With Connecticut’s legislative session in rear view, elections on horizon

The following legislative recap and elections forecast comes by way of Dentons 50 partner firm the Connecticut Group–editor

The 2018 legislative session came to a close on Wednesday night. Although it was a so-called “short session,” that didn’t mean it wasn’t packed with activity on a number of major policy proposals. Many big-ticket bills passed, including:

  • A compromise budget between Republicans and Democrats, which closed a $200+ million deficit in the ’18-’19 fiscal year.
  • Major energy legislation that increases the state’s “renewable portfolio standard,” requiring the state’s utilities and energy suppliers to purchase an increasing amount of energy generated by renewable resources.
  • A bill instituting a statewide ban on “bump stocks.”
  • Legislation providing “dreamers” with access to financial aid at state colleges and universities.

Many high profile proposals, such as a minimum wage increase, the anti-sexual harassment “time’s up” bill, two frameworks for state-based net neutrality regulations, and a bill authorizing tolling on state highways all died at sine die.

* * *

Danbury Mayor Mark Boughton secured the endorsement of the Connecticut GOP on Saturday evening at the Republican State Convention. It’s Boughton’s third time running for Governor, and his first time running with the party’s endorsement.

Former Trumbull First Selectman Tim Herbst and businessman Steve Obsitnik both received enough delegate support to qualify for a primary against Boughton, which they plan to take on. Businessmen David Stemerman and Bob Stefanowski, as well as Shelton Mayor Mark Lauretti plan to petition their way onto the primary ballot.

Sen. Joe Markley won the GOP endorsement for Lt. Governor over New Britain Mayor Erin Stewart and Darien First Selectwoman Jayme Stevenson. Both Stevenson and Stewart plan to challenge Markley in a primary race for the party’s nomination.

Everything to watch for (and when) on primary day in IN, NC, OH, and WV

Today, voters in Indiana, North Carolina, Ohio, and West Virginia will go to the polls as primary season swings into high gear.

Republicans will choose Senate nominees to take on three vulnerable Democratic incumbents: Indiana’s Joe Donnelly, Ohio’s Sherrod Brown, and West Virginia’s Joe Manchin. Both sides also have competitive races to succeed termed-out Gov. John Kasich in Ohio, as well as plenty of House races to watch across these four states.

It only takes a simple plurality to win nomination in Indiana, Ohio, and West Virginia, while North Carolina requires a July runoff if no candidate takes more than 30 percent of the vote. However, since all of the primaries we’ll be watching have no more than three candidates running, all of these nominations will be settled on Tuesday, barring the most extraordinary of circumstances.

Things kick off at 6 PM ET when polls close in most of Indiana, with the small portion of the state in the Central time zone closing an hour later. Polls close in North Carolina, Ohio, and West Virginia at 7:30 PM ET.

INDIANA

● IN-Sen (D): Sen. Joe Donnelly is a vulnerable Democrat on everyone’s list, but it’s anyone’s guess who will face him in the fall. Republicans long expected a nasty duel between Rep. Luke Messer, who is close to the state party establishment, and Rep. Todd Rokita, a former secretary of state who has always been more of a lone wolf. But wealthy former state Rep. Mike Braun has scrambled things, and he’s used his fortune to outspend both congressmen and run ad after ad portraying himself as a political outsider. Polling has been scarce, so there’s no telling how this one will go.

All three Republicans attracted some bad press throughout the campaign and even into the final days. Rokita has been the most aggressive about portraying himself as the one true Trump ally in the race, so it didn’t look so good when Trump’s re-election campaign demanded that he stop using yard signs that seemed to suggest the White House was supporting Rokita’s bid. (After initially snarking, “We not not comment on yard sign strategy,” the Rokita campaign appeared to cover up the bogus endorsement with painter’s tape.)

