Maryland’s Future

Investing in

Maryland’s Future

Benjamin Orr

Executive Director, MDCEP

Presented to: Maryland Affordable Housing

Coalition

February 9, 2016

How state spending and taxes support the building blocks of our modern economy

All MDers should be able

to achieve their full

potential in a healthy

economy that offers a

widely shared, rising

standard of living

How does Maryland

Invest Our Money?

What do we care about?

$40.5 Billion Operating Budget Fiscal Year 2016

Source: 2015 90 day Report Exhibit A-1.1

$16.2 Billion General Fund

Source: 2015 90 day Report Exhibit A-1.15

Fiscal Year 2016

How Much State Spending is Discretionary?

FY 15 Mandated Appropriations In The Maryland State Budget Exhibit 1

What $5.4 Billion is Discretionary?

FY 15 Mandated Appropriations In The Maryland State Budget Exhibit 2

$3.9 Billion Capital Budget Fiscal Year 2016 Expenditures

Transportation

60%

Environment

11%

Higher Ed

11%

Education

9%

Housing/

Community

Development

3%

Health

2%

Local Projects

1% Facilities

2%

Public Safety

1%

How Do We Pay for

These Investments?

And who pays?

$40.5 Billion Operating Budget Fiscal Year 2016 Revenues

Board of Revenue Estimates FY 16 Sept. Revisions

$16.2 Billion General Fund Fiscal Year 2016 Revenues

Board of Revenue Estimates FY 16 Sept. Revisions

Business taxes are a smaller share of

MD’s economy than in other states

Ernst & Young, FY14 COST report on state and local taxes

4.6% 3.8%

0%

2%

4%

6%

8%

10%

12%

14%

ND AL

VT

WY

NM M

I

HI

ME

WV

NY

MT

MV

WA RI

FL NJ IL AZ

SC TX DC KS

KY

OK

MN SK

USA ID IA P

A

WI

AL

CA

DE

AK

CO

NB

TN MA

NH

OH LA GA

MD

UT

VA IN MI

MO

NC CT

OR

MD business gets a $1 return for every 70

cents invested in state and local taxes

9.7% 9.5% 10.3% 9.7%

8.5% 8.8%

6.7%

0%

2%

4%

6%

8%

10%

12%

Lowest

20%

Second

20%

Middle

20%

Fourth 20% Next 15% Next 4% Top 1%

Low income MDers pay greater share

of income in state/local taxes Shares of family income for taxpayers under 65

Who Pays? A Distributional Analysis of the Tax System in All 50 States. (2015). Institute on Taxation and Economic Policy. See: http://www.itep.org/whopays/full_report.php

MDers of color more likely to pay a

greater share of their income in taxes

Maryland Center on Economic Policy. Maryland’s Poor Taxed More Than Rich; Communities of Color Feel Biggest Pinch. March 2015.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Poorest20% ≤$24,000

Second20%$24,000-$44,000

Middle 20%$44,000-$67,000

Fourth 20%$67,000-$111,000

Richest 20% ≥$111,000

White alone Non whites Excluding Asians

Female-headed HH more likely to pay

greater share of their income in taxes

Maryland Center on Economic Policy.

0%

5%

10%

15%

20%

25%

30%

Poorest20% ≤$24,000

Second 20%$24,000-$44,000

Middle 20%$44,000-$67,000

Fourth 20%$67,000-$111,000

Richest 20% ≥$111,000

Total Male-Headed Households Total Female-Headed Households

$3.9 Billion Capital Budget Fiscal Year 2016 Revenues

Transportation

60%

General

Obligation

27%

Special Funds

6%

Federal Funds

3%

Bond Premiums

1%

General Funds

1%

What fiscal issues

are rising to the top

of the legislative

session?

