Legislators focused on a number of important matters ranging from balancing the fiscal year 2019 budget, the impacts of federal tax reform, funding for K-12 education and school safety, expanding medical cannabis licenses, prescription drug pricing, and initiatives to prevent gun violence to name a few.
Again this session, a number of bills were passed and presented to the Governor at the end of March to provide sufficient time for the General Assembly to override any potential vetoes. Of the bills presented, the Governor vetoed two billswhich were overridden by the General Assembly, let several take effect without his signature, and signed others. Legislation referred to as the “Rape Survivor Family Protection Act” had broad support and was passed and signed by the Governor in mid-February.
With the early presentment of bills, two bill signings were held prior to the end of session on February 13 and April 5. The traditional bill signing was held the day after session ended on April 10. Three additional bill signings will be held.
Below is a summary of some of the major issues and final outcomes from the 2018 General Assembly Session. A more detailed overview of significant legislation that passed or failed can be found in the Department of Legislative Services 90 Day Report.
The fiscal year 2019 budget as enacted by the General Assembly (Senate Bill 185) totals $44.6 billion, a 2.3% increase from fiscal year 2018. The general fund budget, the portion supported by tax related revenues such as the income tax, sales tax, and state lottery, accounts for 40.1% of the total budget or $17.9 billion. The general fund budget is subject to volatility as its revenue sources are directly affected by the economy. The term structural deficit or shortfall often refers to the gap between general fund expenditures and general fund revenues. Prior to the beginning of the 2018 session, a general fund shortfall of $298 million was projected. Senate Bill 187 – the Budget Reconciliation and Financing Act of 2018 accompanied the budget to address the structural deficit and fund certain budget priorities.
Federal tax changes enacted at the end of December 2017 resulted in additional general fund revenue of almost $550 million. However, legislation passed to credit $200 million of this additional income tax revenue to a special fund to be used in the future to implement recommendations of the Commission on Innovation and Excellence in Education (Kirwan Commission) and additional legislation passed to provide limited tax relief to those who would be affected by the recent federal tax law changes.
The budget as enacted by the General Assembly leaves a $106.9 million general fund balance at the end of fiscal year 2019 and preserves $882.5 million in the State’s Rainy Day fund. State support for public education and libraries is approximately $6.6 billion and total state aid for primary and secondary education will increase by approximately $170.6 million. In addition to the $200 million being set aside to implement future recommendations of the Kirwan Commission, the General Assembly restricted $11.4 million to implement preliminary recommendations of the Commission and provided a total of $40.6 million in operating and capital funds to improve safety and security in Maryland’s public schools. Other legislative funding initiatives included providing an additional $33.6 million in aid for local governments, and $57.4 million for providers of health care services to vulnerable populations. Additional information on the fiscal year 2019 budget as enacted by the General Assembly can be found in the Budget and State Aid section of the Department of Legislative Services (DLS) 90 Day Report.
Individual and Corporate Income tax
State Income Tax Modifications Resulting From Federal Tax Changes
As mentioned above, legislation passed to provide limited tax relief to those who would be affected by the recent federal tax law changes. Senate Bill 318/House Bill 570 will increase the standard deduction for State income tax purposes beginning in tax year 2018 and then index the standard deduction based on the annual change in the cost of living beginning in tax year 2019. Senate Bill 184/House Bill 365, both bills passed, clarify the number of personal exemptions a taxpayer can deduct for State income tax purposes.
Single Sales Factor Apportionment
After being proposed a few years ago by a Commission examining Maryland’s business climate and tax structure, Senate Bill 1090/House Bill 1794 passed to phase-in a single e sales factor formula to be used to calculate a corporation’s corporate income tax. This will be phased-in over a five-year time frame beginning in tax year 2018. By tax year 2022, all corporations, with limited exceptions, must allocate to the State the part of the corporation’s Maryland modified income derived from or attributed to being carried on in the State using an apportionment formula in which Maryland modified income is multiplied by 100% of the sales factor. Under current law, unless engaged primarily in manufacturing activities, corporations must use a three factor formula that incorporates property, payroll, and a double-weighted sales factor.