Messer, meanwhile, has been on the defensive for months since news broke that he co-owns his Indiana residence with his mother while his family now lives in the D.C. area. (Similar charges that he’d “gone Washington” famously sank Sen. Richard Lugar in his 2012 primary.) Late in the race, the public also learned that in 2003, when Messer was persuading local Indiana GOP leaders to appoint him to replace a state representative who had been killed by a drunk driver, Messer had kept his own two DUIs a secret.

And finally, it turns out that Braun consistently voted in the Democratic primary until 2012, naturally leading his rivals to question his loyalty to the GOP. Braun has argued that he’s a successful businessman, but a recent Associated Press article painted him in a very different light, finding that his company has been charged with a litany of labor law violations and has sought the very sort of government subsidies that Braun has attacked on the campaign trail.

● IN-02 (D) (59-36 Trump, 56-42 Romney): While GOP Rep. Jackie Walorski decisively won re-election in 2014 and 2016, Democrats haven’t forgotten about her surprisingly tight 49-48 victory when she won her first term in 2012. The DCCC is hoping to target Walorski in the fall, and healthcare executive Mel Hall appears to be the frontrunner to take her on. Hall’s main primary foe is businessman Yatish Joshi, who has the support of Joe Kernan, a former mayor of South Bend and Indiana’s most recent Democratic governor. Hall outspent Joshi by a wide $233,000 to $59,000 from April 1-18, which the FEC calls the “pre-primary period.”

● IN-04 (R) (64-30 Trump, 61-37 Romney): Rep. Todd Rokita is leaving to run for the Senate, and the winner of the crowded GOP primary should have little trouble holding this seat, which includes Lafayette and some of Indianapolis’ western suburbs. The frontrunners appear to be Diego Morales, who served as a senior advisor to then-Gov. Mike Pence, and Steve Braun, who resigned as state Department of Workforce Development director to run here. (Yes you’ve read that name before in this piece, Braun is also a brother of Senate candidate Mike Braun, though the two haven’t campaigned together.) State Rep. Jim Baird, an Army veteran who lost his left arm in Vietnam, is also in the mix.

Morales has the support of some old Pence allies (the vice president has formally remained neutral), but he drew bad headlines in March when the Journal & Courier reported that he’d left several government jobs for poor performance and seemed to exaggerate his resume. Braun, who has done some considerable self-funding, outspent Baird $321,000 to $73,000 during the pre-primary period, while Morales spent $64,000.

A pro-Morales group called With Honor Fund has aired ads hitting Braun, while the pro-Braun Citizens for a Strong America has spent at least $300,000 attacking Morales and $18,000 against Baird. Morales, a Guatemalan immigrant, took umbrage with a CSA mailer encouraging voters to send him “back across town, where he actually lives!”, while another one charging that a gas tax Baird voted for cost Indiana a proverbial arm and a leg generated plenty of news coverage and condemnation.

● IN-06 (R) (68-27 Trump, 60-37 Romney): GOP Rep. Luke Messer is leaving his eastern Indiana seat to run for the Senate, and there’s one undisputed frontrunner in the primary to succeed him. Businessman Greg Pence, an older brother of Vice President Mike Pence and a close Messer ally, has benefited from his family’s name recognition and connections, and he’s mostly cleared the field. Pence has earned some negative attention both for staying largely out of sight on the campaign trail and for some serious business failures, but it’s unlikely to be enough to stop him. Pence’s most visible primary foe is self-funding businessman Jonathan Lamb, who has run some truly bizarre ads (They’re on youtube check’em out).

● IN-09 (D) (61-34 Trump, 57-41 Romney): Democrats hope that freshman Rep. Trey Hollingsworth’s very weak ties to the state and unimpressive fundraising will give them an opening in this southern Indiana seat. The two main Democrats competing to face him are Indiana University professor Liz Watson, who previously served as a senior Democratic staffer on the U.S. House’s Committee on Education and the Workforce, and civil rights attorney Dan Canon. EMILY’s List is backing Watson, who outspent Cannon $89,000 to $20,000 during the pre-primary period.

