What happened during the final few rushed days in Annapolis? Amidst the Coronavirus crisis that we are experiencing and shut downs all around us, the Legislature’s 2020 session came to an abrupt end three weeks early. There was an urgency to pass bills that were deemed priorities, despite the economic catastrophe that is taking place. It didn’t seem to matter what impact financially some of these bills would have on the public. Pass tax increases, they did, and pass the expensive education bill, they did.

While the sweeping sales tax bill that would have added sales tax to nearly all services was defeated, a “luxury” sales tax bill did pass. As did the “Google” digital advertising tax, the digital download tax and the tobacco tax. These were all identified as ways to pay for a small portion of the most expensive legislation of all, the Kirwan Blueprint Education bill.

However, the use for some of these taxes has already been changed. The first year of the “download” tax will be used to deal with the Covid 19 response. The tax revenue from the tobacco tax will now be used to settle a lawsuit with the historically black colleges. And the digital tax will be likely be challenged in court because it conflicts with the U.S. Constitution’s commerce clause and the International Tax Freedom Act.

Point being, we have known all session long, that these new taxes would never come close to paying for the State share of Kirwan and we counties have definitely known that it didn’t pay for ANY of the local share.

Last minute amendments were added to the Kirwan bill to supposedly make lawmakers more “comfortable” with its passage. Spreadsheets were updated and numbers kept changing during the past several weeks, somewhat reducing the local share. There were two that I previously discussed that unfortunately ended up being merged onto one sheet of paper. One was the “local relief” to give counties such as Prince George’s and Baltimore City, along with jurisdictions like Caroline, Dorchester and Somerset additional State aid. The other was to fix a double counting of the “floor formulas,” which means that no matter the supposed wealth of your county, 15% of the base and 40% of an “at promise” student is funded by the State. This amendment corrected a mathematical error when the bill was written. Included counties were Anne Arundel, Kent, Talbot, Worcester and a few others .

As I wrote before, the two amendments got merged and was titled “Local Relief.” As the Senate was going into its final voting passage on Monday, one more set of figures came out for the Local and State shares. The final numbers ended up being higher for the County share. Part of this must be due to other amendments pushing implementation dates for certain aspects of the bill sooner than the original phase in. But there is an oddity that I can’t figure out yet. Most of the seven counties whose technical fix was being corrected, changed dramatically. I cannot yet explain what caused the changes but will be inquiring, as it just doesn’t seem logical since it has no “wealth formula” attached to it.

The other major amendment was the “trigger” provision offered on the floor by Senate majority leader, Nancy King. It reads:
Beginning December 1, 2020, and each December 1 thereafter, if the December General Fund estimate in the December Board of Revenue Estimates report is more than 7.5% below the March General Fund estimate in the March Board of Revenue Estimates report of that year, per pupil increases in major education aid required under this Act shall be limited to the rate of inflation, as defined in § 5–201(h) of the Education Article as enacted by this Act”.

The Board of Revenue Estimates consists of the Comptroller, the Treasurer and the Secretary of Budget and Tax. They update their revenue projection in March. This amendment states that if on December 1, the revenues are down by more than 7.5%, education increases will be limited to the rate of inflation. With current revenue estimates about $18 billion, the revenues would have to drop by $1.4 billion. That is an enormous number, bigger than even what is considered a recession. On the surface, this appears to be a safety net, but the likelihood of this occurring more than once is pretty slim.

Here’s why. Let’s say you project $100 in March. In December, revenues are $92.50 or less, the trigger provision kicks in. The following year in March, one would assume that a responsible budget projection should be similar to your actual number. For an example, the estimate comes in at $90. That means that the following December, actual revenues would have to project to be $83 or less. The reality is, that this trigger may only happen once. Even though it would be evaluated each December, it is unlikely to happen in successive years. Meaning the full force of Kirwan implementation and massive spending increases would occur even without a recovery in our economy. Many of the legislators took comfort in this provision, however I do not.

At the end of the day, the passing of this and other legislation that costs our citizens dearly, in the face of this unprecedented health and economic crisis is irresponsible.

Laura Price is 2nd Vice President on the Executive Board of Directors of MACo, Chair of Budget and Tax, Talbot’s legislative liaison and member of the Talbot County Council.

