Maryland Companies Have Billions in Assets Overseas

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The president’s budget, released in early March, called for the creation of a national fund to finance repair of the nation’s crumbling roads, bridges and other infrastructure — an idea also proposed by a freshman Maryland congressman.

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US Rep. John Delaney, D-Potomac

Rep. John Delaney, D-Potomac, wants to fund infrastructure repair by bringing home billions of dollars in foreign earnings from U.S.-based corporations.  The congressman said he has been long concerned about decaying infrastructure.

Delaney’s Partnership to Build America Act would create a new way to pay for these repairs. Corporations would provide the money by buying bonds in The American Infrastructure Fund.

In exchange, they would be allowed to bring back money locked up overseas without paying the full 35 percent corporate tax rate.

Delaney’s bill could come as a relief to corporations with large foreign operations that have deferred paying U.S. corporate taxes on their overseas earnings indefinitely. For example, 10 Maryland-based multinational corporations, including Columbia-based MICROS Systems Inc. and Baltimore-based Under Armour Inc., are holding a combined $3.5 billion overseas, according to filings with the Securities and Exchange Commission.

Screen Shot 2014-04-01 at 1.42.15 PMWhile it would mean a major tax savings, none of the 10 publicly held Maryland companies contacted would comment on the proposed legislation.

One expert said there’s little incentive to bring the funds back with so much business opportunity overseas. Instead, it makes sense for U.S. companies to let the overseas funds stay put and postpone a U.S. tax bill.

“It’s better to defer,” said Michael Faulkender, a finance professor at the University of Maryland’s Smith School of Business.

Further, the Delaney proposal is out of sync with many plans to overhaul the U.S. tax code, he said. “Every proposal on the table is for the corporate tax rate to go down, not up.”

Rich Badmington, W.R. Grace & Co.’s vice president of global communications, said most of the Columbia chemical company’s revenue comes from international operations. The company plans to continue investing in those operations.

“We are able to do that without bringing cash back to the U.S. because we are continuing to invest,” Badmington said. “(Research and development) is a function that requires continuing investment and we have quite a lot of that outside the U.S.”

President Barack Obama’s latest budget plan called for the creation of a government-owned entity to finance infrastructure projects. Delaney said the president’s support for something similar to his bill was “great,” and said it shows how much momentum the bill has.

“We’re very optimistic about it, we have strong bipartisan support,” Delaney said.

The bill has 57 co-sponsors in the House and 12 in the Senate, including Sens. Lindsey Graham, R-S.C., and Michael Bennet, D-Colo., head of the Senate Finance Committee’s Taxation and IRS Oversight subcommittee. Hearings have not been scheduled for the bill.

Under the tax code, corporations can avoid paying taxes on foreign earnings as long as the money is being permanently reinvested overseas. When the corporations decide to bring these funds back home, a process called “repatriation,” the money then is subject to U.S. taxes.

Originally, the tax exemption was meant to help U.S. corporations compete overseas, said Mitchell Kane, a tax professor at New York University’s School of Law. Companies claimed paying taxes in two countries would put them at a disadvantage and the government responded with the exemption, he said.

The plan was to have the companies pay foreign taxes, which in many cases are lower than the U.S. tax rate, and then pay U.S. taxes when the money was repatriated. After this process, the company would receive a credit for any foreign taxes paid, Kane said.

Allowing such an exemption has created an incentive for companies to keep their money overseas and defer the U.S. corporate tax, said Jane Gravelle, an economist with the Congressional Research Service. But parking money offshore isn’t a long-term solution for companies, she added.

“They may think they can hold their breath forever and borrow money,” Gravelle said. “How long are they going to be able to do that? Shareholders eventually want dividends.”

This exemption could result in $265.7 billion in lost revenue for the federal government through 2017, according to a 2013 report by Congress’ Joint Committee on Taxation.

For now, however, companies aren’t likely to repatriate without a major tax discount.

W.R. Grace has more than $1.1 billion held overseas and would have to pay $149.7 million in taxes if it was repatriated, according to SEC filings. That money will remain overseas, except in instances where repatriation would result in minimal or no U.S. taxes, the company said in its most recent SEC filing.

MICROS Systems, a Maryland-based computer hardware and software producer, has about 61 percent of its cash and cash equivalents, $385.8 million, held internationally with no plans to repatriate, according to the company’s most recent filings with the SEC.