NORTH CAROLINA

● NC-02 (D): (53-44 Trump, 56-43 Romney): Democrats are planning to target GOP Rep. George Holding in this suburban Raleigh seat. Tech executive Ken Romley, who has been self-funding much of his campaign, outspent former state Rep. Linda Coleman $254,000 to $34,000 during the pre-primary period. But Coleman, who lost competitive general elections for lieutenant governor in 2012 and 2016, likely began the race with considerably more name-recognition than Romley. In addition, in primaries so far in Texas and Illinois, we’ve generally seen women candidates performing well this cycle; if this pattern continues, it could help Coleman offset Romley’s considerable spending edge. Army veteran Wendy May, who would be the first transgender member of Congress, is also in, but she hasn’t reported raising anything.

● NC-03 (R): 61-37 Trump, 58-41 Romney): Twelve-term Republican Rep. Walter Jones has spent years voting against the House leadership’s priorities, and now he’s turned hostile to Trump’s policies: This Congress alone, the self-described “thorn in people’s ass” voted against the House version of Trumpcare and the tax bill, arguing that both were fiscally irresponsible. Jones faces a primary challenge from Craven County Commissioner Scott Dacey, who is arguing that this coastal seat needs a more reliable Trump ally.

Dacey outspent Jones $120,000 to $39,000 during the pre-primary period, and a mystery group called the Conservative Leadership Alliance began airing ads against Jones last month. But Jones, who announced during the campaign that he wouldn’t seek another term in 2020, has won more than his fair share of competitive primaries. Marine veteran Phil Law, who lost to Jones 65-20 in 2016, is running again, and he could split the anti-incumbent vote. The only poll we’ve seen was a late March survey from the conservative think-tank Civitas and conducted by an arm of SurveyUSA that gave Jones a 37-28 lead over Dacey, with Law at 15.

● NC-09 (R) (54-43 Trump, 55-44 Romney): Last cycle, Rep. Robert Pittenger won a three-way GOP primary with pastor Mark Harris by just a 35.0-34.5 margin. Pittenger was running for a redrawn seat that largely new to him while also facing an FBI and IRS investigation related to his old real estate company over loans he made to his 2012 congressional campaign. Harris is seeking a rematch, but now that the investigation has ended without charges and redistricting won’t be the same factor, Pittenger looks like he’s in much better shape this time around in this suburban Charlotte seat.

A March poll from SurveyUSA for the conservative Civitas Institute found Pittenger ahead 52-20, with little-known candidate Clarence Goins at 7. Pittenger’s campaign later released its own poll giving him a 59-26 edge, while even Harris’ own survey found the incumbent up 38-30. Pittenger outspent Harris $117,000 to $64,000 during the pre-primary period, and he’s aired many ads arguing that Harris opposed Trump in 2016. Whoever wins will quickly need to prepare for an expensive general election with solar energy businessman Dan McCready, who faces only a weak opponent in the Democratic primary.

OHIO

● OH-Sen (R): Two wealthy Republicans are competing to take on Democratic Sen. Sherrod Brown, but Rep. Jim Renacci is the heavy favorite. Renacci picked up an endorsement from Donald Trump late in the race, while businessman Mike Gibbons never seemed to impress party leaders. What little polling there is has found that neither candidate is very well-known, but it would be a big surprise if Renacci loses to Gibbons, who doesn’t seem to have much of a base of support to draw from.

● OH-Gov (R & D): Republican incumbent and Trump critic John Kasich is termed out, and both parties have primaries to succeed him. On the GOP side, Attorney General Mike DeWine has the support of much of the party establishment over Lt. Gov. Mary Taylor, and he’s also outspent her. Taylor has attacked DeWine, who served 12 years in the U.S. Senate, as a member of that dreaded establishment. DeWine and his allies have spent heavily on the airwaves to hit Taylor, so they’re at least taking her seriously. But what little polling we’ve seen has shown DeWine consistently ahead by sizable margins, and it would be a huge upset if Taylor beat him.

