Inside Maryland Politics: The Unemployment Insurance Tax Drop

Inside Maryland Politics. Logo courtesy of WYPR

Inside Maryland Politics. Logo courtesy of WYPR

In case you missed it this morning, I joined Fraser Smith, senior news analyst for WYPR, on Inside Maryland Politics to discuss the expected decrease in the state’s unemployment insurance tax. Continue reading

Last of 2012 laws go into effect on New Year’s Day

After three sessions of the General Assembly that spanned almost 100 days in 2012, the last of the 797 bills approved by state legislators and made law by Gov. Martin O’Malley this year will go into effect as the fireworks start in Baltimore’s Inner Harbor.

The most famous of those laws is the Civil Marriage Protection Act, which gives gay couples the right to marry in Maryland.

In Baltimore, the first same-sex couples will be wed shortly after the stroke of midnight and will have a special guest in Mayor Stephanie Rawlings-Blake, who intends to witness the marriage of seven couples at City Hall at 12:30 a.m.

Ordinarily, the Hall would be closed at that hour, and all city offices are closed on New Year’s Day. But Rawlings-Blake, who joined other state Democratic leaders in the campaign to legalize gay marriage, said this constituted a special occasion.

“New Years Day will have a new meaning for the hundreds — if not thousands — of couples who will finally have the right to marry the person they love,” Rawlings-Blake said in a statement. “It is a remarkable achievement for Maryland, and we are excited to open City Hall to host some of the first wedding ceremonies in our great state.”

Ten other laws go into effect Tuesday, too. A state law that alters the election schedule of Baltimore to bring it into line with presidential elections will become effective, but that effect won’t be felt until 2016, when Rawlings-Blake and the city council are able to stay in office for an extra year, until the calendar turns to 2017.

A similar law passed by the council was approved by voters in November, the intent being to foster greater voter turnout in the city.

Another bill, requested by the state Department of Labor, Licensing and Regulation, removes exemptions for low-volume mortgage lenders, some of whom did not previously have to be licensed by the state.

The law, originally SB 302, also allows state regulators to oversee affiliates and subsidiaries of a national bank operating within the state. The legislation was a reaction to the  federal Dodd-Frank Wall Street Reform and Consumer Protection Act, which allowed states to regulate those institutions.

Other laws protect children from identity theft, potentially reduce the supervision time of a parolee based on behavior, ban the use of arsenic in chicken feed and provide tax credits for operators of thermal biomass systems — thermal energy generators powered by manure and chicken litter.

The laws go into effect just in time; the legislature will reconvene for its regular, 90-day session on Jan. 9, when members will start the process of reviewing more than 2,500 potential laws.

Sarah Bloom Raskin urges mortgage servicing reforms

Sarah Bloom Raskin hasn’t been at her new job long, but she’s already making herself heard.

The Senate confirmed Maryland’s former commissioner of financial oversight to a post on the Federal Reserve Board in September and she started work there on Oct. 4.

Last week, Raskin said mortgage servicers are not doing enough to help homeowners avoid foreclosures and the industry needs “serious and sustained reform,” the Wall Street Journal reported in its Real Time Economics blog. (And a hat tip to them for reporting this.)

“Many may view these procedural flaws as trivial, technical, or inconsequential, but I consider them to be part of a deeper, systemic problem and am gravely concerned,” Raskin said, according to the Journal.

Raskin had been Maryland’s top banking regulator since 2007 and had previously worked at the New York Fed.  Her former deputy, Mark Kaufman, took the top financial regulation spot on Sept. 30.

The ups and downs of stimulus accounting

From May to August, it appears Maryland lost about $100 million, give or take, in stimulus funds.

Earlier this year, the state officials said Maryland was due $4.3 billion of the $787 billion stimulus spending package. But, when the state released its second quarter spending statistics, the award total was an estimated $4.2 billion.

So what gives?

That total allocation is “a moving target,” said Beth Blauer, who runs the governor’s StateStat office and oversees stimulus spending in the state. Wrapped into that big number — $4.3 billion or $4.2 billion, depending when you ask — are dozens of different types of funding and thousands of projects.

There’s money for home weatherization, road paving, teacher salaries, prison guards, water treatment plants and affordable housing projects, to name a few. Also included are federal matching dollars and extended funding for entitlement programs.

As the quarterly reimbursements come in for things like unemployment insurance and Medicaid — at more than $210 million in April, May and June, Medicaid was the largest single target of stimulus funding — the calculators whir in Annapolis and in D.C. and that bottom line “goes back and forth a little bit based on the entitlement dollars,” Blauer said.

