Sustainable Growth and Preservation Act of 2012

Background: At the conclusion of the 2011 regular session the Governor created the Task Force on Sustainable Growth and Wastewater Disposal following a vigorous debate on HB 1107 and the issue of the use of septic systems. Last year’s legislation would have prohibited, with specified exceptions, the State or a local authority from recording or approving a residential major subdivision on septic and required best available technologies (BAT) for all septics. The Governor’s legislation was crafted with the recognition that outdated wastewater technologies—septic systems—are one of the few nitrogen pollutant sources in Maryland that continues to increase and which often supports wasteful land development practices outside of our sewered areas. If left unchecked, such practices could undermine Maryland’s Bay restoration, smart growth, and sustainability efforts. Maryland’s population continues to grow and is expected to increase by 1 million people by 2035. Implementing protective measures now will ensure that the land use and pollution impact of future Marylanders is minimized, giving us the greatest chance of success in restoring the Chesapeake Bay and protecting our rural landscape.

Description: This year’s legislation will address the pollution and land use impacts of septic systems and follows the recommendations made by the Task Force on Sustainable Growth and Wastewater Disposal, a group that consisted of 28 members from across the State of Maryland representing a wide spectrum of stakeholders.  The bill creates four tiers for inclusion in local comprehensive plans to guide growth on central sewer and septic systems.  Instead of banning septic systems, with optional new tiers to aid local, comprehensive planning – it assists local communities in moving septic growth away from areas where it will contribute to sprawl and pollution.

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Bay Restoration Fund

Background: The main goal of the Bay Restoration Fund is to provide grants to owners of wastewater treatment plants (WWTPs) to reduce nutrient pollution to the Chesapeake Bay by upgrading the systems with enhanced nutrient removal technology.

Description: The legislation restructures an existing fee on users of wastewater facilities, septic systems, and sewage holding tanks. Reflecting some of the recommendations of Task Force on Sustainable Growth and Wastewater Disposal, the Governor’s legislation proposes to double the revenue from the current fee.  This is necessary to address to address the current funding shortfall for upgrading all 67 major WWTPs by 2017 as committed to in Maryland’s Phase 1 Watershed Implementation Plan (WIP), and to provide resources to address two other major components of the Phase 1 WIP Developed Land strategies: septic system upgrades/connections to WWTPs and stormwater retrofits. The bill proposes a progressive fee structure based on consumption that doubles the yield.

The proposed Bay Restoration Fund fee structure is as follows: $0.90 per 1,000 gallons for first 2,000 gallons per month and $1.25 per 1,000 gallons thereafter.  Under this scenario, the average fee will increase from $2.50 per month to $5.00 per month.  Low end users (e.g. 2000 gallons per month) will see a lower fee ($1.80/mos) and higher end users (e.g. 8,000 gallons per month) will see an increase ($9.30/ mos).  Since septic systems are not metered for water use, the current fee of $2.50/month will double to $5.00/month.  However, those residents who qualify for an exemption from the fee because of income will be encouraged to apply to the local jurisdiction for this exemption.

January 23 press release by the Governor’s office on his 2012 legislative initiatives

MACo will provide more information on the bills as it becomes available but remains concerned, particularly regarding the four tier system for septic systems.

Nearly two-thirds (63%) of voters would spend more tax dollars to make the waters safe and healthy “if State leaders and scientists said more tax dollars were needed.” Fewer than half that many (29%) oppose this idea. …

There is equally strong support for an increase in the Bay Restoration Fund – with 64% of voters supporting an increase in the Fund “to finish upgrading major wastewater treatment plants and provide local governments with money to reduce polluted stormwater runoff and complete other water quality projects.” Only 27% of voters oppose that.  …

Voters’ underlying concerns about the impact of growth and their interest in an active state role managing it translate into strong support for two proposals to regulate and limit septic systems.  Nearly three-quarters (72%) of voters support legislation that would tighten regulations on septic systems, with a majority (53%) strongly supportive.  Only 20% overall are opposed.

From a January 20 Maryland Reporter.com article:

On January 23, the Department of Legislative Services briefed the members of the Senate Budget and Taxation and House Appropriations Committees on the steps being taken to balance the FY 2013 budget.  In general, the budget plan is closing a gap of almost $1.5 billion which can be attributed to a structural gap of $1.1 billion; additional one-time spending to repay a previous transfer of transfer tax revenues to the general fund and increase the rainy day fund balance; and general fund deficiencies.  To close this gap, the budget relies on a general fund balance of $534 million; constrained budget growth of $615 million, which includes the flat funding of local programs and the teacher pension shift; increased revenues of $404 million; and transfers to the general fund totaling $104 million. (This is described in much more detail in the fiscal briefing document.)

The analysis also provides an overview of State aid to local governments.  Page 31 of the briefing document shows the net effect of State aid reductions and local revenue enhancements on each funding category.

• Public schools – funding increases by $113.2 million and the Local Education Agencies are relieved from paying retirement payment for federally funded teachers – Total effect – $150.3 milion
• Local libraries – funding increases by $0.9 million
• Community college – under current law funding would have increased by $5.7 million, but contingent reductions in the Budget Reconciliation and Financing Act of 2012 (BRFA) reduce this figure by $2.5 million – Total effect – $3.2 million
• Local health departments – under current law funding would have increased by $0.9 million, but language in BRFA flat funds health departments at the base funding level of $37.3 million – Total effect – a reduction of $1.0
• County/Municipal – under current law, funding would have increased by $66.2 million, but language in the BRFA to reduce police aid, a Baltimore City Grant, horse racing impact grants, and shift teacher pension costs reduces funding by $264.5 million;  an increase in the disparity grant and revenue enhancements offset this reduction by $187.3 million – Total effect $8.6 million

The Lanham-based organization is highlighting the disparities in Maryland’s public schools, despite their recent No. 1 national ranking for a fourth consecutive year by Bethesda-based Education Week magazine. It calls for an overhaul of the state’s charter school law to help this effort.