Maryland-based apparel company Under Armour has $95.2 million, or 27 percent, of its cash and cash equivalents held overseas with no plans to bring it back.

Spokespersons from MICROS and Under Armour could not be reached for comment.

Other companies have begun to repatriate their foreign funds, which Kane said could help cover corporate expenses. McCormick & Company, a spice, herbs and flavoring manufacturer, repatriated $70 million in 2012, according to the company’s most recent SEC filings. Even still, most of the company’s cash is held in foreign subsidiaries, the filings said.

A spokesperson for McCormick and Co. could not be reached for comment.

Some of the largest U.S. corporations make about half of their money internationally, Delaney said. The bill is just a way to get some of it back.

“It creates a way for some of that money to come back, which is good for our economy,” Delaney said. “And it creates this large-scale infrastructure fund, which is good for our country.”

Instead of government funding, the American Infrastructure Fund would raise cash through a $50 billion bond offering. Companies would buy the bonds at a 1 percent fixed interest rate and a 50-year term, in exchange for a chance to repatriate a certain portion of overseas earnings tax-free for every dollar spent on bonds.

A bond to repatriation ratio would be determined by an auction and could result in companies paying an effective 12 percent tax rate, Delaney said. Money raised in the bond sale could then be leveraged and loaned to state and local governments for projects.

The auction process will benefit both the infrastructure fund and the corporations, which will be able to find a price that is right for them, Delaney said.

“We’ve talked to them and they’re very supportive of it,” he said.

The American Business Conference, Associated Equipment Distributors and Terex Corporation are among those supporting the bill.

Tech giants and pharmaceutical corporations have lobbied for a repatriation holiday since the 2004 American Jobs Creation Act allowed them to repatriate at a discounted rate. Because of the intellectually-based capital that these companies thrive on, it is sometimes easier for them to keep assets overseas.

For example, Apple has $124.4 billion held overseas, according to the company’s most recent SEC filing.

The 2004 bill reduced repatriation taxes to 5.25 percent if corporations promised to invest the money at home. The one-year holiday is widely regarded as a failure because it spurred an increase in repatriation, but not an increase in jobs or investments, according to a report by the Congressional Research Service.

“The argument was that it would be a stimulus” to the U.S. economy, Gravelle said. “Most people who studied this found out it was being used to repurchase shares.”

Share repurchases are a common way to boost stock prices.

Corporations used the money to pay stockholders dividends and pay off debts, which doesn’t make for a good stimulus, she continued.  Instead, the holiday created a “moral hazard” and companies have parked money overseas, waiting for the next holiday, Gravelle said.

Delaney’s bill has short-term benefits but doesn’t address the larger problems with the tax code, Faulkender said. Corporations will want to move more and more operations overseas if they can find discounts on U.S. taxes, he added.

“If you signal that firms are going to realize a lower tax rate, even after repatriation, on their foreign operations than on their domestic operations, you’re going to incentivize even more offshoring,” he said.

“I don’t think that’s good for the U.S. economy.”

By 
Capital News Service

Maryland Senate Passes Marijuana Decriminalization Bill

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ANNAPOLIS — After a 22-minute debate Friday, March 14, the state Senate passed a bill to decriminalize recreational use and possession of small amounts of marijuana in Maryland with a bipartisan vote of 36 to 8.

If passed by the House and signed into law, the legislation would reclassify the possession or use of less than 10 grams of marijuana as a civil offense punishable by a $100 fine. It is currently a criminal offense punishable to no more than 90 days in jail and a fine of up to $500. Convicted juveniles and, in accordance with an amendment proposed by Sen. Christopher Shank, R-2-Washington, adults convicted for a third or subsequent time also could be mandated by court to attend drug treatment or education programs.

Bill co-sponsor Sen. Robert Zirkin, D-11-Baltimore County, told lawmakers Friday, March 14 that the 18 states that already have decriminalized small amounts of marijuana have seen “no discernable effect.”

“When [the other states] moved from a criminal to a civil statute, there has been no increase in drugged driving, no increase in marijuana usage, no increase in the so-called ‘gateway effect,’” Zirkin said.

Opponents previously have argued that marijuana can be a “gateway” to more dangerous drugs.