The Democratic frontrunner is Richard Cordray, who narrowly lost re-election as attorney general to DeWine in 2010 and resigned in the fall as head of the federal Consumer Financial Protection Bureau to run for governor. His main opponent is former Rep. Dennis Kucinich, a longtime Cleveland politician and quixotic two-time presidential candidate. (Also a top ten member for one of your editors)

Cordray has the support of Massachusetts Sen. Elizabeth Warren (who first proposed the creation of the CFPB) and much of the state Democratic establishment, while Kucinich is relying on his old Cleveland base and several Bernie Sanders allies, though Sanders himself has remained neutral. State Sen. Joe Schiavoni never gained much traction, but he could do well in his Youngstown base; former state Supreme Court Justice Bill O’Neill is also running.

Cordray has a huge financial edge over Kucinich, but the former congressman got some last-minute help when a super PAC run by a Republican donor friendly with Kucinich ran a flight of ads hitting Cordray from the left. Still, a Kucinich win would be an upset, though it’s something we can’t rule out. Kucinich touted his longtime support for Medicare for all and has hit Cordray for his past A-ratings from the NRA, and even Cordray’s allies concede he’s not an exciting speaker.

Polling has been light here, but the last couple of surveys have given Cordray double-digit leads, albeit with large numbers of undecideds.

● OH-12 (R & D) (53-42 Trump, 54-44 Romney): GOP Rep. Pat Tiberi resigned to take a job leading an industry lobbying group, and that’s created a bit of an odd situation in this suburban Columbus seat. There will be an Aug. 7 special election to complete the final months of Tiberi’s term, but the primary for both the special election and the regular two-year term will take place simultaneously on Tuesday. As a consequence, there’s always a small chance that someone could win their party’s nomination for just one of the two contests.

The crowded GOP primary has turned into a classic establishment vs. insurgent battle. Defending Main Street, a super PAC set up to stop anti-establishment candidates from winning GOP primaries, has spent at least $400,000 on ads for state Sen. Troy Balderson. And Tiberi’s used the remaining funds in his campaign account to air ads staring the former congressman praising Balderson.

On the other side, the House Freedom Caucus’ allied House Freedom Action group has been spending for Liberty Township Trustee Melanie Leneghan. The anti-tax Club for Growth hasn’t formally taken sides, but they’ve been airing ads hitting Balderson and have said they’d be happy with Leneghan.

The only poll we’ve seen was a mid-April Balderson poll that showed him leading Leneghan 17-11, with economist Tim Kane and state Sen. Kevin Bacon at 10, while Delaware County Prosecutor Carol O’Brien was at 7; Bacon and O’Brien seem more establishment-oriented, while the Club for Growth also said it was comfortable with Kane. In a familiar storyline, GOP insiders privately fretted to the media a few weeks ago that Leneghan is a weak candidate who could cost them this seat in the August special.

On the Democratic side, local leaders have consolidated behind Franklin County Recorder Danny O’Connor. His main primary foe is former Franklin County Sheriff Zach Scott, who badly lost a 2015 race for mayor of Columbus to Andrew Ginther (who is supporting O’Connor) and narrowly lost renomination the next year against a candidate backed by Ginther and his allies. O’Connor only outspent Scott $36,000 to $20,000 during the pre-primary period, but he had a $121,000 to $18,000 cash-on-hand edge on April 18. Farmer John Russell, who lost a 2016 race for the state House, is also in.

● OH-16 (R) (56-39 Trump, 53-45 Romney): The GOP primary to succeed Senate candidate Jim Renacci in this very gerrymandered seat, which includes parts of the Akron, Canton, and Cleveland areas, pits the old party establishment against a more Trumpesque candidate. On the one side is Anthony Gonzalez, who was a football star at the Ohio State University and later went on to play for the Indianapolis Colts. Gonzalez has the backing of influential donors and local political figures, while the U.S. Chamber of Commerce launched a $300,000 buy for him in the final week of the campaign.