So the $100 million drop from Q1 to Q2 means Marylanders needed less government assistance from the stimulus programs intended to help the needy and sick.

Not a bad way to lose $100 million, eh?

Update 4:13 p.m.:

The good people at StateStat have filled me in on the final numbers for the second quarter (which still includes a bit of guesswork on the future funding of entitlement programs) and the state’s allocation now sits at $4.36 billion.

So much for losing $100 million. In fact, by my count, we’re up. Just goes to show how much of a moving target those numbers are.

Going behind the numbers on the unemployment problem

Every month, the state reports unemployment statistics and every month, at least lately, the message that accompanies those statistics follows a formula, something like “things have gotten worse, but they’ve gotten worse less quickly than they have before, so that’s a good thing.”

The numbers released by the state on Friday were made more interesting by the context provided by Gov. Martin O’Malley on Thursday.

O’Malley signed into law a $20 million tax credit program that will give businesses $5,000 for every unemployed Marylander they hire in 2010, up to $250,000 per business. The Department of Labor, Licensing and Regulation expects to start taking online applications for the credits next week.

Less than a day later, DLLR reported that the state’s unemployment rose to 7.7 percent in February, up from 7.5 percent in January. The number of unemployed Marylanders hit 227,524, up from 222,196 the month before.

If businesses decided to take advantage of all the available tax credits and hired 4,000 people immediately, that still would not bring the state’s unemployment situation from the February level down to the January level. That probably says more about the enormity of problem, rather than the scope of the solution.

“While there continue to be signs of improvement in the economy, we are still seeing significant pressure on the job market,” said Labor Secretary Alexander M. Sanchez in a written statement. “Both the unemployment rate and job creation statistics may continue to move erratically as the economy strives to move ahead.”

Maryland lost 68,300 jobs from Feb. 2009 to last month. Of those losses, 13,800 were lost between January and February.

Those figures also have big implications for the Unemployment Insurance Trust Fund, which was the focus of another bill the governor signed Thursday. His overhaul of unemployment benefits will bring the bankrupt trust fund $126.8 million from the feds.

The fund has opened a line of credit with the U.S. Department of Labor to keep paying benefits and state officials hope the one-time infusion brought by the overhaul will keep the state from borrowing again this year. But that assumption is based on the employment situation improving this year. Persistent, high levels of unemployment would be bad news for the fund.

Unemployment insurance bill passes House

Updated @ 2:20 p.m.:

The House of Delegates passed an expansion of unemployment benefits Tuesday, the next-to-last step for legislation that will qualify the state’s bankrupt Unemployment Insurance Trust Fund for $126.8 million from the federal government.

The measure passed mostly along party lines (the vote was 101-33 in the chamber, but the final tally is still being calculated) without a word of debate. Next stop: Gov. Martin O’Malley’s desk for his signature.

Original post:

The House of Delegates has given preliminary approval to compromise legislation that will alter unemployment benefits to secure $126.8 million for the state’s bankrupt Unemployment Insurance Trust Fund.

The bill survived a series of amendments proposed by Republican lawmakers during an often heated debate on the House floor Monday night. The House will soon take a final vote on the bill before it heads to the second floor of the State House for Gov. Martin O’Malley’s signature.

Continue reading

Economic indicators send mixed signals

Maryland’s revenue is, once again, coming in lower than first expected and unemployment is, once again, higher than it was before.

Still, state officials see cause for optimism in the otherwise gloomy figures.

The state is expected to write down $66 million in revenue shortfalls over the rest of fiscal year 2010, which ends June 30. State revenue analysts have not yet predicted any writedowns in 2011.

The letter to the governor from the state’s Board of Estimates reads, in part: “Despite the fact that the aggregate revision is relatively modest, the general fund outlook remains poor, with a decline of 5.2 percent in fiscal year 2010, the largest decline on record.”

It continues: “The recession may be over, and Maryland’s economy has not contracted as much as the national economy, but the effects of the recession will linger.”

According to the Associated Press, Gov. Martin O’Malley said the forecast indicates “a leveling off, and that’s the precursor to true recovery.”

The board reported Wednesday afternoon the state expects $12.2 billion in receipts in fiscal 2010, and a modest increase to $12.6 billion in fiscal 2011.

Indeed, the revenue estimates, while still negative, are more encouraging than those that came even six months ago, when O’Malley took more than $1 billion in budget actions, including cuts, through the Board of Public Works in the first half of this fiscal year.