Shank, who sponsored another amendment that would direct revenue from citations to the state Department of Health and Mental Hygiene to combat drug abuse, also testified in favor of the bill. He did, however, acknowledge that he is opposed to the drug’s legalization.

“The war on drugs … is not working in the state of Maryland. It is not working in the United States. We are spending incredible resources with our judiciary with our law enforcement, and the rate of drug use is not going down,” he said.

Sen. Bryan W. Simonaire, R-31-Anne Arundel, cast one of the eight votes against the legislation.

“I think it sends the wrong message to our children. There’s quite a buzz in our high schools about this bill. … And what I’m hearing is that it’s just like a speeding ticket: They don’t want a speeding ticket, but if they get it, they just move on,” Simonaire said.

“Two years ago, I believe we had a ‘Just Say No’ policy to drugs, which many parents agree with. Now, under this, I think it’s more like, ‘Just Say a Little’ — like 10 grams — and then, at this rate in a year or so, we would just say, ‘Just Do It,’” Simonaire said.

The Senate also passed a decriminalization bill last year by a margin of 30-16, but it died in a House committee.

Another bill, which would decriminalize the possession of a slightly larger amount of marijuana, was debated Thursday, March 13 in the House Judiciary Committee. The sponsor, Del. Heather Mizeur, D-20-Montgomery, who is running for governor, proposes decriminalizing one ounce of marijuana — which is approximately 28 grams. The committee has not yet taken further action.

Proposals to legalize and tax marijuana in Maryland also are pending in House and Senate committees.

By SARAH TINCHER

Capital News Service

O’Malley Hears From Businesses Supporting Minimum Wage Hike

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Screen Shot 2014-03-07 at 1.34.48 PMA day after House Republicans unsuccessfully pushed to amend Gov. Martin O’Malley’s minimum wage bill to provide greater protections for businesses, O’Malley touted the plan Thursday, March 6 before a group of business owners who support an increase of the state’s minimum wage.

O’Malley’s proposal, which would gradually raise the base rate of pay for most workers to $10.10 an hour, was expected to go before members of the House for a vote on Friday, March 7.

Sitting around a conference table at Linemark printers, O’Malley and about a dozen business people from across the state discussed how a hike would benefit companies of all sizes by boosting the economy and reducing turnover costs for companies.

“From time to time, we raise the minimum wage to keep pace with inflation for the people who work at minimum wage,” O’Malley said. “But also, as importantly, it’s to make our economy grow. Because the more a worker earns, the better able they are to be good customers for business. … When people earn more, businesses have more customers.”

Linemark President Steve Bearden was one of several business owners who told the governor that paying a higher wage has contributed to the success of his company.

Bearden said his business employs 125 people and pays a starting wage of $10.50 an hour, which he said has helped tremendously with employee retention.

Nancy Meyer, CEO of Community Forklift in Edmonston, said that a small business’ biggest asset and biggest expense is its workforce, and it pays to invest in it.

“Small businesses that don’t pay their employees well often fail,” Meyer said. “If you’re buying expensive equipment, that’s fine, but if you’re not paying your people well enough and training them well enough, your business will fail.”

Meyer said Community Forklift, which sells environmentally-friendly building materials, has a staff of 50 people and pays a starting wage of $11 an hour.

She said that small businesses are key job creators, and ensuring they don’t fail is important.

Many Republican lawmakers who oppose a minimum wage hike agree. But during a heated debate on the House floor Wednesday, March 5, some argued that increasing the base rate employers have to pay will hurt small businesses and ultimately damage the economy when business owners who can’t afford the raise have to cut jobs.

Those gathered at Linemark, though, said an increase would actually benefit many businesses by putting more money into the pockets of low-wage workers, who are more likely to spend their paychecks out of necessity, rather than put them into a savings account.

Denise Bowyer, vice president at American Income Life Insurance Company, called it the “multiplication factor.” By increasing employees’ hourly wages by a few dollars, she said, the employer’s “consumer base is multiplied.”

O’Malley’s proposal is still awaiting a vote by members of the Senate Finance Committee, and O’Malley said March 6 he hopes the Senate will pass a version at least equivalent to what is before the House.

The governor said he was “disappointed” that the House Economic Matters Committee eliminated a provision of his bill that would index the minimum wage to rise with the cost of inflation.