As an example of the large inequity, MarylandCAN cites the results of the 2011 Nation Assessment of Educational Progress — a federally administered national test in various subjects — in which Maryland had the second-largest gap in the nation in eighth-grade math between low-income and wealthier students.

The Maryland Planning Directors Roundtable brings together the planning leadership from across the State. The Roundtable allows counties and municipalities, rural and urban jurisdictions alike, to talk about the challenges relating to sustainable growth and to share experiences and ideas and planning best practices. The Maryland Planning Directors Roundtable is open to all planning officials in Maryland’s 23 counties and 157 municipalities. Meetings are held every three months.

For information visit the Department of Planning’s webpage.

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Cigna also works in partnership with the Local Government Insurance Trust (LGIT) and Benecon on the Maryland Local Government Health Cooperative.  The Health Cooperative program provides local governments with an alternative to self insuring or purchasing health insurance.

For more information on the programs available through Cigna contact Beth Truffer.

Since the recession began in fiscal year 2010, counties have struggled to meet their maintenance of effort standards. Collins said the state has a set minimum per pupil amount that each county must fund, and that has been consistently met. There has been more of a struggle to keep up with the additional money that counties could more easily provide before the economy got worse.

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Maintenance of effort works well to fund schools in good economic times, Hise said. In bad economic times, however, counties have significant problems with it. Counties can apply for waivers if they think they will fall short of maintenance of effort goals, but none of the counties this year have applied for them. Hise said that penalties for not meeting the goals have been cut, and four of the counties falling short this year have no penalty.

Changes to the maintenance of effort formula to make it work better in tough economic times have been drafted, considered and discussed in the General Assembly in past years, but have never become law. As of Friday, no bills on maintenance of effort have been proposed during this session.

(Mr. Collins and Ms. Hise are both staff analysts for the Department of Legislative Services)

The document used for the presentation was substantially similar to that used for a comparable presentation to the Senate in July, available online here. Once the revised presentation document is available, MACo will post a link to that on the Conduit Street blog as well.

The Examiner writes:

O’Malley’s uncharacteristic acknowledgment that local school boards have no incentive to keep negotiated pension benefits “within the leaps and bounds of the perimeters of fiscal responsibility” because they don’t have to pay for them is correct. Requiring Maryland cities and counties to pay at least half of the benefits they so promiscuously promise educators is the governor’s belated attempt to provide that missing incentive.

We will skip the obviously errant comment about Maryland cities (municipal governments in Maryland have no funding or oversight responsibilities for public schools) and focus on the central argument raised: are county decisions the main cost drivers for state pension costs?

Rather than rely on the counties’ own analysis, consider the statements made by Governor O’Malley in defending the pension shift. There, we see an understandable and compelling case for the drivers of increased teacher pension costs:

Teachers’ retirement costs driven by :

Benefit Design/Employee Cost Sharing;
Investment performance; and
Growth in teacher salaries

From that starting point, consider the decision-makers involved at each level:

Benefit Design/Employee Cost Sharing – this is entirely a state decision, as these facets of the system are defined directly in state law by the General Assembly. When the State chose to greatly enhance the benefit structure in a recent election year (2006), the action was taken by the General Assembly and passed into law directly. A round of cost-saving reforms in 2011, too, was an act of the General Assembly. The structure of the pension system is a state function, county governments have no vote in any part of that process.

Investment performance – this, too, is a state decision. The State’s pension fund is invested under the oversight of a State-appointed Board and agency. The system’s ability to yield returns comparable to similar systems also resides strictly with state policymakers, not with counties.

Growth in teacher salaries – the most-discussed element of the costs is listed last, but what drives teacher salaries? County governments are not empowered by state law to even sit at the local negotiating table, that role falls to the local Boards of Education. However, the implied allegation that local largesse underlies these decisions is at best misleading. As the state has ramped up education funding each year (cutting local roads, police, and health departments to help find the funds to do so), there is no mystery where these funds eventually go. State policy– from a state sponsored “Teacher Salary Challenge” to the continuing intense focus on class size, recruitment, and retention– serves to funnel billions into the classroom in the form of educators’ salaries. To then suggest that it’s local decision-making that somehow has brought about a surprise in pension costs is an unreasonable stretch.

In each case, the cost drivers are understandable, but none of them actually reside in the hands of county elected officials, who are now asked to pay a huge and increasing share of their costs.

Governor O’Malley and the General Assembly face a deeply difficult fiscal situation, brought on by unprecedented economic struggles. This policy change and its resulting effects on both taxes and non-education services, should surely be debated by all parties involved. That debate should be informed by a well-reasoned understanding of the benefits and drawbacks of the cost shift.

The Examiner‘s uninformed comments about “the individual counties that negotiated retirement packages that are too generous” doesn’t do justice to the important policy debate.

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An abbreviated version of this response letter has been sent to the Examiner for publication in response to its recent editorial.