By Donald C. Fry
Going into the 2013 General Assembly session, business advocates hoped lawmakers would consider passing legislation to address the state’s growing crisis in funding transportation infrastructure.
But even the most optimistic of transportation advocates, myself included, gave passage of a transportation revenue bill a 50 percent chance at best – largely because of lawmakers’ long-standing reluctance to increase transportation funding by the $600 million to $800 million it would take to begin easing the more than $40 billion backlog of unfunded priority projects around the state.
But lawmakers this year delivered. They passed the first comprehensive transportation revenue package in decades and, on the last day of the session, even passed a constitutional amendment creating a lockbox to protect transportation funding from being used for other purposes.
What changed? Several things. First, the General Assembly’s own fiscal analysts projected, because of stagnating revenue to the state’s transportation fund, that by 2017 Maryland would not have any funding for new transportation projects and could afford only maintenance of the state’s roads, bridges, transit and other transportation assets.
Second, Virginia’s state legislature this year managed to pass a badly-needed transportation revenue package that raised basically the same amount of new funding Maryland legislators had been avoiding like the plague for at least a decade. This instilled a fresh spate of competitive pressure on those under the Maryland State House dome.
Third, and perhaps most important, the state’s top elected officials, Governor Martin O’Malley, Senate President Mike Miller, and Speaker of the House Michael Busch forged a consensus and demonstrated political courage and leadership to address this long-standing state need.
Something else happened in Annapolis this year. Lawmakers didn’t stop with just passing the transportation bill. They delivered positive outcomes on a number of key issues relating to the state’s competitiveness for business growth and job creation.
They passed a host of bills supported by business advocates, including a bill to encourage private-sector investment in infrastructure projects through public-private partnerships, a new tax credit for cybersecurity investment, and tax credit increases for research and development, biotechnology investment and film production.
This year, the issue of business competitiveness and job creation rose to the top of the priority list in Annapolis. For example, lawmakers passed two-thirds of the bills the Greater Baltimore Committee supported.
Following are summaries of keynote issues for the GBC and other business advocates that gained favorable outcomes this session.
• Transportation funding. The General Assembly passed HB 1515, a consensus proposal by Governor O’Malley, Senate President Miller and House Speaker Busch that was the GBC’s top priority. It is estimated to generate up to $3.4 billion in new revenue to the state’s transportation fund over the next five years and will allow the state to begin addressing the massive backlog of unfunded transportation projects.
• Transportation funding lockbox. Lawmakers passed SB 829, a constitutional-amendment lockbox bill sponsored by Senate President Miller and supported by the GBC that would require Transportation Trust Fund proceeds to be used only for transportation purposes. For any other use, the measure requires a declaration of a fiscal emergency by the governor and a three-fifths vote of the entire General Assembly. In the final two hours of the session, the measure passed the House by a 106-32 vote and the Senate by a 40-7 vote. This proposal will appear on the 2014 election-year ballot for voter approval.
• Public-private partnerships. On the last day of the session, lawmakers passed HB 560, another GBC priority that establishes state policy on the use of public-private partnerships and expressly authorizes specified state agencies to enter into them. It is expected to be a key option for the state to leverage private-sector funding for transportation assets and other infrastructure projects. The bill creates a streamlined process by which state agencies and private industry can partner in financing and delivering public infrastructure projects.
• School construction in Baltimore City. Lawmakers passed an amended version of HB 860, a high priority of the GBC, that will overhaul the way public school construction is financed in Baltimore City. The measure leverages approximately $1.1 billion in funding by allowing the Maryland Stadium Authority to issue bonds that would generate funding for construction of 15 new schools and renovation of 35-40 other schools.
• College readiness. A bill to improve college readiness of Maryland’s high school students, SB 740, passed on the last day of the session. Among other things, the legislation is intended to address an alarming need for remedial courses in math and English among Maryland high school graduates when they enter college. More than 57 percent of students attending community colleges in the state need remedial courses, while 24 percent of Maryland high school graduates who go to a four-year college require remedial courses, according to state data.
