Highlights From Annapolis

April 2017 – Legislative Session Overview

The 2017 General Assembly Session came to a close at midnight on April 10. A total of 2,879 pieces of legislation were introduced – 1,200 originating in the Senate, 1,661 originating in the House, and 18 Joint Resolutions.  Of this number, the General Assembly passed 935 pieces of legislation and 5 Joint Resolutions.

Legislators focused on a number of important matters ranging from balancing the fiscal year 2018 budget, bail reform, medical cannabis, prescription drug pricing, and paid sick leave to name a few. Legislation was also introduced in response to policy changes at the federal level. A number of these bills were passed and presented to the Governor at the end of March to provide sufficient time for the General Assembly to override any potential vetoes. Of the bills presented, the Governor vetoed one bill, which was overridden by the General Assembly. This bill is described in the education section below.

With the early presentment of bills, four bill signings were held prior to the end of session. Two additional bill signings have been held since session ended, April 11 and April 18. The final two bill signings will be held on May 2 and May 4.

Below is a summary of the major issues and final outcomes from the 2017 General Assembly Session. A more detailed overview of legislation that passed and significant legislation that failed can be found in the Department of Legislative Services 90 Day Report.

Fiscal Year 2018 Budget
The fiscal year 2018 budget as enacted by the General Assembly (House Bill 150) totals $43.6 billion, a 1.2% increase from fiscal year 2017. The general fund budget, the portion supported by tax related revenues such as the income tax, sales tax, and state lottery, accounts for 39.5% of the total budget or $17.2 billion. The general fund budget is subject to volatility as its revenue sources are directly affected by the economy. The term structural deficit or shortfall often refers the gap between general fund expenditures and general fund revenues.  Lower than expected general fund revenues created a structural deficit that needed to be addressed in the fiscal year 2018 budget. House Bill 152 – the Budget Reconciliation and Financing Act of 2017 accompanied the budget to address the structural deficit and fund certain budget priorities. Similar legislation has been relied upon in prior years to bring the budget into balance.

The budget as enacted by the General Assembly leaves a $100.2 million general fund balance at the end of fiscal year 2018 and reduces the structural deficit from nearly $400 million to $38 million. It also preserves $860.3 million in the State’s Rainy Day fund. State support for public education is almost $6.4 billion and direct aid to local school systems will increase by approximately $96.4 million. In addition, $28.2 million in new funding is being provided as grants to school systems experiencing declining enrollment and/or providing full-day pre-kindergarten to their four-year olds. Other funding in the budget includes: $30.7 million for local governments, almost half of which supports public education and libraries; $29.7 million for providers of health care services to vulnerable populations; an additional $16.5 million in dedicated funding to respond to the opioid epidemic; and an additional $32.7 million to hold tuition growth at public four-year colleges and universities at 2%. Additional information on the fiscal year 2018 budget as enacted by the General Assembly can be found in the Budget and State Aid section of the Department of Legislative Services (DLS) 90 Day Report.

Medical Cannabis Licensing
Several bills were introduced this session to alter the composition of the Natalie M. LaPrade Medical Cannabis Commission and the number of grower and processor licenses. However, none of the bills passed. The one that gained traction, House Bill 1443, would have reconstituted the membership of the Commission, increased the cap on medical cannabis grower licenses, instituted a cap for processor licenses, and prohibited the issuance of Stage One pre-approval licenses until a disparity study was completed and required any new licenses to be issued only in accordance with a new scoring process that focused on racial, ethnic, and geographic diversity. Although the House concurred with the Senate amendments in the last few minutes of the session, time ran out before the bill could be voted for final passage. The Legislative Black Caucus, a priority for which is the expansion of licenses for minority growers, is now calling for a special session to pass the bill. It’s uncertain whether a special session will be called.

Paid Sick and Safe Leave
After several years of debate, House Bill 1, Maryland Healthy Working Families Act, passed to require an employer with 15 or more employees to have a sick and safe leave policy under which an employee earns at least 1 hour of paid sick and safe leave, at the same rate as the employee normally earns, for every 30 hours an employee works. An employer with 14 or fewer employees must have a sick and safe leave policy that provides an employee with at least unpaid sick and safe leave based on the same conditions. The Governor has stated he will veto this bill. A more detailed summary of the legislation can be found in the DLS 90 Day Report.

Pretrial Release and Bail Reform
In response to changes to the Maryland Rules adopted by the Maryland Court of Appeals regarding pretrial release of criminal defendants, several bills were introduced this session to change pretrial release procedures.  These bills ranged from protecting the imposition of cash bail, to eliminating it all together, to expanding pretrial services and imposing cash bail as a last option. After several weeks of debate, Senate Bill 983 emerged significantly amended by the Senate. As amended, the bill would have required a judicial officer to impose the least restrictive pretrial conditions that are reasonable to ensure the appearance of the defendant as required and the safety of each alleged victim, other person, or the community. The bill also maintained judicial discretion in setting pretrial release conditions and would have prohibited a judicial officer from giving preference to a particular pretrial condition. In addition, judicial officers would have been required to consider a defendant’s ability to pay as a financial condition of release. Senate Bill 983 had a hearing in the House Judiciary Committee, but no further action was taken.  All other bills failed.

Prescription Drug Pricing
House Bill 631, which passed the General Assembly, was introduced on behalf of the Attorney General to address concerns with the high cost of prescription drugs.  As passed, the bill prohibits a manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug. Medicaid may notify the Attorney General when specified price increases occur (i.e. increase of 50% or more in wholesale acquisition cost (WAC) within preceding last year and 30 day supply would cost more than $80 at WAC). On request of the Attorney General, the manufacturer of an essential off-patent or generic drug must submit a statement explaining costs and expenditures associated with the drug. The Attorney General may also require a manufacturer or wholesale distributor to produce any records or documents relevant to determining if a violation of the prohibition on price gouging has occurred.

