Last year, Governor O’Malley pushed hard for the General Assembly to require electric utilities in Maryland to subsidize the construction and operation of a wind farm off Ocean City.  The measure failed, largely because the cost of the subsidy – some $5 to $8 per month per homeowner for an indefinite period - [...]]]>

Scroby Sands Wind Farm

Last year, Governor O’Malley pushed hard for the General Assembly to require electric utilities in Maryland to subsidize the construction and operation of a wind farm off Ocean City.  The measure failed, largely because the cost of the subsidy – some $5 to $8 per month per homeowner for an indefinite period - was thought to be too high to be politically palatable.  This was reinforced by the fact that the charge would have appeared as a separate line on the electric bill.  Every month, every homeowner would be reminded how their representatives had voted to raise their electricity costs.

The Governor is back this year with a new proposal that has one crucial difference.  Instead of requiring utilities to buy electricity directly from the wind farm, they will be required to buy certificates of participation.  The cost will be the same but, crucially, it will not appear as a separate line item on the electric bills but rather will be folded into the total cost of electricity.

Now don’t get me wrong, I would love to see a technology that would provide clean, renewable energy to Marylanders in a cost-effective manner.  It’s just that wind energy isn’t there yet.  Requiring Marylanders to buy into the current technology would lock them in to an expensive technology that has a host of problems.  Let’s look at some of them.

First, wind energy is highly variable.  The speed of the wind, and thus the potential energy, can vary signficantly from hour to hour, day to day and season to season.  Because instantaneous electricity generation and consumption must be in balance to maintain the integrity of the electric grid, additional operating reserves or additional ability to shed loads must be added to the grid.

Second, wind energy adds very little to the generation capacity in Maryland.  Unlike hydro-electric, fossil fuel or nuclear plants, wind energy is not ‘dispatchable’.  That is, if demand increases, the grid operator can’t call on the wind farm to produce more simply because the wind farm is totally dependent on the wind.  In Denmark, which has one of the largest concentration of wind farms in the world (19% of electricity production), wind farms generated less than 1% of the total demand on 52 days in 2002.  That means that other sources have to be available at all times.  In Maryland, it is worth noting, maximum electricity demand is in the summer months while highest average wind speeds are in the winter months.

Insufficient transmission capacity is a problem, too.  On May 19th, 2010 more than a thousand wind turbines in the Columbia River gorge  went from spinning lazily to full throttle in less than an hour as a storm rolled in.  Production went from near zero to the equivalent of two nuclear power plants worth.  The grid operator, Bonneville Power Administration, tried to shut down hydro generation and export as much power as possible, but the transmission lines were insufficient to handle all the power and the wind turbines had to be shut down.  Similarly, in Texas where ratepayers pay a special assessment for wind energy, the transmission capacity is insufficient to move all the electricity from the high plains to the cities on windy days. Ironically, Maryland residents are strongly opposing proposals by electric utilities to build additional transmission lines.

So, what will Marylanders get for their $5 to $8 per month?  Here’s what:

• Not a single fossil plant will be shut down.
• Additional generating capacity on the hot summers days when demand is highest will be negligible
• Grid reliability will not be enhanced, and may be reduced.
• There will be some reduction in the amount of pollution generated by fossil fuel plants, but the reduction will be limited by the need to maintain additional spinning reserves due to the high variability of wind energy.

Wind energy would work if there were a robust transmission network able to move large amounts of electricity from where the wind is blowing to where the demand is, but there seems to be little support for that.  It’s worth noting that the proposed wind farm off Rehoboth Beach, talked about for years, has been all but abandoned simply because the economics don’t work.  That should be a lesson for Maryland.

I have a secret

There was a time when Maryland had a reputation for having the best politicians money can buy.  I was thinking things had gotten better but then along came State Senator Ulysses Currie who had demonstrated the new, modern way of corruption.

Let’s review the facts.  Senator Currie was elected by [...]]]>  

I have a secret

There was a time when Maryland had a reputation for having the best politicians money can buy.  I was thinking things had gotten better but then along came State Senator Ulysses Currie who had demonstrated the new, modern way of corruption.

Let’s review the facts.  Senator Currie was elected by the voters of Maryland’s 2th District to represent them in the state senate.  He rose to become the powerful chairman of the Senate Budget and Taxation Committee which directed the flow of millions of dollars.  While he held office, he entered into a contract with Shoppers Food Warehouse and proceeded to advocate on their behalf before many State agencies.  He set up meetings through his Senate office and wrote letters about Shoppers’ concerns on his state letterhead.

But never did he disclose to either his colleagues or, through his ethics filings, to the voters that elected him, that he was on Shoppers’ payroll.  He must have done a good job because Shoppers paid him just about a quarter million dollars.

His defense, when he was brought to trial by Federal prosecutors on corruption charges, was that he was too stupid, too disorganized and generally befuddled to be able to fill out the ethics forms.  He also blamed his wife.  It’s worth noting, though, that he remembered to report the payment to the IRS on his income taxes, so maybe he wasn’t that stupid.  He was also smart enough to write to Shoppers asking for a raise and citing the many benefits he had bought them, including a $850,000 rent subsidy for a store in Baltimore.  He also told them that he introduced and voted for legislation to allow Shoppers to transfer a liquor license to a store near the University of Maryland campus.  Currie did not recuse himself or file a conflict of interest notice as required by law.