Firearms/Gun Violence
Recent mass shootings at schools and concert venues, and gun violence against oneself or others, led to the introduction and passage of the several bills below to prohibit access to rapid fire trigger activators (bump stocks) and limit access to firearms under certain circumstances.
Senate Bill 707/House Bill 888 prohibits a person (1) from transporting a device defined as a “rapid fire trigger activator” into the State or (2) manufacturing, possessing, selling, offering to sell, transferring, purchasing, or receiving a rapid fire trigger activator. A bump stock device was used in the mass shooting in Las Vegas where a gunman opened fire into a crowd during a concert.
Domestic Violence – Transfer/Surrender of Firearm
House Bill 1646 establishes a process by which an individual convicted or who pleads guilty of a crime involving domestic violence must transfer his or her firearms to law enforcement or a federally licensed firearms dealer. The bill requires the State’s Attorney to provide notice relating to prohibitions on possession of a firearm to a defendant, defendant’s counsel, and the court if the defendant is charged with a disqualifying crime and the facts support a finding that the crime was domestically related. On conviction or a plea of guilty, a court must order the defendant to transfer, either personally or through a representative, all regulated firearms, rifles, and shotguns as specified in the bill. The transfer must occur within two business days after conviction and written proof of the transfer is to be provided to the individual or representative. The court is authorized to issue a search warrant if there is probable cause to believe the individual did not surrender all firearms, rifles, or shotguns.
House Bill 1302 establishes a process by which certain medical professionals, law enforcement, and family or household members may seek an interim, temporary, or final court order to prevent a respondent from possessing or purchasing a firearm or ammunition for a limited time frame if the respondent is found to be in danger of causing personal injury to himself or others. A petition for an extreme risk protective order can be filed with the District Court, or a District Court Commissioner if the Court is closed. The bill also establishes a process for the surrender of the firearms and ammunition and a process for the return.
Business and Regulatory Issues
Breweries and Alcohol Regulation
In response to legislation that passed during the 2017 session (Ch. 813, Acts of 2017) making changes to laws regulating Class 5 breweries, several bills were introduced to either expand or limit the privileges of breweries in the state. Ch. 813, which applies to small craft breweries and a Guinness brewery that recently opened in Baltimore County, (1) increased the number of barrels a brewery may sell for on-premises consumption; (2) authorized a brewery to contract to brew and bottle beer with and on behalf of other classes of breweries; and (3) changed the hours of operation for sales and serving privileges of an on-site consumption permit.
Legislation introduced this session, all of which failed, would have modified these changes. House Bill 1052 would have partially repealed the bill from last year to just apply to the Guinness brewery. House Bill 518, the Reform on Tap Act of 2018, the product of a workgroup led by the State Comptroller, would have significantly expanded the production limits, onsite sale and sampling, and distribution for any type of brewery. Other bills, Senate Bill 839/House Bill 1015 would have removed limits on the number barrels for a brewery that obtained a limited wholesaler’s license; and several other bills (Senate Bill 1044/House Bill 1176, Senate Bill 1017/House Bill 1148, Senate Bill 609, and Senate Bill 406) would have expanded Class 5 brewery privileges related to the onsite sampling and sale of beer.
However, legislation did pass, House Bill 1316, to establish a 21-member Task Force to Study State Alcohol Regulation. The Task Force, whose report with findings and recommendations is due to the General Assembly by December 1, 2018, is charged with examining whether the Comptroller’s Office is the most appropriate agency to ensure the safety and welfare of Maryland residents, or whether those tasks should be assigned to another State agency or to one created specifically to carry out those tasks.
