Former Gov. Robert L. Ehrlich Jr. said he would clean out Maryland’s business regulation arm with a “power hose” and repurpose the “dormant” Department of Business and Economic Development if given another shot at running the state.
Maryland has struck an adversarial, anti-business tone that slows growth, job creation and the economic recovery, Ehrlich said during an interview this week with The Daily Record.
“For the cowboys out there, there’s the attorney general. If somebody is really out there, acting out over the line, that’s where the lawman comes in,” said Ehrlich, 52. “But as far as just normal, average businesspeople, they’re trying to make a buck, trying to get answers, trying to get consistent responses, trying to get regulators to understand that time is money in the private sector.”
The Republican has made business regulation and the state’s treatment of the private sector one of the cornerstones of his reelection campaign, while Gov. Martin O’Malley, a Democrat, has largely run on his stewardship of the state through economic hardship.
Ehrlich said the state has too often balanced the budget on the backs of businesses, viewing them as a source of revenue rather than one of job creation. He said business owners who have attended roundtable discussions held by his campaign have identified the Department of Labor Licensing and Regulation and Department of the Environment as the biggest culprits.
Watch video of Ehrlich’s interview
“You take a big power hose and you go to a couple of those agencies and get the leadership out of there fast, and that will send, in and of itself, a very positive message,” Ehrlich said.
He said issues like unemployment insurance hearings that “almost always” favor employees over employers “despite meritorious cases” show how the attitude in the state government has shifted.
“Certain interest groups have a lot of influence on those agencies, and that has upset the balance of power, if you will,” Ehrlich said. “It has upset the balance, generally, of how we regulate and supervise business in the state at the cost of a lot of jobs.”
‘Beating up on Constellation’
Ehrlich criticized O’Malley’s approach to two major business issues that have cropped up recently in Maryland.
He blasted O’Malley for the handling of Constellation Energy Group’s joint venture with French utility Electricite de France to build a third nuclear reactor at the Calvert Cliffs power plant. The Public Service Commission attached a set of conditions to the deal in October 2009, including a $250 million investment in Baltimore Gas & Electric Co. and $110.5 million in credits for BGE’s customers, about half of what O’Malley had called for.
O’Malley was “beating up on Constellation in a continuous way,” Ehrlich said.
Last week, Constellation took itself out of the running for a federal loan guarantee, casting doubt on the future of the project. EDF has since said it would be willing to move forward alone.
Ehrlich described the uncertainty as a “temporary negative” and said the state should be lobbying the federal government for more-favorable loan guarantee terms to get the project back on track.
“This is a big deal for the state, for the country, for Maryland,” he said. “It’s 4,000 construction jobs, 400 permanent jobs, and it’s obviously a more reliable grid.”
On the flawed foreclosure document crisis, Ehrlich said he would have steered away from a blanket moratorium, as O’Malley has called for, and to which some lenders have agreed.
“It’s a difficult threshold to reach, to blanket, to suspend contractual obligations unilaterally,” he said.
Ehrlich said the state can help borrowers in “close cases” by working with banks or through mediation programs. Maryland lawmakers, at the urging of O’Malley, passed a voluntary foreclosure mediation program in the spring, allowing homeowners the option of requesting a face-to-face meeting with their lenders.
The former governor said one of his first priorities after the election would be to appoint “a DBED secretary that will send messages around the state, region, country and world that we’re back in business.”
He repeatedly praised Aris Melissaratos, who headed the department during Ehrlich’s term.
One change Ehrlich said needs to be made at the agency is a return to the Melissaratos practice of assigning his top deputies geographic regions in the state in which they worked with businesses and regulatory agencies to keep the permitting and other processes humming.
“DBED is dormant, not particularly relevant these days,” he said.
Ehrlich said he has not spoken to Melissaratos about a return to his old post to shake up the agency. The former Westinghouse Electric Corp. executive is an advisor to the president of Johns Hopkins University.
Wants a fast start
Ehrlich said he wants to start fast with a “home run”-type of announcement that could provide a strong contrast O’Malley’s failure to woo Northrop Grumman Corp. to the state this year.
“There is a malaise in the business community. We’re viewed as a flyover state, and the ability to hit a home run early is a clear priority,” Ehrlich said. “The ability to hit a home run could mean a corporate headquarters — a big deal, a lot of jobs. I’m not defining it now. We’re teeing up a few things in that regard.”
He would not reveal any specific plans in the works, but did say such an announcement could come during the transition period between the election and inauguration in January.