But the jury wasn’t convinced; maybe they bought the idea that he was stupid.  More disheartening that his acquittal was the parade of Maryland politicians that testified on his behalf.  Lieutenant Governor Anthony Brown, Representative Steny  Hoyer, State Senator Brian Frosh and former Governor Bob Ehrlich all testified that he was an upstanding man of fine character.  Apparently they don’t get it that this kind of blatant cronyism among our political class helps confirm the dismal view that many Americans have of politics and politicians in general.

Now it’s not unusual for politicians to go to bat for their constituents, but they’re not supposed to get paid extra for it, or at least they shouldn’t.  That’s not to say that our state legislators can’t have other jobs, but they need to disclose who is paying them and recuse themselves from representing them.

So now it’s up to the General Assembly to decide what to do with Senator Currie.  So far, they’ve behaved badly, allowing him to keep his committee chairmanship (he resigned the chairmanship voluntarily) and stating that they would wait until after his trial.  It’s worth noting that they expelled former Senator Larry Young before he even went to trial, but he was not as popular with his fellow Senators.

The General Assembly needs to expel Senator Currie immediately.  His behavior is unacceptable for an elected official.  The General Assembly also needs to pass new ethics legislation that spells out clear penalties for late or incomplete ethics filings and publishes them on the internet.  Right now, voters must go to Annapolis and pay a fee of 20 cents a page to review their own elected official ethics filings.

If the General Assembly acts as they should and expels Mr. Currie, then the voters of the 25^th district can elect someone else who will, hopefully, represent the voters’ interests.  And Shoppers Food Warehouse can, I’m sure, buy someone to represent theirs.

Governor Martin O’Malley is proposing a law that would require Maryland utilities to sign multi-decade contracts to purchase offshore wind energy from developers who want to build giant windmills, such as those pictured above, off the coast of Ocean City.  In addition to the government subsidies already provided for wind [...]]]>

Windmills off the Belgian Coast

Governor Martin O’Malley is proposing a law that would require Maryland utilities to sign multi-decade contracts to purchase offshore wind energy from developers who want to build giant windmills, such as those pictured above, off the coast of Ocean City.  In addition to the government subsidies already provided for wind energy, the proposal would mean an increase of at least $1.60 per month for every Maryland household due to the high cost of wind energy.

I believe the Governor is well-meaning in his attempt to encourage renewable energy in Maryland and, as he says, to create jobs.  But lets take a close look at wind power and what it means to Maryland.

Wind power, of course, has been used by man for thousands of years to power sailboats, later to mill grain and still later to pump water and finally to generate electricity.  Wind energy is plentiful, renewable, widely distributed, clean and generates no ‘greenhouse gases’ during operation.  The use of wind energy to generate electricity is popular and growing.  Some 80 countries are using wind power on a commercial basis and in a few, wind power accounts for more than 10% of the electricity production.

In Maryland, developers are planning to install some 150 – 200 wind turbines similar to those pictured above, about 12 miles off the Ocean City beach.  The turbines will have a maximum capacity of 600 megawatts.  Just to put things into perspective, the towers pictured above stand about 515 feet above the water.  The turbine blades are 202 feet long.  Each turbine will generate a maximum of 5 megawatts of electricity.

Note that I refer to the maximum capacity.  The wind doesn’t blow continuously.  Most wind turbines generate a full capacity only when the wind is blowing above 15 mph.  Typcially the annual energy generation of wind turbines is somewhere between 20% and 40% of the maximum capacity, depending on their location.  Modern turbines do a better job than older ones and offshore locations are favorable as the winds are somewhat stronger and more constant. 

That said, it’s worth noting that the maximum electricity demand in Maryland is in the summer (when all those air conditioners are running) and the highest and most continuous winds are in the winter and spring.  It’s worth looking at the experience of Texas, which has more installed wind generation capacity (about 9.700 megawatts) than any other state. 

On August 4th of last year, Texas set a record of 63,594 megawatts of electricty demand.  Of that, only 500 megawatts was provided by wind energy when demand was peaking. In Texas, just like in Maryland, the wind blows least during the hottest part of the year.  ERCOT, the energy regulator in Texas, considers less than 9% of the total capacity of wind generation to be ‘dependable capacity during peak demand periods.’ Residential users in Texas pay approximately $4 a month in additional costs for the transmission lines constructed to bring wind energy from the rural areas of the state to the big cities.

 Electricity is very expensive to store.  Consequently virtually all electricity is generated at the moment it is consumed.  Demand varies during the day with peaks in the morning as people wash up and have breakfast and as offices and factories open up for the day and again in the evening as people return home, turn on the lights and cook dinner.  It also varies from season to season.  To cope with this, we have a large, baseload capacity (usually coal or nuclear) to provide relatively inexpensive electricity all day and smaller plants which run on natural gas or hydroelectric plants which can be ramped up and down more quickly.  Throw highly variable wind power into the mix and you add to the problem of balancing supply and demand.  

Studies have shown that wind power from geographically diverse sources can be easily incorporated into an electricity grid that has robust demand management (to reduce demand when wind turbines are not running) and interconnection to a large grid.  Unfortunately, Maryland is missing the first two of these elements.  The Public Service Commission has so far rejected the application of Baltimore Gas and Electric to install ‘smart meters’ in customers’ homes to help regulate the demand. 

The final problematic part of the Governor’s proposal is the requirement that our utilities sign long term contracts.  While this will help provide assured financing to the developer who wants to build the wind farm, it won’t guarantee that utilities get the lowest price.  In fact they will be unable to take advantage of lower prices and improved technology that might come along later. 