Internet Privacy and Net Neutrality
In response to Congress approving and the President signing a resolution nullifying Federal Communications Commission rules on internet privacy and net neutrality, House Bill 1654 was introduced to establish requirements at the State level. This bill, which did not pass, would have established privacy requirements for (1) the use, disclosure, sale, or provision of consumer data; (2) the protection of consumer data; and (3) enforcement provisions by the Consumer Protection Division in the Office of the Attorney General. The bill also would have prohibited the use of state funds to procure services from an ISP that engaged in certain activities.
Following the failure of legislation during the 2017 General Assembly session and increasing support from the Legislative Black Caucus, legislation was again introduced this session to enhance diversity in the medical cannabis industry. House Bill 2, which passed, (1) requires outreach to encourage industry participation by small, minority, and women owned businesses; (2) the promulgation of regulations based on a recent disparity study; (3) raises the cap on the number of licensed growers up to 22, subject to certain reductions; (4) requires the issuance of licenses to two growers that were initially ranked, but not awarded; (5) establishes a cap of up to 28 processors, subject to certain reductions; (6) establishes a compassionate care fund to provide free or discounted medical cannabis to individuals enrolled in Medicaid or the Veterans Administration Health Care System; and (7) makes changes to the membership of the Natalie M. LaPrade Medical Cannabis Commission.
During the 2017 session, the General Assembly passed, House Bill 1, Maryland Healthy Working Families Act, to require an employer with 15 or more employees to have a sick and safe leave policy under which an employee earns at least 1 hour of paid sick and safe leave, at the same rate as the employee normally earns, for every 30 hours an employee works. An employer with 14 or fewer employees must have a sick and safe leave policy that provides an employee with at least unpaid sick and safe leave based on the same conditions. The Governor vetoed this bill and the General Assembly overrode the veto during the 2018 session. The bill became law in February 2018.
To assist small businesses with providing paid sick and safe leave as specified in the bill, the General Assembly passed Senate Bill 134 to provide a refundable credit against the State income tax for a small business that employs 14 or fewer employees. The tax credit applies to an employee who earns 250% or less of the annual federal poverty guidelines for a single person household.
Drug Cost Review Commission
Legislation to address concerns with the cost of prescription drugs was introduced again this session. As introduced, Senate Bill 1023/House Bill 1194 would have (1) established a Commission to review prescription drug costs and value with the goal of setting price controls for the drug supply system; (2) mandated a 30-day advance price notification of wholesale acquisition cost (WAC) for branded, generic sole, source off-patent drugs in certain circumstances; and (3) required the disclosure of pricing information. As amended by the House, the bill established a Drug Cost Commission to determine how to make prescription drugs more affordable after reviewing, evaluating, and assessing the pharmaceutical distribution and payment system, among other requirements. Although the bill was heard and voted favorable in the Senate Finance Committee on the last day of the session, the bill was not reported out of Committee and failed on Sine Die.
Affordable Care Act and Market Stabilization
In response to concerns that the repeal of the federal mandate for health coverage under the Affordable Care Act (ACA) would cause premium rates to increase significantly, result in healthier individuals discontinuing benefits, and jeopardize the viability of the individual market, several bills were introduced and passed to stabilize the market. This was a bi-partisan effort and all bills have already been signed into law by the Governor.
Senate Bill 1267/House Bill 1795 (Chs. 7 and 6, Acts of 2018) requires the Maryland Health Benefit Exchange, in consultation with the Insurance Commissioner, to submit a State Innovation Waiver application for a Federal Section 1332 waiver to establish a program for reinsurance and seek federal pass-through funding. The program authorized under this bill must provide reinsurance to carriers that offer individual health benefit plans and meet the requirements of the waiver. The program must also mitigate the effects of high-risk individuals on the rates in the individual market.
Senate Bill 387/House Bill 1782 (Chs. 38 and 37, Acts of 2018), a companion bill, identifies revenue streams to fund the reinsurance program authorized under SB1267/HB1795, upon receipt of the 1332 waiver. This bill establishes a 2.75% state health insurance provider fee assessment on health insurers, including nonprofit health service plans, health maintenance organizations, managed care organizations, and others for calendar year 2019. This fee is in place of the fee that would have been assessed under the ACA, but was temporarily suspended for that year due to federal action. This bill also establishes limitations for association health plans, as well as short term limited duration insurance.