“It’s been my experience that legislators tend to index to inflation things which they should not, and tend to impose flat [rates on things] which should be indexed,” he said.

The committee also delayed the date when the proposed raise would begin to be implemented. The amended measure would increase the minimum wage in three stages, postponing the end goal of $10.10 an hour to 2017, six months later than O’Malley’s initial proposal.

Report Shows Some Improvements in Bay Restoration

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ANNAPOLIS-Amidst statewide debate about how to fund restoration of the Chesapeake Bay, a report released Thursday shows that many local and national efforts to curb pollution have had a positive effect on the watershed.

The New Insights report was conducted by the Chesapeake Bay Program and looked at more than 40 case studies in the Chesapeake bay watershed examining whether practices aimed at reducing nutrients in the water worked.

According to the report, wastewater treatment plant improvements, reductions in nitrogen released in the atmosphere and reducing agricultural land runoffs were three of the most effective long-term practices for water quality improvement.

This was the first time the program had looked at that many sites and monitored data from before many pollution controls, or best management practices, were implemented, said Nicholas DiPasquale, Chesapeake Bay Program director.

Some of the data analyzed in the report was from as far back the mid-1980s, said Bill Dennison, an author of the report and vice president for science applications at the University of Maryland Center for Environmental Science.

While some of the information in the study was expected, DiPasquale said the research team did not expect as high a reduction of airborne nitrogen as the report showed.

Some of the reasons for the improvements were regulatory programs aimed at reducing air emissions from power plants, legislation like the Clean Air Act and an increase in fuel-efficient automobiles.

He said the air quality in other states can impact the Chesapeake bay watershed because west to east winds from states like Ohio and Michigan can affect the nitrogen content of Maryland’s air which then can impact the state’s waters through rain.

But the report also highlighted efforts by Marylanders using local solutions to clean up the watershed.

The town of Centreville, on the Eastern Shore, used several best management practices, such as stormwater wetland ponds, manure management and using cover crops to reduce winter soil erosion.

The study showed that because the town aggressively implemented many of these practices, there was a significant reduction of phosphorous and nitrogen in two tributaries of the Corsica River.

While the study showed several positive signs for water quality improvement around the state, population growth – which causes intensified land use – remains a major challenge, research team members said.

In addition, while many best management practices have short-term results, some, especially those involving groundwater, have a lag time and patience is required in order for the benefits to be realized, said Scott Phillips, Chesapeake bay coordinator for the United States Geological Survey.

Dennison said the study helps show Marylanders that efforts across the state and the country have led to some water quality improvements.

“We’ve got demonstrable evidence that shows that we can improve our air and water and land, and it’s going to work, so hang in there,” Dennison said.

Phillips said that he thinks that because the study shows a summary of what is working, it could potentially lead to better decision-making regarding bay restoration. It could also lead to the application of effective practices in other parts of the country, such as the Gulf of Mexico.

By 
Capital News Service

States’ Support of Chesapeake Lawsuit Draws Thousands of Petition Signatures

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Three weeks after 21 states signed on to a lawsuit challenging the Environmental Protection Agency’s Chesapeake Bay pollution limits, more than 25,000 people have signed a petition condemning the suit.

The Chesapeake Bay Foundation petition has garnered an unusually high response from the public in the 23 days since the attorneys general from states such as Florida, Kansas and Alaska filed an amicus brief in support of the lawsuit.

“It’s quite a statement of the public’s interest in this issue,” said Kim Coble, the Bay Foundation’s vice president for environmental protection and restoration.

The lawsuit, filed by the American Farm Bureau Federation, the Pennsylvania Farm Bureau, the National Association of Home Builders and other related industry groups, challenges pollution limits set by the EPA under the Clean Water Act (CWA).

The Chesapeake Bay Foundation and several partners sued the EPA in 2009 asking a federal court to require the agency to reduce pollution in the bay after it became clear states wouldn’t meet a cleanup goal they agreed to in 2000. As part of the settlement, the EPA created pollution limits in 2010, which the Chesapeake Bay Program refers to as the bay “pollution diet.”

Each state in the Chesapeake Bay watershed created cleanup plans to reach the pollution diet goals. The EPA can impose consequences on states that fail to reach them by designated two-year milestones.

Efforts by Maryland and other states to restore the Chesapeake Bay have been underway since 1983. The Chesapeake watershed includes all or parts of Maryland, Delaware, Virginia, West Virginia, Pennsylvania, New York and the district.