His opponent is state Rep. Christina Hagan, who was a prominent Trump backer in 2016 when Ohio Gov. John Kasich was also seeking the GOP presidential nomination. Hagan has an endorsement from the NRA as well as from two of the most prominent people to be fired from the Trump administration: Anthony Scaramucci and Sebastian Gorka. Hagan has pitched herself as a Trump ally and argued that Gonzalez, who worked in Silicon Valley before he came home to run for office, is an insider. Gonzalez outspent Hagan by a wide $272,000 to $74,000 during the pre-primary period, and most of the outside spending has been for him.

WEST VIRGINIA

● WV-Sen (R): Democratic Sen. Joe Manchin is one of the GOP’s top targets in the Senate this year, and three noteworthy Republicans are competing to face him. The party establishment hasn’t shown much of a preference between Rep. Evan Jenkins or Attorney General Patrick Morrisey, but they’ve made it very clear they view former Massey Energy CEO Don Blankenship as dangerously unelectable, and they’ve spent heavily to stop him. One day before the primary, Trump even tweeted that voters should support Jenkins or Morrisey but not Blankenship.

It’s not hard to see why so many Republicans fear that Blankenship would be a toxic nominee. After a 2010 explosion at Massey’s Upper Big Branch mine resulted in the deaths of 29 of Blankenship’s employees, he spent a year in prison for conspiring to violate federal mine safety laws. While most people with such a record would gladly slink off into obscurity, not Blankenship: He declared himself a political prisoner of the Obama administration, spending millions of his own money on ads making that argument (with racist flourishes), as well as attacks on Manchin, Morrisey, and Jenkins. It’s a message that could indeed work in a state like West Virginia.

The good news for Blankenship enemies like Senate Majority Leader Mitch McConnell (whom Blankenship infamously dubbed “Cocaine Mitch” in a campaign ad) is that recent public polls show him firmly in third place, while Jenkins and Morrisey are locked in a tight race. However, they’re still acting worried, and private GOP polls reportedly showed Blankenship taking a small lead in the final days of the race.

And indeed, Jenkins and Morrisey have mostly been attacking one another, though Morrisey belatedly started going after Blankenship in the final weekend of the campaign. Jenkins has hit Morrisey’s past work as a lobbyist, while Morrisey has gone after Jenkins for being a Democrat until he ran for Congress in 2013. Morrisey has also benefited from some outside spending from a super PAC funded by conservative mega donor Richard Uihlein. National Democrats, meanwhile, have also spent big to influence the race. While it originally looked like they were attacking both Jenkins and Morrisey equally in order to help Blankenship, Team Blue has spent almost all of its money against Jenkins while mostly leaving Morrisey alone.

● WV-02 (D) (66-29 Trump, 60-38 Romney): This central West Virginia seat is very much a longshot Democratic target, but Team Blue hopes that Rep. Alex Mooney, who, believe it or not, was a member of the Maryland legislature before joining the Mountain State’s congressional delegation in 2014, could be vulnerable in a good year. Army veteran Aaron Scheinberg is facing off with former U.S. State Department official Talley Sergent in the Democratic primary. Scheinberg outspent Sergent $92,000 to $65,000 during the pre-primary period, and he had considerably more money left over. However, Scheinberg only moved to West Virginia from New York in 2017, and while he touts his family’s roots in the state, he could negate Team Blue’s best line of attack against the carpetbagging Mooney.

● WV-03 (R) (73-23 Trump, 65-33 Romney): Evan Jenkins’ 2014 win over Democratic incumbent Nick Rahall made him the first Republican to represent southern West Virginia in generations, and there’s a crowded GOP field to succeed the Senate candidate. There’s no obvious frontrunner, and major outside groups also haven’t taken sides here.