Certainly, wind power has a place in our energy future.  Whether our government needs to mandate that we all use it regardless of price or reliability is another matter.   While wind power is attractive because it’s clean and renewable, we need to understand that, for a variety of factors, it will never replace the dirty coal plants we currently rely heavily on for our baseload electricity supply.   We need to look elsewhere for that.

Many Republicans ran last year on a platform of slashing Federal spending.  Now that they have taken over the House of Representatives, they are having to come up with actual proposals to accomplish that.  it’s harder than it looks.  One of the reason that it’s so hard to significantly trim [...]]]>

Trying to cut the budget

Many Republicans ran last year on a platform of slashing Federal spending.  Now that they have taken over the House of Representatives, they are having to come up with actual proposals to accomplish that.  it’s harder than it looks.  One of the reason that it’s so hard to significantly trim the Federal budget is that every program is there for a reason – someone thought it was a good idea and managed to get a majority of the House and Senate to support it.  While it’s true that some have outlived their usefullness and some are not as effective as they should be, every one has its supporters and we can expect them to fight for their programs.

One of the first proposals has come from the Republican Study Committee (RSC).  This organization represents about two-thirds of the Republicans in the House (the most conservative two-thirds) and includes our own Andy Harris who joined imediately.  Let’s take a look at their proposal which consists primarily of some across-the-board cuts, some ideological attacks on perennial Republican targets and a few tiny programs they think will be easy to pick off.  What’s notably missing are real cuts that could balance the budget.

Keeping in mind that these cuts are being proposed against a projected budget deficit of $1,500 billion in the coming year and $9,000 billion over the next ten years let’s look first at the ideologically-driven cuts, they propose to:

• Eliminate funding for the Corporation for Public Broadcasting.  Yes, Big Bird is on the chopping block again.  This was a major agenda for Newt Gingrich and his Contract With America.  According to the RSC, Sesame Street is popular and so should be able to pay its own way, perhaps by advertising cereal to 5-year olds or something.  Completely eliminating funding for the Corporation for Public Broadcasting would save $445 million this coming year.
• Eliminate the National Endowment for the Arts and the National Endowment for the Humanities.  Perennial Republican targets, these cuts would save about $330 million a year.
• Eliminate Amtrak.  Too many city people use Amtrak to go back and forth from sin cities like Washington, New York, Boston and such.  They should drive their cars like rural people do.  This would save about $1.5 billion a year and basically eliminate passenger rail service in the United States.
• Eliminate the Legal Services Corporation.  This organization provides free legal services to poor people.  RSC claims the program is duplicated by local bar organizations and such, but there still seems to be a demand for its services.  But why should poor people have legal services?  Savings: $420 a year.
• Eliminate the New Starts Transit Program.  This program provides funding for the expansion of commuter rail, subways, etc.  Again, this is on the chopping block because its for city folks.  Getting rid of it will save about $2 billion a year.
• Eliminate Inter-City and High Speed Rail Grants.  A companion to eliminating rail service is eliminating rail infrastructure.  Never mind that other countries, including China, are making great strides in building their high-speed rail networks with great success, we want to stay in the 19th century.  Besides, there’s that word ‘city’ again.  Savings: $2.5 billion a year.
• Eliminate Title X Family Planning Programs.  We don’t want to help women, especially poor women, take control of their lives.  Savings: $318 million a year.
• Eliminate Programs under the National and Community Services Act.  These programs include Americorps, which supports some 85,000 Americans who provide services to their communities and country as Americorps, VISTA or National Civilian Community Corps volunteers.  Apparently, many of these volunteers who tutor, work in hospitals and nursing homes, help build and maintain parks, mentor youth, help support non-profit organizations throughout the country and run after school programs are really liberals.  Eliminating this program will save $1.15 billion a year.
• Eliminate the Agency for International Development.  A favorite target of conservatives, many Americans seem to think that foreign assistance is a huge part of the Federal budget.  In reality, it’s about one percent.  Eliminating it will save about $1.4 billion a year.
• Eliminate General Assistance to the District of Columbia.  The RSC argues that DC already gets the same kinds of payments other states get.  This ignores the fact that, as the seat of government, more than half of the District’s real estate is untaxable because it is occupied by the Federal Government, foreign embassies and chanceries, international organizations such as the World Bank and IMF and national associations.  projected savings: $250 million a year
• Prohibit Federal Workers from Using Official Time for Collective Bargaining and Grievances.  This is just another swipe at unions which the RSC apparently hates.  In the private sector, union reps generally are authorized a limited amount of paid time to deal with union issues.  That’s the way it works in the government, too.  The RSC estimates savings at $1.2 billion a year, but it’s hard to see how this amount would be realized.
• Eliminate Payment of the US Share of the IPCC Coss.  The Intergovernmental Panel on Climate Change is a favorite target of the right wing.  This would save an estimated $12.5 million a year.
• Eliminate Funding to Implement the Health Care Reform Act.  Another favorite target.  $900 million total.
• Finally, Sell Off Fannie-Mae and Freddie-Mac.  The RSC estimates the government would save $30 billion by getting rid of these two giant mortgage funders.  Of course, the housing market would be thrown into chaos and the cost of mortgages would rise, but that’s a small price to pay for ideological purity.

In addition to these ideologically-driven cuts, the RSC proposes a number of ‘across-the-board cuts.  Now I believe these kind of budget maneuvers are a sign of intellectual weakness and/or political cowardice; all programs are not equal and treating them as equal makes no sense.  I’ll have more on that later.  Here’s what they are proposing:

• Return every program to 2008 levels.  $80 billion in savings.
• Remove Increases for Inflation from the CBO baseline for future budgets.  This is just stupid.  The CBO baseline doesn’t require any appropriation or budget request, it’s just a mark.  The RSC thinks it will save $2.29 trillion over ten years.  Actually, it won’t save anything.
• Eliminate Unspent Stimulus Funds.  RSC projects $45 billion in savings.  I’d be very surprised if it was that much.