The Kirwan Blueprint bill is continuing to move way too fast, this week through the Senate.  There are still so many things that haven’t been vetted thoroughly. As we hear amendments and arguments in the committees, it’s pretty clear that it still needs more work.  But legislators are determined to get this passed, before too many questions are asked, let alone answered.

Having attended several sessions this week, I will share my perspective on the process.  As a reminder, this passed the House of Delegates last Friday after a “leadership chosen” package of 65 amendments was added to the bill.  Amendments offered from the floor, mostly by Republicans were summarily defeated. This same progression played out in the Senate.

On Monday. Senator Pinsky had a walk-through of the Kirwan bill with members of the Education, Health and Environment committee (EHE) and some members of Budget and Tax (B&T), primarily to go through all the House amendments.  Rachel Hise from Department of Legislative Services (DLS) was also there to explain the changes. It went on for three hours before announcing the procedure for the rest of the week. On Wednesday afternoon, 55 “leadership chosen” amendments were offered by Senator Pinsky and voted on before taking amendments from other EHE Senators, primarily Republicans.  With one exception, they were all rejected on a pure party line vote. When writing these reports, typically I don’t talk about the politics of a piece of legislation, but this one is so partisan. Many of these common sense amendments that were offered were not given any consideration at all. Later that night, B&T went through a similar process.

Meanwhile, as I wrote last week, “until you account for many different factors, it would be unfair to classify a county wealthy, poor or somewhere in between.  The true wealth of a county has very little to do with how many kids we educate and everything to do with the quality of jobs, incomes, and demographics of who we serve.”  An amendment was being offered in the Senate to consider “median household income” and I placed it on the agenda for the Talbot County Council to discuss and send a letter of support.  For some strange reason, there were members who resisted, though three of us voted to support the amendment. Our county and many others who also have median incomes far below the State average would benefit from such an amendment to the wealth formula and potentially receive millions more in State education aid.  We have been asking for this “Fair Funding Formula” for many years, and this would truly help equalize all counties in the State.

On Friday, the full Senate was on the floor and before voting on other pieces of legislation, Senator Pinsky went through all of the Kirwan amendments.  A full vote is expected on Saturday afternoon and undoubtedly the Senate will pass the bill. There are some differences between the House and Senate versions, which they will have to reconcile before the entire Education Blueprint bill can be approved by the legislature.  After which, it will move on to Governor Hogan. If he vetoes the bill, expect that the super majority will override his veto before the end of session and it will become law.

Additionally, one of the major problems that has been identified by the counties are the budget requests by our local Boards of Education.  In many cases, the BOE’s are asking for millions more than not only Maintenance of Effort (MOE), but also millions more than what we would be required to fund two or three years down the road as per the Kirwan formula.  In Talbot County, the request is $46.5 million dollars, over $2 million above MOE and nearly as much as would be required in FY23. In Queen Anne’s County, the budget request is about $5 million more, close to Kirwan requirement in FY24.  These requests are happening all over the State. This is where the formula falls apart. The counties have always known that Boards of Education will say they need more money than what is in the formula. We have been saying for years that there are categories in their budgets that Kirwan doesn’t include, such as salaries for non-teachers, other operations, health insurance and transportation.

But what also concerns me is in the pleas for additional money are items that are INCLUDED in the Kirwan formula.  The Blueprint is a ten-year phase in and BOE’s want the money for those programs now. During my interactions this week in the hallways, while waiting around for hearings to begin, I mentioned this to a member of this group.  I asked, where were the Boards of Education during the process, and in particular, during the public hearing last month? Why didn’t they testify that the billions in Kirwan money wasn’t enough? I was told that conversations were going on quietly but they were waiting until the bill had actually passed before they really voiced that concern.  That is beyond disingenuous. Wait until it is law, then say they need more. There is no way for counties to deal with this massive (now even larger) increase that is not only the billions of dollars more in the formula, now we have to plan on even more funding.  

Exactly how much are we supposed to raise taxes on our citizens?  Those same citizens that are struggling. Those same citizens that need other county services, especially our roads and emergency services, that we can’t find the money to pay for.  The State really needs to step up and figure out how to fund this increase themselves and not put this mandate on the local jurisdictions. Exactly when is enough, enough?

