$1.2B relief plan moves ahead, but counties fear a hit

ANNAPOLIS — Maryland 24 major political subdivisions could lose $180 million in revenue under provisions of Gov. Larry Hogan’s pandemic aid bill.

The potential for cuts to local government at a time when they are also struggling to keep up with the costs of a pandemic are cause for concern for local governments.

“We hope we don’t see our front lines stripped of the resources they need. I don’t think anyone wants that,” said Michael Sanderson, executive director of the Maryland Association of Counties. “We’re hopeful we can balance this all out.”

Any rebalancing would likely have to come from the House of  Delegates.

The Senate gave preliminary approval to the $1.2 billion proposal Wednesday, just two weeks after Hogan’s proposal was introduced in the legislature. The quick pace comes as Hogan and Senate President Bill Ferguson and House Speaker Adrienne Jones have all said publicly that a coronavirus pandemic relief package is the top priority for the 2021 session.

The Senate could take up a final vote on the bill as early as Friday.

The Senate essentially kept in place all of Hogan’s proposals while adding $520 million in additional aid.

The proposal, which Hogan dubbed The Relief Act of 2021 — The Recovery for the Economy, Livelihoods, Industries, Entrepreneurs and Families Act — includes targeted financial relief and tax cuts to struggling individuals and businesses, according to the governor.

The governor’s plan also calls for the elimination of all state and local income taxes on unemployment payments, an amount totaling about $180 million.

Maryland’s 23 counties and Baltimore city would lose nearly $165 million in the current fiscal year, which ends on June 30, according to an analysis by the Department of Legislative Services. More than 62% of that, a combined total of nearly $103 million, could come from just four jurisdictions — Baltimore, Montgomery and Prince George’s counties and Baltimore.

Sen. Guy Guzzone, D-Howard and chairman of the Senate Budget and Taxation Committee, said the costs to local governments may be less than the amount reported by he analysis.

“The question is, are (local governments) taking a hit?” said Guzzone, adding that the “underlying reality” is that the state unemployment program helped provide money to out-of-work Marylanders who would have otherwise not received a check.

The money, he said, was then pumped back into the local economy.

“With unemployment, at a minimum, those jurisdictions have citizens that are in better shape and that better shape includes having some money to go out into the community with a multiplying effect, buying and selling goods and services,” Guzzone said. “Therefore, it’s really the unemployment insurance program that gives (local governments) a citizenry that is in better shape and helping the overall economy.”

Guzzone said the spending provided an offset for the potential loss income tax revenue though how it does so is not immediately clear. Local governments do not collect sales and use tax.

“I’m sure someone has done a study on it but I can’t provide you a citation,” Guzzone said.

Included in the governor’s proposal, is nearly $270 million in direct payments to families in need. Families who apply for the earned income tax credit will receive $750  in additional payments while individuals will receive $450. A total of 400,000 people would be eligible, and no application would be necessary.

Another $300 million in tax relief for small businesses would come from allowing 55,000 small businesses and restaurants to keep up to $12,000 each in sales taxes over a four-month period.

The plan also would place a hold for all of 2021 on increases on state unemployment taxes to small businesses, officially codifying an executive order issued late last year. The move, Hogan said, would save small businesses $218 million.

Additionally, there would be a $1,000 direct payment to those who have filed for unemployment but have been left in limbo as the state adjudicates those claims. Some of the claims date back months.

“I’m a little worried about whether there is going to be sufficient transparency and willingness to share. I think we’ve seen evidence since March or April that (state unemployment workers) are overwhelmed and that their third new system is still not providing satisfaction and delivery of the goods, of well-deserved benefits to our constituents,” said Sen. Cheryl Kagan, D-Montgomery.

“We still have people pending, some from last April and I don’t think that I have confidence that we’re going to make sure that all of our people are addressed,” she said.