So, with all this huffing and puffing, they will save $2.5 trillion out of a projected $9 billion deficit over the next ten years.  Why so little?  Because they haven’t touched Defense, Social Security or Medicare.  That’s where the big money is, but it takes political courage to actually propose changes in these programs, changes that will save real money.  it will be an interesting year.

Ive been watching the Maryland General Assembly as it plows through the current session and I’m pleased to say there seem to be far fewer outrageous, ridiculous and silly bills introduced than I saw last year at this time.  So congratulations to our legislators!

Fewer, of course, does not mean none.  There is definitely some [...]]]>

Congratulations!

Ive been watching the Maryland General Assembly as it plows through the current session and I’m pleased to say there seem to be far fewer outrageous, ridiculous and silly bills introduced than I saw last year at this time.  So congratulations to our legislators!

Fewer, of course, does not mean none.  There is definitely some interesting legislation being proposed.  First, let’s take a look at  special ‘Days’ of observance being proposed.  These special days are a good way for legislators to respond to the expressed needs and desires of their constituents without actually doing anything substantive.  For the most part, the legislation simply requires the Governor to issue a proclamation.

First up is SB 238, introduced by Senators Shank, Brinkley, Jacobs, Glassman, Jennings, Reilly, and Simonaire.  These 7 Republican Senators (more than half the total number of Republican Senators) want the state to observe Ronald Reagan Day annually on February 6th.  A similar bill has been crossfiled in the House with 37 co-sponsors.  The bill provides that the Governor’s proclamation urge the citizens of Maryland to observe the day in ‘proper manner’.  It’s just a guess, but I think Marylanders will differ in what they think is the proper manner to remember Ronald Reagan.

Senator Simonaire and a raft of co-sponsors have introduced SB 224 which requires the Governor to proclaim the first Monday of October as ‘Young Heroes Day’.  There is no specific criteria for what constitutes a ‘young hero’ except that it be a ‘minor who is recognized by the residents of the State for the positive contribution the minor has made to society.’  Given the current tendency to reward and praise our children for the most mundane of accomplishments, I presume that every child in Maryland will qualify as a ‘Young Hero.’  Similar legislation was proposed last year but failed to be enacted.

Senate Majority Leader Garagiola and 15 co-sponsors have introduced SB 150 which requires the Governor annually to proclaim January 13 as Korean American Day.  Certainly Korean Americans deserve their own day and I look forward to the day when we recognize those Marylanders who have come from every one of the 200+ countries in the world. 

Senator Katherine Klausmeier (a good German name) has put Garagiola to shame by introducing, with six co-sponsors SB 121 which requires the Governor to annually proclaim October to be German-American Heritage Month.  A whole month!  I’m sure the Korean Americans will be jealous.  German-Americans, you will be pleased to learn dear reader, comprise the largest self-identified ancestral group in Maryland and in the nation as a whole.  German-American day  is celebrated annually throughout our country on October 6th and it was signed into law in 1987 by, who else, Ronald Reagan! 

 Delegate Jill Carter, together with eight co-sponsors has introduced HB 223 which directs the Governor to annually issue an order in observance of Earth Hour to turn off the lights of Government House and State House on the last Saturday in March at 8:30 pm.  The lights are allowed to come back on at 9:30.  It’s interesting to note that the Korean Americans get a day, the German-Americans get a month but the Earth only gets an hour.  Of course, the Earth doesn’t get a vote.  On the other hand, Delegate Carter has introduced this as an emergency bill, ‘necessary for the immediate preservation of the public health or safety’!  Take that, Ronald Reagan, Young Heroes, Koreans and Germans!  None of your days or months are emergencies! 

Delegate Talmadge Branch and two co-sponsors have introduced HB 186 which designates American Indian Heritage Day as a school holiday in Maryland!   Before all your school children go out and celebrate and before all you school administrators tear out your hair, it’s worth noting that American Indian Heritage Day occurs annually on the day after Thanksgiving.  So there really won’t be much in the way of extra time off. 

Delegate Barbara Robinson and an impressive 35 co-sponsors have introduced HB 157 which requires the Governor to annually proclaim March 8 as Women’s History Day.    With 35 co-sponsors and given that women comprise more than half the Maryland electorate, I think this has a good chance of passage although it doesn’t appear any companion bill has been cross-filed in the Senate.  On the other hand, they already have an entire month.

Any of these bills which become law will join an illustrious list of official Maryland commemorative days and months including:

• Asian Lunar New Year Day (occurs annuallly on the Asian Lunar New Year)
• Black History Month (February)
• Women’s History Month (March)
• John Hanson’s Birthday (April 13th)
• Negro Baseball League Day (second Saturday in May)
• Law Day (May 1)
• Fire, Rescue and Emergency Services Workers Day (first Sunday in June)
• Maryland Charter Day (June 20)
• Hispanic Heritage Month (September 15 – October 15)
• Poetry Day (October 15th)
• Annapolis Charter Day (December 17th)

In addition, according to an earlier version of the Maryland Manual, the Governor is authorized to proclaim Republic of Lithuania Day on February 16th, Arbor Day (any day in April), National Anthem Day on September 14th, Constitution Day on September 17th, General Pulaski Memorial Day on October 11, and Republic of Czechoslovakia Day on October 28th.