Laura Price is on the Board of Directors of MACo, Chair of Budget and Tax, Talbot’s legislative liaison and member of the Talbot County Council.

Laura Price is 2nd Vice President on the Executive Board of Directors of MACo, Chair of Budget and Tax, Talbot’s legislative liaison and member of the Talbot County Council.

The Kirwan Blueprint bill is currently moving way too fast through the House before it moves next week to the Senate. After the “public-hearing” on February 17, about 65 amendments were offered. Most never saw the light of day as certain committee members made the decisions on which amendments were worthy of consideration. The vast majority were related to one of the five specific policy areas and some were related to funding. I will address the local funding requirement amendments.

I will reiterate what MACo’s position is regarding whether to split the costs of this additional layer of education funding. The total price tag adds an additional $6 billion per year by 2030 and the counties believe these new costs should be borne by the State. MACo’s statement says “The State of Maryland should live up to its constitutional obligation, stand behind its own ambitious recommendations, and provide State resources to implement the full costs of the Kirwan Blueprint plan….The Maryland Constitution’s requirement of ‘thorough and efficient’ public schools properly places this duty on the State…The far-reaching Kirwan plan is a continuation of this State requirement.”

There are two primary reasons for this position. One, if legislators believe that this is a good idea, and they are the ones voting on the plan, they should not pass another unfunded mandate onto the County governments. The second is that the State has more flexibility on raising revenues and/or making adjustments within the State budget to pay for this new level of education costs. Counties only have property and income taxes and most are maxed out at 3.2% on income taxes, leaving only property tax, thereby forcing the local elected officials to raise rates significantly with no local control.

Since there was no amendment offered, it’s obvious that the State still expects the counties to pick up a significant share of these new costs. While most have heard that the split was $2.8 billion for the State and $1.2 billion for the Counties, that is a bit misleading. Fiscal year 2020 funding for all counties is $6.69 billion (51.8%) and state share is $6.23 billion (48.2%), so the locals are already funding $464 million more than the State. The bill as introduced (with an inflation factor of 23% that DLS has used), counties would be funding a total of over $9.2 billion in FY30. That is an actual increase in local spending of $2.5 billion, which is inclusive of the current Maintenance of Effort (MOE) law. It is also why the numbers that keep getting reported of $1.2 billion appear distorted and understated.

The funding amendments that were offered were to accomplish two things. First, the massive local increase on Baltimore City and Prince George’s County has been widely reported and something in the formula had to change in order to offer those jurisdictions relief. As originally drafted, the “Local Share Relief” to 12 counties was $431 million with $375 going to just those two jurisdictions.

The second was a technical fix to the Funding Floors for seven counties. Notwithstanding the wealth formula, each county receives 15% funding on the base per pupil and 40% funding on a Special Education, English Language Learner or Concentration of Poverty. When the bill was initially introduced, this had not been factored in and the local share was overstated. An amendment was needed to adjust the calculation because it had been double counted and ended up with the local + state being greater than the total formula funding required. This amendment was NOT the State granting relief to those seven counties, it was to correct a mathematical ERROR.

The first amendment was to grant relief to 12 counties and the second was to fix the error. Unfortunately, these got combined and the title of the amendment is “Net Local Share Relief.” Why does this concern me and several other counties who are supposedly wealthy? Because, legislators will say that they “fixed” us and granted us a reduction. That really is inaccurate. Our reasoning and that of several legislators is that the “wealth formula” does not accurately reflect the actual demographics and economy of a jurisdiction. One major factor that is not considered in any way is the Median Household Income. The tables below show examples of the education wealth formula versus the median income ranking as compared to the State average:

This illustrates that no funding formula really works. There are many other factors that comprise a county’s “wealth,” not just property value + net taxable income divided by the number of children in the school system. Until you account for many different factors, it would be unfair to classify a county wealthy, poor or somewhere in between. The true wealth of a county has very little to do with how many kids we educate and everything to do with the quality of jobs, incomes, and demographics of who we serve. What we really need is to amend this wealth formula that fits no one and add a factor that accounts for median household income. That would be a good start.

Laura Price is on the Board of Directors of MACo, Chair of Budget and Tax, Talbot’s legislative liaison and member of the Talbot County Council.