Del. Carol Miller outspent fellow Del. Rupie Phillips, a longtime Democrat who only became a Republican last year, $179,000 to $135,000 during the pre-primary period, while former state party chair Conrad Lucus deployed $135,000. Del. Marty Gearheart and former Del. Rick Snuffer, who lost to Rahall in 2004 and 2012, are also in, but they’ve spent little between them. Team Blue is hoping that this seat’s old Democratic heritage could give them an opening, and a few candidates are competing for the nod. However, only state Sen. Richard Ojeda, an Iraq veteran who was brutally beaten at a campaign event in 2016, has spent much money, and he’s also attracted a good deal of national attention

Kentucky puts leg. session in rear view

The follow legislative recap comes by way of Dentons50 partner MML&K Government Solutions–editor

The first three months of Kentucky’s 2018 legislative session now seem like prologue. The sexual harassment scandals and shakeups within House Leadership that informed the opening weeks of session were superseded a grand finale that included pension reform, a state budget, tax reform, vetoes, veto overrides and fixes to bills that were passed earlier in the session–all within the final four legislative days.

To some extent, the process became as much the focus as the policies themselves, as a seemingly more engaged public witnessed firsthand how the Schoolhouse Rock version of sausage making is largely discarded by General Assembly once they are staring down the clock.

Tax reform began as a straightforward revenue bill (HB366) to balance the budget, but it grew to encompass major tax policy shifts over a series of behind-closed-doors meetings prior to the veto recess. It was passed by the legislature after being in the public domain for mere hours, vetoed by the Governor, then overridden. House and Senate leaders, acknowledging the need to change the bill over the veto break but unable to make further changes to it, amended a new bill altogether that superseded HB366. HB487 was passed on the last day of session and is now law. It flattens the individual and corporate tax rates to 5%, phases-out the inventory tax, moves the state to a single-sales-factor corporate tax apportionment, suspends or caps several tax credits, requires combined filing among business groups, expands the sales tax to several services, and increases the per-pack cigarette tax by $0.50, among other changes. The legislature estimates that the bill will generate $400 million over the biennium, a number disputed by the Governor’s budget director.

The state budget (HB200) faced similar circumstances following the Governor’s veto. The veto was overridden, and changes to the law were included in a new bill, HB265. The combination of generating new revenue in HB487, draining the “rainy day” fund, and preserving some of the Governor’s proposed reductions balanced the budget without cuts to public education. As a result, public education advocacy groups, who were organized and motivated to rally against pension reforms, came out in support of the budget and revenue measures in the session’s final days. Pension reform, which became law with the signing of SB151, drew the ire of educators statewide. The law largely held harmless existing employees and retirees across most state retirement systems, but it puts future teachers into a hybrid cash balance plan, which new state and county employees have had since 2014. Such plans guarantee a minimal rate of return during periods of market downturns.

Pensions, budget and tax reform were considered a collective three-legged stool for purposes of final legislative negotiations, but there were other meaningful items that were considered over the 60-day session. Workers’ compensation reform (HB2) passed following defeat last year. Tort reform was filed as a constitutional amendment (SB2), and it did not through the Senate. However, medical peer review panels (HB4) are now law. The General Assembly passed a balanced road plan (HB202), but they did not act on a proposed $0.10 increase in the motor fuels tax (HB609).

It may take some time to ultimately score this session. The General Assembly passed a pension reform measure that doesn’t cut the unfunded liability in the short term, but will likely reduce the state’s long-term public pension risk by making changes to future hires. The two-year budget funds the pension systems and per-pupil public school spending at unprecedented levels, but does not reflect commensurate investments in higher education and other areas of state government. Tax reform places Kentucky on a more competitive footing with its peer states, but, as always, there are winners and losers any time substantial revisions to the code are made.

