Donald Fry: Transportation legislation not the only issue on business radar in Annapolis

By Donald C. Fry

While business advocates are focusing much attention on Governor Martin O’Malley’s proposal to address Maryland’s crisis in funding its transportation infrastructure, lawmakers are considering a number of other issues that would impact the state’s competitive business environment.

Business and transportation advocates are reviewing the details of the governor’s bill filed last week that seeks to ultimately raise an estimated $613 million per year in new revenue to the state’s Transportation Trust Fund by applying Maryland’s 6 percent sales tax in 2 percent annual increments to the price of gas over the next three years.

The legislation, SB 971/HB 1302, also contains a braking mechanism that could postpone phasing in the tax increase in a year when the price of gas has risen by more than 15 percent in the previous year.

Another key provision would protect the state’s transportation fund from routine transfers by lawmakers to the state’s general fund for non-transportation purposes. The governor’s bill would require three-fifths favorable committee votes in the House and Senate for any future legislation to transfer transportation funds, or would require the governor to proclaim a state of emergency resulting from a major catastrophe.

Other provisions would provide more transportation funding to local governments, establish a workgroup to study the creation of regional transit financing authorities, and enact a two-dollar increase to the registration surcharge to support the state’s emergency medical system fund.

The governor’s bill is before the Senate Budget and Taxation Committee. In the House, the bill has been jointly assigned to the Ways and Means Committee and the Environmental Matters Committee. No hearings have yet been scheduled.

A well-funded and maintained transportation infrastructure is among eight core pillars for a competitive state business environment and job creation compiled by the Greater Baltimore Committee from Maryland business leaders and economic development experts.

Other core pillars are: government as a partner, not an adversary; workforce development that meets business needs; streamlined and stable regulatory policies; fair and competitive tax structure; competitive costs of doing business; effective state investments in business growth; and a long-term, aggressive and well-funded business marketing strategy.

Other legislative issues relating to these core pillars for a competitive economic environment include:

Maryland Innovation Initiative This administration legislation, Senate Bill 239 and House Bill 442, is intended to address the significant challenge Maryland faces in converting the wealth of research conducted in our state into technology-driven commercial products and services. Maryland leads the nation in research, but lags significantly behind competing states when it comes to commercializing it.

This legislation would create within the Maryland Technology Development Corporation (TEDCO), a fund of at least $1.25 million from which grants could be issued to promote technology transfer to the private sector and nurture the development of research-based “high impact” economic development activities. The fund would be created through annual contributions of $250,000 each from five Maryland nonprofit research universities – Johns Hopkins University, Morgan State University, University of Maryland College Park, University of Maryland Baltimore County and University of Maryland, Baltimore.

This type of state investment dedicated specifically to converting research into private-sector economic development, is well-targeted to business growth, job creation and cultivating stronger economic competitiveness for Maryland.

Public-private partnerships. Administration legislation, House Bill 576, to establish state policies regarding public-private partnerships will be heard Feb. 24 by the House Environmental Matters Committee. The potential for public-private partnerships is illustrated by the existing partnership with Ports America to operate the Seagirt Marine Terminal. Such partnerships are an important resource for applying private-sector resources to bear in operational and capital challenges faced by our fiscally-constrained state. It’s to Maryland’s benefit to develop a set of policies that provide for careful planning of such agreements, but to also ensure reasonable and timely government overview and implementation.

Research and development tax credit – small business refund. House Bill 943, sponsored by Delegate Kumar Barve (D-Montgomery), and Senate Bill 570, sponsored by Nancy J. King (D-Montgomery) and 11 other senators, would apply to small businesses – defined as firms with less than $5 million in assets – that are awarded tax credits for research and development. The bill proposes that, if the amount of a tax credit awarded a small business exceeds the income taxes owed that year, the small business may take the excess amount as an immediate refund, rather than apply it to income taxes in future years. This bill would offer a reasonable potential fiscal benefit to technology-oriented small businesses, upon whose growth we will be depending.

Security clearance expenses. Senate Bill 296, sponsored by Senator Roger P. Manno (D-Montgomery) and 27 other senators, and House Bill 1248, sponsored by Delegate Justin D. Ross (D- Prince George’s) and six other delegates, would allow companies or individuals seeking federal security clearances to claim a tax credit for the total cost of obtaining them. Gaining security clearances has been identified as a significant barrier to national security operations, which involves a number of Maryland contractors.

In light of the sizable number of federal contracting jobs in Maryland that require security clearances, it is within our economic interests as a state to ease barriers to employment in the security-clearance fields. This legislation could provide those seeking work at places like the National Security Agency and U.S. Cyber Command headquarters at Fort Meade and other military, intelligence and aerospace installations, with a useful tool in competing for high-paying jobs in this critical sector by reducing the expenses associated with expanding Maryland’s security-cleared workforce.

Tax Credit Evaluation. House Bill 764, sponsored by Delegate C. William Frick (D-Montgomery) and 17 other delegates, would require General Assembly committees to review tax credits every five years to determine if the state should continue to offer them. The review would look at the intent of the tax credit and whether the state is meeting the articulated goals. Some business groups opposed a similar bill introduced last session, arguing that a provision to place arbitrary expiration dates on credits would create too much uncertainty for companies that rely on them.

Tax credits are among the most valuable incentives at the state’s disposal to promote business growth and a competitive business climate. It’s certainly fair to review them. But lawmakers currently have the authority, and exercise it, to review the state’s tax credits every year when they consider funding them.

These are just a few issues relating to business competitiveness that have surfaced this year in the form of legislation. Another key issue to business competitiveness – streamlining the regulatory process – was raised in January by Governor O’Malley in releasing his agenda for the 2012 session.

The governor reported that, as a result of internal reviews and business suggestions, state agencies have recommended 150 existing regulations for either elimination or streamlining in order to spark faster job creation. He was to review them and submit recommendations to the Administrative, Executive and Legislative Review Committee during the session.

Business advocates eagerly look forward to these recommendations and are hopeful they mark the beginning of a regulatory reform initiative to ultimately strengthens Maryland’s position regarding a core pillar of competitiveness that is critically important to businesses across the state.