Donald Fry: What did state lawmakers achieve before the meltdown?

 

By Donald C. Fry

The so-called “Doomsday” budget that resulted from the 2012 General Assembly’s failure to enact two key pieces of fiscal legislation had some negative impacts on business development. It cut three important tax credits for business growth and also eliminated more than $260 million in state funding initially targeted for education at all levels.

But before their budget meltdown on the session’s final day, lawmakers did generate a number of other outcomes that relate to core pillars of a good business climate compiled by the Greater Baltimore Committee from business leaders and economic development experts and outlined in the GBC’s signature report, “Gaining the Competitive Edge.”

Significant adverse Doomsday effects on Maryland’s business climate included notable blows to state investment in bioscience industry growth in Maryland, by eliminating $10.4 million in stem cell research funding, and $8 million in tax credits for biotechnology investment.

Also, $7 million to fund another proven valuable state incentive for development – Sustainable Communities tax credits – was cut by the Doomsday budget. Meanwhile, $204 million in state funding for public schools was eliminated, as was $60 million for public and private higher education institutions.

These outcomes detract from two important GBC core pillars for a good business climate: state investment in business development and superior workforce development.

Beyond the Doomsday effects, however, there are other noteworthy business-related outcomes from this year’s General Assembly session.

Legislation that passed includes:

Maryland Innovation Initiative. House Bill 442, promotes technology transfer from Maryland research universities to the private sector through a grant program funded by University System of Maryland institutions and other higher education sources.

Security Clearances. Senate Bill 296, offers Maryland companies tax credits to defray costs related to obtaining security clearances. Tax credits to expire in 2017.

Tax credits for job creation. House Bill 592, extends until 2027 the law that gives businesses with more than 2,500 employees tax credits for jobs created by expansions in Maryland.

Procurement from small businesses. Senate Bill 549 and companion legislation, House Bill 456, expands the definition of small businesses that can participate in the state’s small business procurement program.

Life Sciences Advisory Board. Senate Bill 405 will add to the state’s Life Sciences Advisory Board three additional members with executive small business experience in the life sciences.

These bills address GBC core pillars that include state investments in business growth and positive state support for business as a partner.

Noteworthy business-opposed legislation that didn’t pass includes:

Sales tax expansion. House Bill 1051 would have applied the state’s sales tax to an expanded list of more than two dozen services, including cable television, car repairs, barber and beauty services, business consulting, real estate management, photo and art services, and dieting services. The bill would have increased tax revenue by an estimated $296 million.

Combined reporting. Senate Bill 269 and House Bill 941, both of which would have shifted Maryland’s corporate income tax system to a method that would take into account income to Maryland firms earned in other states, died in their respective committees.

These bills would have worked against the core GBC pillar business climate pillar: a tax structure that is fair and competitive.

Business-supported legislation that didn’t pass includes:

Research and development tax credit. Senate Bill 570, which would have increased tax credits for research and development expenses, passed the Senate on March 22 but did not emerge from the House Ways and Means Committee. The amended version of the bill would have increased the annual available tax credits to $18 million.

Public-private partnerships. Senate Bill 358, which was intended to promote the development of public-private partnerships, endured amendments in both houses. The House passed its amended version in the final hours, but the bill never got to the Senate for concurrence.

Film Production Tax Credit. Senate Bill 1066 would have extended the expiration of the existing film production tax credit from 2014 to 2016 and increased the amount of annual available tax credits from $7.5 million to $22.5 million. The bill passed the Senate on March 22, but did not emerge from the House Ways and Means Committee.

Finally, for the 20th consecutive year, state lawmakers failed to ensure sufficient funding exists in the state’s Transportation Trust Fund to provide for a well-developed and maintained transportation infrastructure – a prominent core pillar cited by the GBC’s “Competitive Edge” report as essential to a competitive business climate.

A decade of advocacy by the Greater Baltimore Committee and statewide business leaders to address the growing crisis in funding roads and transit has clearly identified serious issues that block state legislators from acting. They include clashing rural and urban perspectives regarding transit, whether transit should be funded by gas taxes, and a demonstrated reluctance to enact any substantial transportation revenue mechanism, much less one that accounts for inflation.

State lawmakers must find a way to resolve these issues if Maryland’s transportation infrastructure is to again be adequately funded.

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