More specifics on each of these bills can be found by clicking on links above or in the Health and Human Services section of the DLS 90 Day Report.
A broad range of legislation passed affecting funding levels for K-12 education and education policy. An overview of all education policy and funding initiatives, including State Aid to Public Schools, Nonpublic Schools, and school construction, is summarized in the Education Section of DLS 90 Day Report. A summary of several education policy and funding initiatives that passed are listed below.
Constitutional Amendment to Supplement State Funding for Education
Senate Bill 1122 proposes a constitutional amendment to be placed on the ballot for the 2018 general election to require after a four-year phase-in period, 100% of the gaming revenues dedicated to public education be used as supplemental funding. If approved, general fund expenditures for education will increase by $125 million in fiscal 2020 and increase to $522 million in fiscal 2023.
Commission on Innovation and Excellence in Education (Kirwan Commission)
House Bill 1415 extends the deadline of the Commission and implements and mandates funding for several preliminary policy recommendations. Policy initiatives include: (1) a comprehensive teacher recruitment and outreach program; (2) the Maryland Early Literacy Initiative; (3) the Learning in Extended Academic Programs (LEAP) grant program; (4) Public School Opportunities Enhancement Program; (5) the Teaching Fellows for Maryland scholarship program; and (6) the Career and Technology Education (CTE) Innovation grant program.
21st Century School Facilities Commission
House Bill 1783, as introduced, made several comprehensive changes to the school construction process as proposed by the 21st Century School Facilities Commission. As amended and passed by the General Assembly, among other changes, the bill expands the membership and changes the name of the Interagency Commission (Committee) on School Construction (IAC) and transfers the authority to grant final approval for school construction projects from the Board of Public Works (composed of the Governor, Comptroller, and Treasurer) to the IAC. This transfer of authority led the Governor to veto the bill, but the General Assembly overrode the veto during the 2018 session and the bill became law.
In response to a lack of heat and closures of Baltimore City schools due to extremely cold weather, Senate Bill 611 was introduced to establish the Healthy School Facility Fund within the IAC to provide grants for facility improvements. Priority for awarding is given to schools based on the severity of issues including air conditioning, heating, mold remediation, temperature regulation, plumbing, and windows. The Governor is required to appropriate $30 million to the fund in fiscal 2020 and 2021 and no jurisdiction may receive more than $15 million in a fiscal year.
Maryland Safe to Learn Act of 2018
Following recent school shootings in Maryland and other parts of the country, several pieces of legislation were introduced that took a comprehensive approach to ensuring Maryland’s schools are safe. These bills ranged from requiring threat assessment teams and school resource officers (SRO) located at all schools, to enhancing the security of school buildings and providing school safety drills. All of these bills were consolidated into one piece of legislation, Senate Bill 1265 – Maryland Safe to Learn Act of 2018. This bill, among other requirements (1) establishes a School Safety Subcabinet; (2) requires the Maryland Center for School Safety to develop training, gather data, and review and comment on school safety plans; (3) requires school safety evaluations of all public schools; (4) requires school resource officers to complete a specialized training; and (5) requires local school systems, working with local law enforcement, to identify which public schools have an SRO and for those schools without, the adequate law enforcement coverage that is provided to the school. This requirement applies to high schools for the 2018-2019 school year and to all public schools for the 2019-2020 school year. A total of $40.6 million is being provided in the fiscal 2019 budget to provide grants to local school systems and law enforcement agencies. Of this amount, $2.5 million will be used to staff the Maryland Center for School Safety. Beginning in fiscal 2020, the bill mandates $10 million in annual grants to assist with providing SRO/ law enforcement coverage.
A more detailed overview of the legislation listed above and other legislation that passed or failed during the 2018 General Assembly session can be found in the Department of Legislative Services 90 Day Report.