Bioscience and Technology
• Cybersecurity tax credit. On the last day of the session, lawmakers passed HB 803, creating a tax credit for investment in Maryland cybersecurity companies. The bill authorizes $2 million per year in tax credits between fiscal 2014 and 2018. Personal and corporate investors can claim a 33 percent income tax credit for an investment of up to $250,000 in a cybersecurity company located in Maryland.
• Biotechnology tax credit eligibility. Lawmakers passed HB 328, which expands tax-credit eligibility for investors in Maryland biotechnology companies. It would extend eligibility for biotechnology businesses older than 10 years by calculating from the date that the first tax credits were awarded to investors rather than the start date of the company. The legislation is intended to take into account the longer early-stage and product development cycles experienced by biotechnology companies.
• Biotechnology tax credit. The operating budget passed by lawmakers includes $10 million in available tax credits for biotechnology investment, a $2 million increase from the current fiscal year.
Expanding the Economic Base
• Job skills training. Lawmakers passed an administration bill that would nurture the creation of industry-led partnerships to advance the skills of the state’s workforce. Companion bills, SB 278/HB 227, passed both the Senate and the House by substantial majorities. They establish the Maryland Employment Advancement Right Now (EARN) program within the Department of Labor, Licensing and Regulation to provide competitive grants to industry partnerships to develop workforce training programs.
• Research and development tax credit. Passage of HB 386 increases available funding for research and development tax credits to $8 million from $6 million available in the current fiscal year.
• Film production tax credit. Lawmakers passed SB 183, which increases the amount of available tax credits for film production activity from its current level of $7.5 million annually to $25 million in FY 2014. Available tax credits will revert to $7.5 million in FY 2015 and FY 2016.
• Corporate training centers. On the final day of the session, lawmakers passed a GBC-supported bill, SB 631, which will exempt corporate training facilities that have lodging for employees from paying county hotel taxes. Currently, counties in Maryland require corporate training facilities to pay hotel taxes, even though such corporate lodging facilities are not open to the public and are used exclusively to lodge employees attending training programs.
• Combined reporting. Legislation strongly opposed by the GBC and business advocates that would have instituted a combined reporting method of tax calculation for Maryland corporations with operations in other states, died in both Senate and House committees.
Lawmakers passed HB 228, which put in place policies necessary to further implement federal health care reform in Maryland. Specifically, this bill provides funding for the Maryland Health Benefit Exchange, which is slated to begin open enrollment by October 1. Health insurance offered to individuals and small businesses through the Exchange will be effective January 1, 2014.
The bill expands Medicaid coverage and enables the Exchange to become financially self sufficient by 2015, according to the legislation’s fiscal note.
The exact impact of the bill on small businesses is difficult to quantify, say state fiscal analysts. However, beginning in 2014, the Exchange will be the only place small businesses will be able to receive tax credits for offering coverage, providing incentives for small businesses who do not offer coverage today.
Including federal funding to subsidize premiums for individuals making less than 400 percent of the poverty level (approximately $44,000 per year), the projected impact of the legislation on all providers, health care expenditures and jobs is $682 million in increased funding and 9,000 new jobs in 2014, according to the fiscal note.
Lawmakers passed the O’Malley administration’s offshore wind legislation, HB 226. The legislation adds offshore wind energy to the state’s renewal energy standards. Beginning in 2017, the bill requires retail electricity sales in the state to include up to 2.5 percent from offshore energy sources. The specific required annual amount from offshore energy would be determined by the Maryland Public Service Commission.
What made the difference in Annapolis this year? In previous legislative sessions, business was frequently the target of proposed legislation that would hurt our state’s competitive position. Although legislative efforts contrary to business interests are still a concern, this year’s session did not leave the impression business had a target on its back.