Unresolved issues from FY 16 budget Legislative Priorities Not Funded by

Governor’s Original

FY 15 Budget Proposal

Cost to General

Fund

Governor’s

Decision

2% Salary Increase (COLA) $68.7 million Yes

Geographic Cost of Education Index

(GCEI)

$68.1 million No

Physician Rates $15.5 million Yes

Medicaid Coverage for Pregnant Women $4.8 million Yes

Substance Abuse Treatment (Heroin) $2 million Yes

Prince George’s County Hospital $15 million No

All other priorities $42.6 million Yes

Students of Color Most Likely to be

Hurt by GCEI Cuts

75.3%

92.1% 92.6% 93.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

White Minority (all) Black Hispanic

Ch

an

ce o

f B

ein

g i

n G

CE

I D

istr

ict

Budget Process Has Started Anew

No budget shortfall as revenues are up

Maintaining status quo = balanced FY 17 budget

Does not mean all needs are met

Gov. Hogan has proposed a $17.1 billion budget

• Fairly moderate, but still $214 million below DLS baseline (status quo)

• Disinvestment in Baltimore (no $700M for demolition, $24M less for schools)

• Continued shift to roads over transit

• 650 jobs cut, minimal wage increases for state workers

• Medicaid reenrollment issues may cut into fund balance

Constrained non-transportation capital budget through FY 2023

Affordable Housing Budget Cut

http://dbm.maryland.gov/budget/Pages/capbudhome.aspx

Administration is limiting new capital debt

No capital $ budgeted for legislators to designate

Non-transportation capital spending down 6%

DHCD affordable housing/community revitalization capital budget down 22%

Administration projects DHCD affordable housing/community development capital spending level funded through FY 2021

• No adjustment in capital debt capacity for inflation

Total rental housing programs and activities funds are down 16% ($9.2 million)

Rental Programs, Activities Down 16%

MDCEP analysis of FY 2017 Budget: http://dbm.maryland.gov/budget/Pages/capbudhome.aspx

$10.0 $10.0

$6.0 $7.0

$10.0

$28.3

$26.4

$3.0

$4.7

$0

$10

$20

$30

$40

$50

$60

$70

FY 2016 FY 2017 (proposed)

Federal Funds

Special Funds

General Funds

Other GO Bonds

Rental Housing

Works (GO

Bonds)

$ in millions

Rental Programs, Activities Down 16%

MDCEP analysis of FY 2017 Budget: http://dbm.maryland.gov/budget/Pages/capbudhome.aspx

$47.8

$-

$6.0 $3.5

$29.5

$8.6 $6.5

$3.5

$0

$10

$20

$30

$40

$50

$60

Rental Housing

Programs

Housing and

Building Energy

Programs

Partnership Rental

Housing Program

MD-BRAC

Preservation Loan

Fund

FY 2016

FY 2017 (proposed)

$ in millions

State leaders also talking taxes Gov. Hogan proposed $480M tax cuts over 5 years

• Increase senior exemption (not income-based)

• Tax-free zones for manufacturers

Legislative leadership just proposed tax cuts recommended by the Augustine Commission:

• Cut top personal income tax rates, exempt some pass-through income

• Speed up estate tax giveaway to top 3% of estates in Maryland

• Allow large, multi-state corporations to reduce what counts as taxable income in Maryland

• Cut corporate tax rate to 7%

Governor Hogan press release: http://governor.maryland.gov/2016/01/12/governor-hogan-introduces-over-480-million-in-tax-relief-measures/

Report of the Maryland Economic Development and Business Climate Commission: http://mgaleg.maryland.gov/Pubs/CommTFWorkgrp/2016-MEDBCC-Report-Phase-II.pdf

Expanding MD’s EITC to help low-

income workers make ends meet

MDCEP, CBPP analysis of Census, state data

Campaign to expand EITC for younger workers, non-custodial parents

• Would help 355,000 MDers make ends meet

• Would put roughly $40 million into local economies

Already phasing in expansion of refundable state EITC to 28% of federal benefit by 2018

Gov. Hogan, Augustine Commission proposed speeding up refundable expansion

Senator Madaleno has proposed raising the refundable state EITC to 30% of federal benefit

Other factors influencing tax policy

discussion

Proposals to expand homeowner, renter’s tax credits

Lockheed Martin is floating its own corporate tax cut proposals

• Reduce tax rate for research intensive companies

• Remove the cap on the R&D tax credit

VA Governor McAuliffe proposed cutting their corporate tax rate, increasing tax credits

Emails sent to the House Ways and Means Committee.

Bottom line:

Will Maryland continue

to invest in the pillars

of our modern

economy, or will she

have to make cuts to

education, healthcare,

and public safety?

www.mdeconomy.org

@mdeconomy

Benjamin Orr

[email protected]

@BenjaminOrr63