Tight times on State Circle
The $1.6 billion budget hole will challenge business leaders' agenda in the 2011 session
With legislators challenged by another $1-billion-plus budget deficit when they convene Wednesday, business leaders will face issues in the 2011 General Assembly session similar to last year's.
Mostly, those issues will come down to money, or the lack thereof, those leaders say.
"Everyone is looking for efficiencies and where the money will go," said H. Walter Townshend III, president and CEO of the Baltimore-Washington Corridor Chamber of Commerce. "It will not be an easy time in Annapolis."
With a shortfall of some $1.6 billion, budget deliberations are likely to dominate much of the session, said Ronald Wineholt, vice president of government affairs for the Maryland Chamber of Commerce.
"I'm sure we will see various tax proposals," Wineholt said. "We will insist that lawmakers keep Maryland competitive with other states in business-related taxes and not add additional taxes."
Wineholt and his colleagues probably need not worry about the legislature adopting the long-studied combined reporting tax system. Opponents say such a system would be too complex for businesses and question whether it would generate significantly more tax revenues.
The Maryland Business Tax Reform Commission recently recommended against adopting a combined reporting tax system and that "bodes well for our industries," said Renée M. Winsky, CEO of the Tech Council of Maryland. Combined reporting, which about 23 states use, requires companies that operate in multiple states to pay a portion of all combined profits based on revenues in those states and other factors.
But another business-related tax could get more traction this year, as some consumer groups are lobbying for a 10 cent-per-drink increase in the alcohol tax.
With the quadrennial election two months ago, a raft of new legislators will take some time to get oriented and the bill filing process likely will be slower initially, Wineholt said. The session is slated to end April 11.
With job creation slower than many had hoped, the economy will again be the overriding issue, business leaders say.
"The No. 1 priority of Maryland government policy makers has to be job creation and business development," said Donald C. Fry, president and CEO of the Greater Baltimore Committee.
The Baltimore business organization recently released a report that identifies eight "core pillars" for economic growth based on focus group sessions involving business leaders and economic development experts. Those include political leaders welcoming the private sector as a partner, not an adversary; doing more to ensure regulatory policies are streamlined and reasonable; implementing a tax structure that is perceived by businesses as fair and competitive with other states; and developing more effective state investments, including tax credits and incentives.
To this end, many business leaders are calling for more funding for education and programs such as the biotechnology investment tax credit. Some want new programs supported, such as InvestMaryland, an initiative designed to raise investment funds through tax credits to insurance companies that would need approval by the General Assembly.
H. Thomas Watkins, president and CEO of Human Genome Sciences of Rockville, is among those who want to see more funding for the biotech tax credit program.
"It literally provides a lifeline to many companies," he said during a recent forum.
Watkins also supports InvestMaryland and the state's network of business incubators. But he acknowledged the budgetary constraints legislators are under.
The state is dealing with another large budget deficit, after already cutting its budget last year and trimming staff, Gov. Martin O'Malley said in a recent forum. State government has shed 1,100 jobs in the past year, while local and federal governments have added several thousand positions, according to federal figures.
"There are likely more cuts ahead," O'Malley (D) said.
Supports raising gas tax
Many chambers of commerce are lobbying for road improvement projects and other infrastructure upgrades.
The Gaithersburg-Germantown Chamber of Commerce lists among its top priorities an interchange from Watkins Mill Road to Interstate 270 and the Corridor Cities Transitway, a proposed light-rail line along I-270 from Shady Grove to Clarksburg.
The Greater Bethesda-Chevy Chase Chamber of Commerce wants to see funding for the Purple Line, the proposed light rail line from Bethesda to New Carrollton, and accelerated construction of the state portion of Montrose Parkway east of Rockville Pike to Veirs Mill Road.
The Frederick County Chamber of Commerce puts the U.S. 15-Monocacy Boulevard interchange and the widening of the Motter Avenue Bridge project as its top local transportation projects.
The chambers propose raising the gasoline tax and indexing it to inflation to finance their wish lists. But leaders want to make sure the transportation trust fund is not raided to help balance the general budget.
On the health insurance front, business leaders want a say in how the new state health insurance exchange is set up. That program is an insurance market mandated by the federal reform law intended to allow individuals and small businesses to purchase insurance at more affordable rates. The Maryland Health Care Reform Coordinating Council recommends the legislature begin work creating the exchange this year.
The exchange "has the potential to restructure the private health market," Wineholt noted. "How it is designed is very important to employers."
Issues to be resolved include whether the exchange is a private or public entity and the size of employers involved.
Repeal arcane' regulations
Regulations are on a lot of business executives' minds.
"The state needs to simplify, or basically repeal, arcane and obsolete laws and regulations," said Karen Myers, president of Wisp Resort Development in Western Maryland.
For example, restaurants that want to serve liquor often face a maze of conflicting and confusing regulations, she said.
In its legislative agenda, the Montgomery County Chamber of Commerce advises lawmakers to "take a comprehensive and thorough review of the current regulatory structure and avoid imposing additional regulatory measures which could stifle innovation and chill investment, especially as it relates to our multi-faceted technology based industries."
The Montgomery chamber also wants the state to redistribute revenues to the county so more tax dollars paid by businesses and residents return to the county.
Then there are environmental matters of concern. One is a watershed improvement plan that could cost the state millions of dollars, Wineholt said.
The Frederick chamber also asks legislators to review "certain well-intended land use and regulatory programs, such as storm water management, that have unintended and damaging impact on the business climate."
Wineholt expects to see legislation on tort liability, businesses being able to contribute to political campaigns and workplace regulations. The latter could include the use of credit reporting history and criminal background checks by employers.
"Employers are still trying to rebound from the recession," Wineholt said. "They can't be burdened by unnecessary regulations that could make it more expensive to do business."
Top priorities for 2011
Major business priorities for General Assembly's 2011 session include:
-No new taxes or fees, except for a slight increase in the gasoline tax to be earmarked for transportation improvements.
-No to the combined reporting tax system.
-Continue to invest in capital infrastructure for public schools and funding for higher education.
-Increase incentives for the research and development tax credit and biotechnology investment tax credit.
-Support InvestMaryland to help boost available venture capital for growing companies.
-Review the state regulatory structure and avoid imposing more regulatory measures that could stifle business growth.
-Urge the retention of a private health insurance market operating in fair competition with the health insurance exchange.
-Oppose efforts to weaken or eliminate existing tort law protections, including Maryland's cap on non-economic damages.
-Maryland Nonprofits legislative preview, 9 a.m.-12:30 p.m., Monday, Loews Annapolis Hotel, 410-727-6367.
-Greater Baltimore Committee legislative forum, 8-9:30 a.m., Jan. 24, Baltimore Convention Center, 410-727-2820.
-Maryland Chamber of Commerce Business Day, 8 a.m., Jan. 25, Calvert House, Annapolis, 410-269-0642.
-Montgomery County Chamber of Commerce legislative reception,
6-8 p.m., Jan. 31, Calvert House, Annapolis, 301-738-0015.