Senate Bill 437/House Bill 666 would have required prescription drug manufacturers to report annually on a number of items associated with producing a specific drug. As amended by the Senate, Senate Bill 437 would have required a review of prescription drug price transparency and notification laws and initiatives adopted and implemented in other states. Both bills failed.

Expansion of Brewery Licenses
Several bills were introduced to increase the amount of beer craft brewers may sell for on-premise consumption in tap rooms. After significant negotiation and debate, House Bill 1283 passed to increase, from 500 barrels to 3,000 barrels, the amount of beer a Class 5 brewery may sell for on-premises consumption each year.  Class 5 breweries include both small craft breweries and a large Guinness brewery scheduled to open in Baltimore County. The bill does not apply to pub-breweries, micro-breweries, or farm breweries. The bill also authorizes a Class 5 brewery to contract to brew and bottle beer with and on behalf of other classes of breweries; and changes the hours of operation for sales and serving privileges of an on-site consumption permit for a Class 5 brewery based on the date the permit was issued.

Immigration Policy – Trust Act
In response to changes in Federal immigration policy, Senate Bill 835/House Bill 1362 were introduced to establish parameters for local participation in federal immigration efforts. As introduced both bills would have prohibited or limited participation by State and local law enforcement, correctional facilities, and other governmental agencies in federal immigration enforcement efforts. The House passed an amended version of House Bill 1362 after holding public workgroup meetings, but neither bill passed the Senate. Instead, Senate Bill 616, a bill pertaining to certifications for U Nonimmigrant Status, was amended by the Judicial Proceedings Committee to include language to prohibit a police officer from stopping or arresting a person without a warrant based on a possible civil violation of federal immigration law, unless the police officer was authorized to do so under federal law. The bill would have also prohibited a police officer from inquiring about an individual’s immigration status, citizenship status, or place of birth prior to arrest, unless the officer is authorized to make such an inquiry under federal law or in furtherance of an ongoing criminal investigation. Additional provisions included training of law enforcement officers on federal immigration laws, law enforcement policies on federal immigration enforcement, inquiries by State agencies into an individual’s immigration status, and confidentiality policies of State agencies. Senate Bill 616 also failed.

More Jobs for Marylanders – Manufacturing Tax Incentives
The Administration proposed and the General Assembly passed Senate Bill 317, More Jobs for Marylanders Act. A new manufacturing business that locates and creates jobs within a Tier I county, defined in the bill as a qualified distressed county (Allegany, Dorchester, Somerset, and Worcester counties and Baltimore City) or a county designated by the department (up to three), may be entitled to a 10-year (1) income tax credit for up to 5.75% of the total wages paid to qualified employees; (2) sales tax refund; (3) State property tax credit equal to 100.0% of the tax imposed on the facility’s real property; and (4) exemption from paying corporate filing fees. An existing manufacturing business that creates jobs may qualify for a 10-year income tax credit. A manufacturing business may apply for the More Jobs for Marylanders Program if the business intends to create at least 5 qualified positions in a Tier I county or at least 10 qualified positions in a Tier II county. Tier II counties are those counties not designated as Tier I counties. Additionally, new and existing manufacturing businesses must offer an ongoing job skills enhancement training program or a postsecondary education program that is approved by the department. The legislation also allows any manufacturer located in the State to claim increased expensing amounts under the State income tax by conforming State law to the maximum aggregate costs of expensing allowed under Section 179 of the IRC and to claim any bonus depreciation amounts provided under Section 168(k) of the IRC.

Hydraulic Fracturing (Fracking)
Legislation passed this session, House Bill 1325, to prohibit hydraulic fracturing which is defined in the bill as the stimulation treatment performed on oil and natural gas wells in low permeability oil or natural gas reservoirs through which specially engineered fluids are pumped at high pressures and rates into the reservoir interval to be treated, causing fractures to open. Governor Hogan signed the bill into law on April 4, 2017.

Heroin and Opioid Use Prevention
Several bills passed to address the opioid crisis. Senate Bill 967/House Bill 1329 is a comprehensive bill to combat the problem by expanding the authority and functions of state and local partners across the State. House Bill 1432 requires a health care provider providing treatment for pain to prescribe the lowest effective dose of an opioid. House Bill 887 prohibits certain insurance carriers that provide coverage for substance use disorder benefits under medical or prescription drug benefit from applying a preauthorization requirement for a prescription drug that is used for treatment of an opioid use disorder and that contains methadone, buprenorphine, or naltrexone. Senate Bill 1060/House Bill 1082 requires public schools and institutions of higher education to incorporate educational components that specifically address heroin and opioids and also require each school and institution to store naloxone or other overdose-reversing medication

Education
A broad range of legislation passed affecting funding levels for K-12 education and education policy.  Education funding, including State Aid to Public Schools, Nonpublic Schools, and school construction, is summarized in the education section of DLS 90 Day Report.  Education policy initiatives, to name a few, included legislation to: 1) to limit mandated assessments (Senate Bill 452/House Bill 461); 2) require the State’s educational accountability program to include at least three school quality indicators that measure the comparative opportunities provided to students or the level of student success in public schools (House Bill 978 – Governor vetoed and the General Assembly overrode the veto during session); 3) establish the Maryland Education Development Collaborative (EDCO) to act as a think tank to study, advise, promote, and support public schools in developing programs that enhance twenty-first century learning and socioeconomic diversity among students (Senate Bill 908). An overview of all policy initiatives can be found in the education section of the DLS 90 Day Report.

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