureaucratic regulations. It’s been needed for a long time. The push-back from special interests could be intense, though.

For a day, Larry Hogan’s vision of a less partisan, more practical state government in Annapolis held sway.

The Hogans and Rutherfords in the State House.

The Hogans and Rutherfords in the State House.

His unfailing optimism and ability to search for areas of agreement are his greatest assets. He’s taking a more accommodating track than Maryland’s last Republican governor, Bob Ehrlich.

So far, Hogan is off to a cheery and encouraging start.

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