Finally, November 23rd, after 12 noon, is Repudiation Day in Frederick County!  Repudiation Day commemorates the day in 1765 – fully ten years before the Boston Tea Party – when the judges of Frederick County assembled and proclaimed that they would not enforce the new ‘Stamp Act’ proclaimed by the British Parliament. 

I personally celebrate all of these days with an adult beverage of my choice and congratulate those who are honored.  I recommend you do the same.

The Tax Dance

How do you support tax increases while seeming to oppose them?  You get someone else to support them and ‘reluctantly agree’.  That’s the dance we’re seeing at the state level in Maryland.

Fresh off a convincing re-election victory, Governor O’Malley has made it clear that he will not include any new taxes in [...]]]>  

The Tax Dance

How do you support tax increases while seeming to oppose them?  You get someone else to support them and ‘reluctantly agree’.  That’s the dance we’re seeing at the state level in Maryland.

Fresh off a convincing re-election victory, Governor O’Malley has made it clear that he will not include any new taxes in his budget even though that will mean signficant cuts to important programs. He has added, however, that his will certainly not be the last word on the budget and, if the legislature wants to increase some taxes he might reluctantly have to go along. 

The legislators, all freshly elected to four-year terms have shaken their heads and agreed that it looked like a difficult budget year – the localities would, in all likelihood, suffer steep cuts.  If, however, the counties and Baltimore City wanted tax increases to temper the cuts, the legislators would reluctantly consider that option.

Sure enough, two county executives, Rushern Baker of Prince George’s County and Ike Leggett of Montgomery County stepped up the plate and said they supported increases in the alcohol and gasoline taxes.  Ken Ullman, of Howard County indicated that county executives were ‘discussing the issue’. 

Of course Montgomery and Prince George’s are only two of Maryland’s 24 local jurisdictions, but they are the two largest and together account for about a third of Maryland’s population and voters.  I think it’s fair to assume that, after the governor reveals his budget cuts, we will see Baltimore City and County joining the call for tax increases. 

The President of the Senate has already indicated that he would like to see an increase in the gasoline tax and a large number of legislators have already indicated that they will support an increase in the alcohol tax.

The gasoline tax of 23.5 cents per gallon hasn’t been increased from the current level since 1992.  Since that time, construction costs have roughly doubled.  Commuting times for Maryland residents of the DC suburbs are among the highest in the nation and there are major unmet needs throughout the state.  An increase of ten cents per gallon would yield roughly $600 million a year.  While that wouldn’t solve our transportation problems, it would be a big help both in maintaining our current infrastructure and adding new capacity to help handle the many new residents of Maryland.  That said, the legislature and the governor need to avoid the temptation to use increased transportation taxes to help out the general fund; any new gasoline taxes should be devoted solely to transportation.

The push for an increase in the alcohol tax is a perennial topic whose time may finally have come.  Some 64 of 141 delegates and 20 of 47 senators have already signed onto an increase in the tax.  The increase, which would amount to about ten cents a drink and increase alcohol prices by about 6.6% would generate some $215 million a year.  Proponents want the money from the increase to be dedicated to health care services, but there is a good chance that some or all of it would end up in the general fund.  A study by the Johns Hopkins Bloomberg School indicates that such an increase would reduce alcohol consumption by about 4% and save about $225 million in costs associated with alcohol consumption.  

An increase makes sense to me.  The alcohol tax hasn’t changed since 1972 for beer and wine and 1955 for spirits.  Polls indicate that about two-thirds of Marylanders support an increase in the alcohol tax.  Despite bitter opposition from the alcohol lobby and from the President of the Senate, it looks like the time has come. 

So when the dancing stops, I think we’ll see increases in both of these taxes this year.  It makes sense from a policy and economic perspective and, with four years to go before another election, the politicians might finally come around.

A Hot Time Begins

The 2011 session of the Maryland General Assembly begins today.  It will continue until April 11th.  There will be a lot going on and, as with the young women in the image above, they will make it seem your are seeing more than you actually are.  Here’s a brief synopsis of [...]]]>  

A Hot Time Begins

The 2011 session of the Maryland General Assembly begins today.  It will continue until April 11th.  There will be a lot going on and, as with the young women in the image above, they will make it seem your are seeing more than you actually are.  Here’s a brief synopsis of some of the issues our Senators and Delegates will be dealing with.

Budget.  The Governor and the General Assembly have made cuts to the budget for each of the last three years and most of the easy cuts are gone.  Yet the budget is still about $1.2 billion out of balance.  The stimulus funds that helped protect the budget last year are gone, so it seems pretty clear that there are going to be some program cuts.  The biggest program in the budget is, of course, state aid to education.  Maryland’s school system was again ranked number one in the nation this past year, and that reflects the copious spending the state has directed to education.  We may see some actual cuts this year, as there doesn’t seem to be anywhere else to turn. 

Look also for continued cuts in highway aid to the counties as well as adjustments to pension funding and more furloughs of state employees.  It’s going to be a tough year for state employees and for the counties and Baltimore City.

Pension Costs  Like many other states, Maryland has fallen a bit behind on dealing with its liability for employee pensions.  While the pension fund itself is not the catastrophe that some other states face, it has set aside very little money to pay for the health benefits it has promised to retired employees and the annual contribution required to the employee pension fund is increasing at what some say is an unsustainable rate.  In addition to this, the state is responsible for funding the pensions of teachers and librarians across the state, even though they are employed by the counties.

