Maryland’s Future
28
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
Transcript of 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?