The 21 states opposed to the plan question the EPA’s authority to impose pollution limits, also known as Total Maximum Daily Loads or TMDLs, saying the agency is violating states’ rights.

“EPA’s untenable interpretation of its authority under the CWA has unlawfully usurped States’ traditional authority over land-management decisions,” the attorneys general wrote in their amicus brief, filed February 3.

The Bay Foundation’s Coble said the arrangement with the EPA is the best approach to cleaning up the bay and gives states the autonomy to decide how to meet EPA goals. It has been very successful so far and the Pennsylvania court found no evidence of federal overreach, she said.

“This lawsuit, the appeal of the decision and the friend-of-the-court brief that has been filed threatens and potentially ends the success that we’ve been seeing with the cleanup plan. There’s a lot at stake,” Coble said.

Nitrogen levels in the bay decreased by 18.5 million pounds between 2009 and 2012, a reduction that represents a quarter of the long-term goal, said Rich Batiuk, associate director for science with the EPA Chesapeake Bay Program office.

Nitrogen is one of the top three bay pollutants, and it comes from many everyday human activities. An excess of nitrogen can disrupt the bay’s system, harm drinking water and lead to habitat loss, Batiuk said.

“There are over 17 million of us that call the Chesapeake Bay watershed home… Life in the mid-Atlantic is really so intricately tied into the Chesapeake Bay and its hundreds and hundreds of rivers and streams,” he said.

The lawsuit opposing the pollution diet originated in 2010 and was struck down in federal court in Pennsylvania in September. The Farm Bureau and associated parties appealed to the 3rd U.S. Circuit Court of Appeals, and all parties will have filed briefs in the appeal by the end of April.

The opposed states, some of which have major natural resources of their own, like the Lake Michigan and Florida Everglades watersheds, said they want to regulate land use within their own borders.

“(T)his case has far-reaching implications for States across the country,” they said in the brief. “If this TMDL is left to stand, other watersheds, including the Mississippi River Basin (which spans 31 states from Canada to the Gulf Coast), could be next.”

In Florida, the state is working with the EPA and using state and federal money to fund restoration of the Everglades. State officials signed a long-awaited $880 million deal with the federal government last year.

All the states whose attorneys general signed the brief are outside the Chesapeake Bay watershed except West Virginia, whose Republican attorney general, Patrick Morrisey, replaced Democrat Darrell McGraw, who was in office when the cleanup agreement was approved.

The attempt by out-of-region states to influence the Chesapeake and the appeal of what Coble called a “very, very strong, legal, solid decision” make this conflict a singular struggle in the bay’s history, she said.

“There’s, needless to say, many challenges with the work of restoring the bay, but this one’s unique,” Coble said. The circumstances “make the situation much more urgent than other challenges we’ve had.”

By Justine McDaniel, Capital News Service

Marijuana Debate Headed to Committee in Annapolis

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ANNAPOLIS – Maryland lawmakers are set to get their first real whiff of marijuana legislation this session with hearings scheduled Tuesday on measures that look to lift or loosen the state’s ban on recreational use of the drug.

A bill sponsored by Sen. Jamie Raskin, D-Montgomery, would make it legal for residents 21 years of age and older to possess, use and grow marijuana, which would be taxed and regulated like alcohol. Proponents say it would create revenue for the state and free up law enforcement officials to focus more time and resources on serious crimes.

Sen. Jamie Raskin, D-Montgomery, speaks at a press conference in Annapolis last month announcing his measure to legalize marijuana in Maryland. Capital News Service photo by Megan Brockett.

“Marijuana arrests and prosecutions are costing us more than $100 million a year, and they are ruining the futures of thousands of our own citizens for doing something that our last four or five presidents readily admitted to doing themselves,” Raskin said. “Alcohol prohibition didn’t work, and marijuana prohibition is not working, and it’s time to have a serious discussion about it.”

The Senate Judicial Proceedings Committee is also slated to hear an alternate proposal Tuesday that would bump the possession of small amounts of marijuana from a criminal offense down to a civil one.

Under the decriminalization bill, co-sponsored by Sen. Robert Zirkin, D-Baltimore County, and Sen. Allan Kittleman, R-Howard, those caught with fewer than 10 grams of marijuana could be issued a citation and ordered to pay a fine, but would no longer have to appear in court.