A commission has recommended changes to the state pension system which will reduce benefits for future employees and require increased contributions from employees.  The same commission has recommended increasing employee costs for health insurance after retirement.  Expect to see some action on these recommendations. 

The cost to the state for teacher/librarian pensions is approaching $1 billion a year.  Last year, the state senate voted to shift a part of these costs to the counties, although the House of Delegates did not agree.  This will come up again this year.  The Governor says he is against it at this time, but there is sentiment in the legislature to begin the shift, perhaps starting with ten to twenty percent.  The biggest losers here will be Montgomery and Prince George’s counties which have the largest number of teachers and the highest pay.

Same Sex Marriage  Several states and the District of Columbia have legalized same-sex marriage without the sky falling.  There’s considerable sentiment in Maryland to legalize it here.  Seeing which way the wind is blowing, Republican Senate Leader Allan Kittleman has introduced legislation to offer ‘Civil Unions’ to same-sex couples.  Gay rights groups such as Equality Maryland have said his bill is not enough.  Governor O’Malley, who says he opposes same-sex marriage has said he will sign a bill if one is passed.  There will be action here and I hope the General Assembly can finally move on this and legalize marriage for all.  The sky will not fall.

Taxes  Of course, every politician has said that they’re against new taxes, but there will be a strong push to increase taxes in at least two areas.  Health care advocates have lobbied for an increase in the alcohol tax for many years.  Maryland’s alcohol tax is one of the lowest in the nation and advocates for a a tax increase say that an increase will provide funds for improved health care, especially for the disabled.  The powerful alcoholic beverage lobby has managed to resist an increase in previous years, but this might be the year they lose.  If the tax is increased, though, expect the money to go into the general fund, not into a dedicated health care fund.  They’re talking about ten cents a drink.  If that’s too much you can brew your own.

Senate President Mike Miller wants to increase the gasoline tax.  The 23.5 cents per gallon tax hasn’t changed in about twenty years, while the cost of building and maintaining our roads and transportation infrastructure has increased dramatically.  There will be a lot of opposition to this, especially with gasoline prices already rising.  But, if they’re going to do it, this is the best year, given that it’s four years to the next election.  Eventually something has to give in transportation financing. 

The Inter-County Connector has cost so much money that other transportation projects have suffered.  And we’re going to be paying for it for years to come as tolls will be raised throughout Maryland over the next few years to pay off the bonds for the Connector.  I think a small increase in the gas tax might fly if it were dedicated to local projects throughout Maryland.  It might be a good idea to change the tax from a per gallon rate to a percentage of the sale price.  This will help keep revenues up with inflation.

Campaign Finance  Another task force, this one convened by State Attorney General Doug Gansler took a look at Maryland’s archaic and arcane campaign finance laws over the past year.  The panel recommended closing some well-known loopholes include the ‘slate account’ and the use of multiple ‘LLC’s to get around contribution limits.  The panel also recommended looking at the current donation limits which have been in effect since 1991.  Look for action on this, but keep in mind that Senate President Miller and House Speaker Busch have their noses a bit out of joint because they were not consulted on the makeup of the panel.

DUI  MADD is again pushing for a requirement that all those convicted of drunken driving, even first-time offenders, be required to install ignition interlock devices on their cars that will prevent the car from starting if the driver has consumed any alcohol. 

Slots  There will be a move to loosen restrictions on slots to encourage bids on more sites.  While two of the five locations envisioned in the original slots legislation are active and a third to come on line in the next 18 months, there have been no bidders on the Western Maryland site and problems with bids on the site in Baltimore City.  Some legislators and many slots interestes think the state needs to sweeten the pot a bit to get bids.  In addition, Baltimore attorney Peter Angelos has indicated he is interested in purchasing Rosecroft Raceway in Prince George’s County if the state will allow slots there.  Because slots were approved by a constitutional amendment, any changes authorized by the legislature will have to go before the voters in 2012.

Redistricting  With the 2010 census complete, the state will have to draw new district maps.  The data won’t be available in time for the regular general assembly session, so look for a special session over the summer to deal with the state’s eight congressional districts.  Population growth in the DC suburbs, the Frederick area and, to a lesser extent, on parts of the Eastern Shore will require changes to the existing districts.  Expect the legislature to try to make the First District, which includes the Eastern Shore, a bit less Republican.

It will be fun to watch, but remember that you’re not going to be allowed to see everything.

One of the interesting topics here in Worcester County is the question of our Liquor Control Board (LCB).  Here in Worcester, the LCB basically serves as the single wholesaler for alcoholic beverages as well as operating a number of retail stores.   In operation since 1933, the LCB is independent of the county [...]]]>

Beer for all!

One of the interesting topics here in Worcester County is the question of our Liquor Control Board (LCB).  Here in Worcester, the LCB basically serves as the single wholesaler for alcoholic beverages as well as operating a number of retail stores.   In operation since 1933, the LCB is independent of the county government and distributes all profits to the County and the four county municipalities.   The Worcester LCB is one of only four (Worcester, Wicomico, Somerset and Montgomery) such entities in the state.

Concerns about the Worcester LCB were first raised by the public last year when the amount of profits remitted to the county was revealed to have fallen sharply.  Preliminary information attributed this to large salary increases the Board members had voted for themselves and the staff of the LCB.  However, further allegations surfaced that the LCB was selling liquor below cost and selling the same product to different retailers and restaurants at different prices. 

A subsequent investigation by the Maryland Comptroller’s Office revealed that the LCB had, in fact, broken Maryland law by selling products below cost and by selling to different customers at different prices on the same day.  A summary of their report can be found here.  The LCB has admitted their violations and promised to hire a lawyer to help it figure out what the rules are and to increase its prices so as to be able to contribute more to the county and municipality budgets.