While transportation issues have largely remained in the background as the candidates have sparred over jobs and the economy, they have proved divisive in some regions of the state.
Ehrlich has been a vocal supporter of using bus rapid transit lines instead of light rail, which O’Malley supports, on the Red Line in Baltimore and the Purple Line in suburban Washington.
“Light rail in Baltimore has generally not been successful,” Ehrlich said. “If the Orioles and Ravens aren’t playing, there are very few people riding.”
But his opposition is based on more than just the efficacy of the lines. Ehrlich said the savings the state would see from choosing bus routes, which could cost as low as one-third of the $3.5 billion total price of the light rail options, would be used to fund other transportation needs in the state.
Ehrlich said he is also looking at the option of diverting more of the corporate income tax revenues to transportation projects, but said the Transportation Trust Fund will likely remain open to raids when the budgetary sledding gets tough.
“Every governor, every executive is going to resist the periodic attempts at protecting their revenue source,” he said. “The more discretion you take away from an executive … the more difficulty you’re going to have during difficult times.”
Priorities are Metro, MARC
Ehrlich identified Metro and MARC rail services as some of his first transportation priorities.
“Let’s fix what’s broken first, and Metro and MARC are broken,” he said. “Before we talk about new lines, we need to fix what’s dysfunctional. People have lived the dysfunction of Metro and MARC these days.”
Ehrlich has also pledged to restore $60 million in local transportation funding, the target of nearly $900 million in budgetary raids dating back to 2003.
The counties and Baltimore city should, however, shoulder some of the burden when it comes to teacher pension obligations, which the state currently pays, Ehrlich said.
Maryland is about $34 billion short of what it needs to pay future retiree pension and health care benefits, a sum greater than the state’s annual budget. While the pension system was fully funded a decade ago, two recessions and slack state contributions have taken their toll, leaving it just 64 percent funded at the end of fiscal 2009.
Last spring, lawmakers discussed transferring some of the responsibility to the counties, but that decision was ultimately put off. A state commission began studying the pension issue this month.
“It has to be done equitable, it has to be done fairly, it has to be done incrementally, it has to be done in partnership with the subdivisions,” Ehrlich said. “It can’t just be one size fits all.”
He added that future employees should eventually be taken out of pension plans and moved into 401(k)s or similar vehicles.
“As far as people who have yet to work for the state, future employees, the era of defined contributions is coming to the public sector,” Ehrlich said. “Everybody knows it.”
While neither candidate has offered a clear path to fiscal health for pensions and health care, O’Malley and Ehrlich have been very open about their stances on another hot-button topic — where to put the casino in Anne Arundel County.
Ehrlich supports the plan to build the casino next to the Arundel Mills shopping mall, while O’Malley has said that racetracks, like Laurel Park, are better locations. Whether to allow zoning for the mall-side casino will be decided by county voters Nov. 2.
‘Not a success story’
Ehrlich called the implementation of the slots program over the last two years “disastrous,” as only one casino has opened, and one other remains under construction.
“That is not a success story,” he said.
The Republican, who failed to legalize slot machine gambling during his term, said he also supports expanded casino gaming in Maryland in certain areas, including the Rocky Gap Lodge & Golf Resort in Western Maryland and Rosecroft Raceway. The Senate this year passed a measure that would have allowed the now closed and bankrupt harness racing track in Prince George’s County to have poker rooms in hopes of keeping it afloat. The bill died in the House of Delegates on the last day of the legislative session.
The rollback of the 1-cent sales tax increase O’Malley championed in 2007 has been front and center in Ehrlich’s campaign. Ehrlich has criticized the bump from 5 cents to 6 cents on the dollar as “the most regressive tax there is.”
“During a recession, when people are hurting, it hits disproportionately,” he said.
The higher rate makes the state less competitive, Ehrlich said, both for businesses and residents. It contributes to a higher cost of living that he blamed for keeping workers at military installations and with public sector jobs from being able to afford to live in Maryland.
But to roll back the tax hike, which would cost the state about $600 million a year, Ehrlich will need to navigate a General Assembly that is, and likely will continue to be, dominated by Democrats. During his last term, the Democratic majorities stymied much of Ehrlich’s legislative agenda and overturned his vetoes on high-profile bills.
He said he hopes a good year for Republican candidates, as 2002 was when he was elected, will bring more allies to Annapolis this time around.
“Hopefully the election results will be red, there will be more Republicans down there,” Ehrlich said. “That will help. Hopefully more moderate Democrats will be empowered.”