A similar bill died in the House last session after earning majority support from the Senate, but Zirkin said he is hopeful about this version, which includes stricter provisions for minors caught with marijuana.

Zirkin said decriminalization offers an abundance of benefits without any of the risks and uncertainties that come with legalization.

“Philosophically, I don’t think [marijuana] should be an illegal substance, but you want to make sure that you’re not getting all these bad effects by moving too fast, too soon,” he said. “With decriminalization, this is something that’s been done for a long time in states across this country.”

Raskin has signed on in support of the decriminalization bill, but like other advocates of legalization, he has said that simply decriminalizing marijuana doesn’t do enough to take control away from drug dealers. Banning the substance drives up its cost and puts money into the pockets of criminals, legalization supporters argue.

“I want to put the drug dealers out of business, and the way to do that is to have government regulate, tax and control marijuana in our state,” Raskin said.

Under his bill, Marylanders could posses up to an ounce of marijuana and own as many as six plants, though smoking the drug in public would remain prohibited. Revenue brought in by the state would fund things like school construction projects and drug and alcohol treatment programs, supporters said at a press conference last month.

Gov. Martin O’Malley has expressed opposition to legalization, calling marijuana a “gateway to more harmful activity.”

Lawmakers are scheduled to weigh a handful of measures seeking to change Maryland’s marijuana laws, including a decriminalization bill sponsored in the House by gubernatorial candidate Delegate Heather Mizeur, D-Montgomery.

As part of her gubernatorial campaign, Mizeur has proposed legalizing, regulating and taxing marijuana in order to finance prekindergarten education for all Maryland children. Mizeur’s opponents in the June Democratic primary — Lt. Gov. Anthony Brown and Attorney General Doug Gansler — have voiced support for the decriminalization of small amounts of marijuana.

 

Questions Raised About Teacher Quality Report

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The National Council on Teacher Quality — which advocates reforming how teachers are evaluated — gave Maryland a D+ for teacher effectiveness in a recent report, a grade that stands in stark contrast to other ratings of the state’s schools.

The council’s report says Maryland’s schools have work to do in terms of enhancing teacher requirements and changing tenure and performance policies.

But Education Week and others consistently say the state has one of the best education systems in the country. And some researchers who study teacher effectiveness argue the report does not evaluate the correct criteria because it focuses on policies instead of teacher performance.

Angela Minnici, principal researcher at the American Institutes for Research, a behavioral and social science organization, found the council’s assessment of teacher effectiveness lacking in substance.

“I think it tells you something about the data used, the way in which the information was reviewed or even the kinds of questions that each organization might have been trying to answer in its review,” Minnici said. “It doesn’t really make sense.”

Minnici said the council does not support the claims in the report with evidence. Also, she does not see a relationship between such items as performance pay and having good teachers, one of the aspects the council studies in ranking a state’s teacher effectiveness.

But the council defends its report, saying its grades are based on criteria such as teacher preparation, performance pay, tenure policies and alternative routes to certification.

The Council’s Managing Director Sandi Jacobs explained the measures of the study.

“We’re not looking at teachers,” Jacobs said. “We’re looking at the policy framework that governs the teacher profession.”

The council’s report focuses on 31 different areas, separating them into five categories, Jacobs said.

“I think this is a very comprehensive report,” she said, explaining that the study depends on a review of each state’s policies.

The Center for Education Reform, a think-tank that supports charter schools, agrees with the council’s report.

Kara Kerwin, the center’s president, said the council’s report reflects what Maryland policymakers need to address to enhance teacher quality and is consistent with their own evaluation.

“The problem in Maryland is that there’s this sense that everything’s fine,” Kerwin said.

A union representative from the Montgomery County Education Association disagreed with the report’s findings. Executive Director Tom Israel pointed out inconsistencies between the issues the report addresses and Maryland policies.

“What strikes me is, one, at many levels what they assert is actually wrong when it comes to Montgomery County,” Israel said.

The report claims that schools in the state make tenure decisions after three years and fail to dismiss ineffective teachers. Additionally, the council suggests having secondary school teachers in Maryland pass subject tests.

Montgomery County decides on teacher tenure based on standards, not just three years of teaching, Israel said. Secondary education teachers are also required to pass the Praxis tests for their respective subjects.