Well, I think it’s time for this anachronistic institution to go.

First, their policies are inscrutable.  While they operate their own stores to sell spirits, they also allow other, private stores to also sell spirits.  What’s the point of that?  Why do they need a lawyer to figure out what the basic rules are?  The rules are not secret, neither are they arcane. 

It should be clear by now that the management of the LCB is ineffective, at best.  Most of the state operates well within the Maryland three-tier alcohol distribution system without the need for a quasi-governmental body to fulfill what, in fact, are non-governmental functions.  Let’s get rid of the LCB and get Worcester out of the 19th century.

Maryland House of Delegates Chamber

The image is of the Chamber of the Maryland House of Delegates in Annapolis.  It’s empty now, but on January 12th, 2011, the 428th session of the Maryland General Assembly will begin with the swearing in of members. 

The composition of the General Assembly is little changed by the election.  There [...]]]>  

Maryland House of Delegates Chamber

The image is of the Chamber of the Maryland House of Delegates in Annapolis.  It’s empty now, but on January 12th, 2011, the 428th session of the Maryland General Assembly will begin with the swearing in of members. 

The composition of the General Assembly is little changed by the election.  There are six more Republicans in the House of Delegates, bringing their total to 43 against 98 Democratic delegates.  In the Maryland Senate, the Republicans actually managed to lose two seats in this year of Republican dominance.  There are now 12 Republican Senators against 35 Democratic Senators.  In neither house do Republican legislators constitute even a third of the total.

The General Assembly is going to have a heavy workload when they convene.  Major issues include the budget, campaign finance, the death penalty, various tax proposals, pension issues and possibly same-sex marriage.  Let’s take a look.

BUDGET  Legislative analysts recently reported that the projected deficit for the next fiscal year is about $1.6 billion.  That’s a lot of money, especially since the flow of Federal funds that have supported the state budget in the past two years seems to be coming to an end.  While it’s possible the estimated deficit will be trimmed a bit in the coming month, there’s still a lot of work to do.  I think we can confidently look forward to continued limits on the size of the state payroll, with further reductions in the number of employees, furloughs and pay freezes.  Restrictions on payments to localities will likely be also continued.  Look below for some other ideas.

TEACHER PENSIONS  Expect the General Assembly to take another run at this in 2011.  Currently the full cost of pensions for K-12 teachers throughout the state are paid by the state even though the localities determine the number of teachers and their pay rates – two of the key factors used to compute the total cost of pensions.  Most agree that the localities should pay this cost as they control the factors that control the amount.  A reasonable compromise would be to phase in the shift to local funding with the localities picking up perhaps ten percent to start.  This passed the Senate last session but failed in the House of Delegates.  With the total cost approaching $1 billion a year, an initial cut of $100 million is nothing to sneeze at.

STATE EMPLOYEE PENSIONS  The State of Maryland faces an unfunded liability for pension costs and benefit costs for retired employees of roughly $33 billion.  We’re not unusual in having a big unfunded liability – most other states are in the same boat – but we need to do something about it.  The General Assembly neatly sidestepped the problem in the last session by the time-honored method of appointing a ‘study commission’.   The commssion is due to make a report before the beginning of the next session, however, and the General Assembly will be on the hot seat again.  I expect to see some combination of increased retirement age, increased employee contributions and a reduction in the speed with which pensions are ‘earned’.  On the benefit side, some reduction in benefits is likely.

COMBINED REPORTING  Corporations that operate in many states are able to avoid taxes in states like Maryland by shifting their profits to states with lower taxes or states that don’t tax certain kinds of income.  Home Depot, for example, is able to transfer profits from its Maryland operations to Delaware by charging its Maryland stores a ‘fee’ for use of the Home Depot trademark, payable to ‘Homer’, a fully-owned subsidiary in Delaware.  Delaware doesn’t tax income from trademark usage and thus Home Depot is ‘home free’!  Hardware and builidng material stores that operate on in Maryland don’t have this advantage and thus pay taxes that Home Depot doesn’t have to pay.

Maryland has considered switching to a system called ‘combined reporting’ which is currently used by 23 other states.  Under this system, multi-state corporations are generally required to allocate their income among the states in proportion to the amount of sales in each state.  This would mean that Home Depot would have to pay taxes at the same rate as our local hardware stores.  Opponents claim that this would drive businesses out of the state, but do you think Home Depot would really leave if they had to pay the same taxes as everyone else?

The General Assembly has put this off before, but the estimated $100 million that combined reporting would yield is a tough thing to turn down in the face of a looming deficit.  Look for a big fight, though.

DEATH PENALTY  In theory, Maryland has a death penalty, but in reality, it is not executing anyone these days.  The last execution in Maryland was in 2005 and there is significant opposition to further executions.  The General Assembly tightened restrictions on the death penalty in the last session, but opponents are likely to push for outright abolition again this session.  Eventually, the death penalty in Maryland will be abolished, but not this session.

SAME SEX MARRIAGE  Maryland Attorney General Doug Gansler has ruled that Maryland must recognize same-sex marriages performed in other states, including the District of Columbia, but same-sex marriage is still not legal in Maryland.  The Governor has stated that he is in favor of ‘Civil Union’ but hasn’t pushed to make it legal.  This will certainly come up again in the General Assembly and I think proponents may have the votes this time. 