Unemployment in Maryland, meanwhile, hit 7.5 percent in January, up a touch from the 7.4 percent figure in December.

The local government, health care and financial services sectors shed 2,500 jobs in January, according to the Department of Labor, Licensing and Regulation.

Some industries particularly hard hit by the recession, like construction and retail, added jobs during the month.

“While it is not across the board, we are seeing some signs of improvement in Maryland’s employment market,” labor Secretary Alexander M. Sanchez said in written statement.

As O’Malley has been scrounging through the state’s fiscal couch cushions this legislative session to find ways to keep the budget balanced heading into next year, he has also taken aim at the state’s unemployment problem.

There’s a job tax credit in the bill that, in its final form, will likely offer businesses $5,000 refundable tax credits for each unemployed Marylander they hire. The governor has also pushed for an aggressive list of capital project to lower the unemployment rate among construction workers. The rate rose as high as 18 percent during the recession.

DLLR secretary by day…

A mostly humdrum budget hearing held at least one interesting tidbit about newly confirmed labor Secretary Alexander M. Sanchez.

His department – Labor, Licensing and Regulation – oversees everything from mortgage brokers to sports agents to barbers, and monitors the state’s financial sector and enforces workplace regulations.

If that wasn’t enough, the department was responsible for coming up with requirements for mixed martial arts referees after the sport was legalized in the state. The first MMA bout was held last year in Baltimore. Sanchez said the event drew more than 5,000 spectators, including the secretary himself.

“Sir, were you there as a participant?” asked Del. John L. Bohanan Jr., D-St. Mary’s.

“Just an interested observer,” Sanchez replied.

The UI saga continues, for now

Maryland lawmakers have for weeks refereed a tennis match as labor and business groups volleyed unemployment insurance proposals back and forth.

The senator running the show said Wednesday morning the game may finally be over.

“I thought we had a very, very good deal on the table,” said Sen. Thomas M. “Mac” Middleton, D-Charles. “My hope is that we can move forward today.

Middleton convened business, labor and employee advocates last night for the latest in a long and nearly constant series of meetings on Gov. Martin O’Malley’s unemployment insurance plan.

Middleton said labor groups are on board with the plan and had offered a small change that would need to be approved by business groups.

The governor’s proposal, filed as SB 107 and HB 91, would expand benefits available to Marylanders to make the state eligible for $126.8 million in federal funds. That one-time infusion would prop up the shrinking Unemployment Insurance Trust Fund and cover the $83 million in breaks for businesses this year.

Middleton has said the tax break portion of the legislation appears to be dead, as most business groups have fought against it.

Debate has centered on finding benefit reductions in other areas to offset the estimated $20 million annual cost of the governor’s proposed benefit expansion.

Misery loves company

Maryland is expected to tap a federal line of credit next week that will allow the state to keep paying unemployment benefits. When it does, it won’t be alone.

As with the unemployment issue, state officials have benefited from tougher economic climates elsewhere as bases for comparison – the jobless rate in Michigan, the housing market in Arizona and budgeting woes in California, to name a few.

When Maryland borrows from the U.S. Department of Labor to keep its Unemployment Insurance Trust Fund afloat, it will be the 28th jurisdiction to do so, following 26 states and the U.S. Virgin Islands. Those other states have nearly $30 billion in outstanding federal loans.

Julie Squire, the DLLR assistant secretary who oversees the unemployment insurance division, said the state has been able to put off borrowing until next week because of a low number of delinquent tax payments and steady claims numbers.

The Department of Labor, Licensing and Regulation expects to borrow $250 million interest-free and pay it all back this year. The infusion will keep the fund solvent until the end of April, when the first wave of tax payments is expected.

Here’s the list of other states that have borrowed. The dollar figures are in millions. And yes, that means California has had to cover a deficit in its trust fund that is more than three times larger than the deficit expected in Maryland’s state budget for next year.

State Loan Balance
Alabama $175.2
Arkansas $253.5
California $6,609.8
Connecticut $3.3
Florida $235.4
Georgia $1,137
Idaho $139
Illinois $1,382.1
Indiana $1,571.5
Kentucky $619
Michigan $3,326.4
Minnesota $372.9
Missouri $514.5
Nevada $183
New Jersey $1,116.5
New York $2,390.3
North Carolina $1,723.1
Ohio $1,857.3
Pennsylvania $2,130.5
Rhode Island $146.2
South Carolina $735.3
South Dakota $11.7
Texas $1,518.6
Virgin Islands $9.9
Virginia $170
Wisconsin $1,025.6
TOTAL $29,488.2