Israel and Montgomery County have been dealing with questions about teacher effectiveness since early February because of widespread exam failures, which teachers in the district attributed to studying habits and the grading system.

Teachers explained exam failures in Montgomery County by arguing that students knew the exam would not affect their final grades, Israel said.

Israel said the exam failures have nothing to do with teacher effectiveness, especially because the results were systematic across the county. But education reform groups attribute the failures to teacher quality.

Although Maryland jumped from a D in 2009, there remains much improvement needed, according to the council’s report.

But Israel argues that the report is agenda driven.

“The so-called grades are in alliance to a particular agenda,” Israel said about the report. “It’s just like the NRA putting out grades on gun rights.”

By Mary Faddoul, Capital News Service

Minimum Wage Hike Debated Before Maryland Lawmakers

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Lt. Gov. Anthony Brown, left, and Gov. Martin O’Malley testify Tuesday in favor of raising Maryland’s minimum wage to $10.10. Capital News Service photo by Ethan Barton

Business owners, low-wage workers, economists and community leaders crowded into an overflowing House committee room Tuesday to offer testimony alongside Gov. Martin O’Malley on a handful of proposals seeking to raise Maryland’s minimum wage to $10.10.

“This is a reasonable step to take. It is the right step to take economically,” O’Malley said. “If we want a stronger economy, if we want more customers for businesses, if we want economic growth, than we should raise the minimum wage.”

Echoing last month’s State of the State address, O’Malley urged members of the Economic Matters Committee to support an increase in the state’s minimum wage, saying that a hike would put money into the pockets of Maryland’s middle class and strengthen the state’s economy as whole.

O’Malley has touted a minimum wage increase as his central priority this session, throwing his support behind the Maryland Minimum Wage Act of 2014, which captured much of the spotlight Tuesday. The bill would raise the state’s minimum wage to $10.10 an hour by 2016 and bump the base rate of pay for tipped workers from 50 to 70 percent of the minimum wage, indexing both rates to the cost of living beginning in 2017.

More than 100 witnesses signed up to testify both in support and opposition of a minimum wage increase, lining the walls of the committee room early on and trickling into an overflow room set up down the hall.

Much of the early testimony, including statements from Attorney General Doug Gansler and Lt. Gov. Anthony Brown, said that an increase in the minimum wage would pull many full-time workers who earn the base pay, and their families, above the federal poverty line.

“We’re failing our workers if we’re telling them that they can work a full day … and yet be unable to go home and support their family,” Brown said.

Other supporters, like Charmington’s Cafe owner Amanda Rothschild, said that a minimum wage increase would benefit small businesses by increasing retention rates and saving businesses money on turnover. Rothschild said a hike would also benefit her business because it would allow more low-wage workers in Baltimore, where her cafe is located, to spend money at her coffee shop.

But many other small business owners and representatives from companies like DavCo Restaurants, which operates more than 150 Wendy’s restaurants in the region, said a minimum wage hike would seriously hurt them, forcing them to cut jobs and potentially shut down.

Many called the governor’s bill extreme, arguing that an increase to $10.10 an hour would come as a shock to businesses.

Louis Santoni, president of Santoni’s Marketplace & Catering in Baltimore, said that a $10.10 minimum wage would cost his business three times its average net profit.

“I was listening to our governor earlier today … and he said the most important thing is developing the middle class. Well, that’s who I am. I’m the middle class,” Santoni said. “I’m the job creator. I’m the one who’s putting my house on the line and investing and bringing kids into work for their first job.”

Both sides battled what they pointed out as misconceptions — the misconception that all business owners are rich, for the hike’s opponents; while proponents of the increase argued that it is a misconception that most minimum wage workers are teenagers.

Santoni, like others, asked lawmakers to consider one of the more moderate bills that call for a smaller, one-time increase.

Another set of minimum wage bills is scheduled to go before the Senate Finance Committee on Thursday.

By MEGAN BROCKETT
Capital News Service

Acidic Chesapeake Bay Water Could Threaten Oysters

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A more acidic bay could make it more difficult for mollusks, such as oysters, to build their shells through a process called calcification. But it could help crustaceans, such as blue crabs, build their shells more quickly, said Justin Ries, a professor at the Marine Science Center at Northeastern University in Boston.