ALCOHOL TAX  Maryland has one of  the lowest taxes on alcohol in the country and there have been strong efforts to increase it.  Opposed are all the alcohol dealers, distributors, restaurants and bars in the state.  Watch for a well-orchestrated public campaign to increase the tax by ‘ten cents a drink’, with the proceeds going to health care, but a strong, organized opposition from the above groups.  With all the discussion of taxes in the past election and public antipathy toward tax increases, this is going to be a big fight.

I’ll have more on the upcoming session soon!

Well, the election is over, the victors are celebrating and I have some time to blog again.  There are about 40,000,000 other bloggers out there analyzing what the election means and dissecting the voting, so I’ll skip that and go directly to discussing the problems facing those who are newly elected. 

I’ll start right here in Worcester [...]]]>  

Well, the election is over, the victors are celebrating and I have some time to blog again.  There are about 40,000,000 other bloggers out there analyzing what the election means and dissecting the voting, so I’ll skip that and go directly to discussing the problems facing those who are newly elected. 

I’ll start right here in Worcester County where it looks like five of the seven current commissioners were re-elected; one decided not to run again and one was defeated in a primary.  The two newest members, Madison Bunting and Merrill Lockfaw are from the northernmost and southernmost districts respectively.  The Commissioners have a number of significant issues to address almost immediately.

Taxes and Revenue – If we look at property taxes and income taxes together, Worcester has the lowest tax rates of any jurisdiction in the state.  We’re able to do this because of the very high proportion of our housing stock that is owned by non-residents.  This means they pay real estate taxes here but don’t use much in the way of county services, particularly education.  The downside of this is that county revenues are heavily impacted by changes in real estate values.  Non-residents don’t get the benefit of the ‘homestead credit’ and changes in assessed values are directly translated into reduced taxes.  As the state moves through its three-year assessment cycle with little new construction and reduced home values, the County’s tax revenues will continue to decline.

We can’t expect the state to bail us out, either.  The state is facing its own budget challenges and has already slashed aid to the counties.  There is a distinct possibility that the state will begin to ask local governments to pick up a share of teacher pension costs in the next year or two and that will be another hole in the County budget.  Balancing the County budget over the next two years is going to be a distinct challenge.

Education   State law requires local jurisdictions at a ‘maintenance of effort’ level – the same dollar amount per student as the prior year.  That’s just what the county did last year and it resulted in a slight reduction in the school budget as there was a slight decline in projected enrollment.  This meant a very tight budget for the school system as costs for everything from teacher compensation to transportation went up.  The additional stimulus funding provided by the Federal government helped mitigate the shortfall a bit and allowed restoration of some programs, but the coming years look very tight with county revenue continuing to decline.  Don’t expect much help from the state here, either.  Worcester receives the second lowest aid per student of any jurisdiction in the state and that’s not likely to change.  With a needy student population (more than 40% are eligible for free or reduced-price meals), the school board is going to be asking for more money.  It will be interesting to see what the Commissioners do.

Transportation  The deadly crash on Route 113 this week highlighted the urgent need for improvements to this road which is the primary artery for the county.  to be sure, the state is committed to expanding this highway to four lanes for its entire length, but the money is flowing – and the work is continuing – at a snail’s pace.  The current state transportation plan does not show a completion date.

Meanwhile, population growth in the Ocean Pines area has put a strain on Route 589 (Racetrack Road).  The opening of the slots casino at Ocean Downs in December will add significant traffic, particularly between Route 90 and Ocean Downs.  While there are some minor improvements being made directly in front of the race track, the state has no intention of funding anything but planning – no engineering, no right-of-way acquisition and no construction – for the foreseeable future.  This road is already heavily congested during the summer months and there is no relief in sight.

In addition to the lack of progress noted above, the state has reduced the allocation of transportation funds to localities by 90%.  In Worcester County, this has meant that road maintenance has been sharply reduced and is below the level needed to deal with ongoing problems and keep county roads from further deterioration.  The Commissioners are going to have to decide whether to put off necessary maintenance or divert funds from other areas to deal with this.

In addition to the roads, other transit options in the county are far below what is needed.  Shore Transit has reduced their operations to a level that cannot provide meaningful services to those without cars.  In addition, the increased number of older residents is going to require additional transportation services in the near future. 

Housing  Housing is an ongoing problem in Worcester County.  In most places housing costs bear some relation to the incomes of county residents.  However, because of the demand for second homes in Worcester County, housing costs are determined primarily by incomes in the Washington/Baltimore/Philadelphia areas where incomes are significantly higher than in Worcester County.  Chapter Five of the Worcester County Comprehensive Plan  deals with housing and recognizes that affordability is a particular problem here.  There are numerous recommendations for the county to improve the stock of affordable housing.  To date, the county has not addressed this issue at all and it doesn’t appear that they have any desire to do so in the future.

Jobs  Employment in Worcester County is highly seasonal.  In the summer the resort industry and, to a lesser extent, agriculture employ tens of thousands.  In the winter, Worcester routinely has the highest unemployment rates in the state.  The county commissioners are aware of this problem, but there has been little progress in addressing the issue.  Whether the new group of commissioners will try to do something in this area is an open question.  I’m not optimistic, though.

Environment  The resort industry – by far the largest economic engine in the county – depends on a quality environment including clean water and clean air and preservation of the county’s fragile wetlands.  Until recently the second largest industry in the county was home construction which depended to a certain extent on the ability of builders and developers to build in a way which potentially degraded the environment.  How the county deals with this issue will have much to say about whether we retain and grow our resort industry or whether we destroy or degrade our coastal bays, marshes and wetlands.  It’s not going to be easy.