This could disrupt the evolutionary balance of the two, Ries said, because blue crabs prey on oysters.

Ries reached these conclusions after growing oysters and blue crabs under lab conditions of high carbon dioxide (higher than found in nature now). His research doesn’t mimic nature, Ries said, but it does provide clues to how increased acidification in the bay could affect the two organisms in the future.

Typically, about 30 percent of carbon dioxide in the atmosphere is absorbed into oceans, where it becomes carbonic acid and makes the water more acidic. As carbon dioxide becomes more prevalent in the atmosphere, more of it ends up in the ocean as well.

Atmospheric concentrations of carbon dioxide have increased by about 36 percent – from about 280 parts per million to 400 parts per million – in the past 200 years, said Whitman Miller, a research scientist with the Smithsonian Environmental Research Center.

The last time atmospheric carbon dioxide levels increased by 120 ppm was in the pliocene era – 2.6 to 5.3 million years ago – and that increase took 10,000 years, Miller said.

Since the Industrial Revolution, which began in about 1760, the ph level – the scale of how acidic water is – of the world’s oceans has decreased by 0.11, indicating a 28.8 percent increase in acidity, according to the National Oceanic and Atmospheric Administration’s Pacific Marine Environmental Laboratory. Further decreases in the ph level of 0.1 to 0.5 are expected during the next 100 years, according to a 2009 paper by Miller.

Ninety-seven percent of climate scientists agree that climate change trends over the past century are caused by human activities that are adding carbon dioxide to the atmosphere at historically high rates.

In the Pacific Northwest, oyster larvae have already been struggling to build their shells, according to the Ocean Conservancy, a nonprofit group advocating for healthy oceans.

Coral is also vulnerable to acidification; a 2009 Oceanography Society study found that an increase in ocean acidity will make it harder for coral to grow.

It’s more difficult to predict how acidification will affect the bay, Miller said. Things get more complicated when saltwater and freshwater meet in the bay, and there are other complicating factors, such as how deep the water is in different parts of the bay.

“The Chesapeake Bay is a really complicated system,” Miller said. “When we think of acidification, we’ve got to think about it differently than we do in the open ocean because the sort of absence of this really convenient equilibrium.”

State Delegate Eric Luedtke, D-Montgomery, is sponsoring a bill that would require the Maryland Department of the Environment to evaluate probable effects of acidification in the bay and other state waters and include recommendations about how to address the issue in a 2015 report.

Luedtke said acidification could “absolutely” hurt watermen who make their living from the oyster and crab industries in the bay.

“It creates a real change in ocean ecosystems for shellfish,” he said, “and Maryland being a state that is very oriented towards the water, I think it’s important that we sort of develop a strategy at the state government level to deal with the consequences of this.”

Little research on acidification in coastal systems has been done, and it’s badly needed, Miller said. In order for the Maryland Department of the Environment report to be successful, he said the report must be assembled by a wide range of people, including scientists, policymakers, watermen and people who manage natural resources.

Some watermen, however, are skeptical that the bill would help identify negative effects of acidification and ways to combat them.

Tim Devine, owner of Barren Island Oysters in Hoopers Island, said he hopes his oysters can be resilient against acidification because he feels helpless to do anything about it – even with Luedtke’s bill.

“There’s nothing a group of politicians comes up with that’s going to end up helping us out. That’s just the way it goes,” he said. “By the time it gets agreed upon, it doesn’t do anything.”

Steve Allen, of the Oyster Recovery Partnership, said Luedtke’s bill could help improve understanding of acidification in the bay.

“I think it’s more important to have correct science investigate potential issues that could arise from ocean acidification,” he said. “That way, we can be ready for it when and if it does occur.”
The “single best” way to combat acidification in the long term, Luedtke said, is to reduce greenhouse gas emissions. But, he added, there’s lag time associated with this; even if greenhouse gas levels were cut, it would take a long time for the effects it could have on acidification to be felt.

The effects that acidification could have on the bay and its inhabitants are unclear. But he believes that better understanding of the phenomenon – whether or not Luedtke’s bill facilitates this – is possible.

“Because of its complexity, it means it’s a headache to work in in some respects,” Miller said. “But if we can understand what’s happening in the Chesapeake Bay, we can understand what’s happening in almost any coastal system just by means of its complicated nature.”

Brian Compere, Capital News Service