By passing a budget, the General Assembly appears to have headed off the need for a special session, although it is completely within the Governor’s purview to call one. It is also within the Governor’s ability to make budget reductions without legislative input if tax receipts do not meet their budgeted amounts, a scenario his office predicted while the floor debate on the revenue bill veto override was going on. Regardless of if a special session takes place, the legislature is setting the table for “tax reform 2.0” in 2019 by establishing a task force to review the voluminous tax breaks and incentives that may negatively impact overall general fund returns.

Everything that passed (and didn’t) this year in Maryland’s General Assembly

The following legislative speed read comes by way of Dentons50 partner Manis, Canning–editorThe 2018 General Assembly Session came to a close at midnight on April 9. A total of 3,127 pieces of legislation were introduced – 1,269 originating in the Senate, 1,832 originating in the House, and 26 Joint Resolutions.  Of this number, the General Assembly passed 890 pieces of legislation.

Legislators focused on a number of important matters ranging from balancing the fiscal year 2019 budget, the impacts of federal tax reform, funding for K-12 education and school safety, expanding medical cannabis licenses, prescription drug pricing, and initiatives to prevent gun violence to name a few.

Again this session, a number of 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 two billswhich were overridden by the General Assembly, let several take effect without his signature, and signed others. Legislation referred to as the “Rape Survivor Family Protection Act” had broad support and was passed and signed by the Governor in mid-February.

With the early presentment of bills, two bill signings were held prior to the end of session on February 13 and April 5. The traditional bill signing was held the day after session ended on April 10.  Three additional bill signings will be held.

Below is a summary of some of the major issues and final outcomes from the 2018 General Assembly Session. A more detailed overview of significant legislation that passed or failed can be found in the Department of Legislative Services 90 Day Report.

Fiscal Year 2019 Budget

The fiscal year 2019 budget as enacted by the General Assembly (Senate Bill 185) totals $44.6 billion, a 2.3% increase from fiscal year 2018. The general fund budget, the portion supported by tax related revenues such as the income tax, sales tax, and state lottery, accounts for 40.1% of the total budget or $17.9 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 to the gap between general fund expenditures and general fund revenues.  Prior to the beginning of the 2018 session, a general fund shortfall of $298 million was projected.  Senate Bill 187 – the Budget Reconciliation and Financing Act of 2018 accompanied the budget to address the structural deficit and fund certain budget priorities.

Federal tax changes enacted at the end of December 2017 resulted in additional general fund revenue of almost $550 million. However, legislation passed to credit $200 million of this additional income tax revenue to a special fund to be used in the future to implement recommendations of the Commission on Innovation and Excellence in Education (Kirwan Commission) and additional legislation passed to provide limited tax relief to those who would be affected by the recent federal tax law changes.

The budget as enacted by the General Assembly leaves a $106.9 million general fund balance at the end of fiscal year 2019 and preserves $882.5 million in the State’s Rainy Day fund. State support for public education and libraries is approximately $6.6 billion and total state aid for primary and secondary education will increase by approximately $170.6 million. In addition to the $200 million being set aside to implement future recommendations of the Kirwan Commission, the General Assembly restricted $11.4 million to implement preliminary recommendations of the Commission and provided a total of $40.6 million in operating and capital funds to improve safety and security in Maryland’s public schools. Other legislative funding initiatives included providing an additional $33.6 million in aid for local governments, and $57.4 million for providers of health care services to vulnerable populations.  Additional information on the fiscal year 2019 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.

Individual and Corporate Income tax

State Income Tax Modifications Resulting From Federal Tax Changes

As mentioned above, legislation passed to provide limited tax relief to those who would be affected by the recent federal tax law changes. Senate Bill 318/House Bill 570 will increase the standard deduction for State income tax purposes beginning in tax year 2018 and then index the standard deduction based on the annual change in the cost of living beginning in tax year 2019.  Senate Bill 184/House Bill 365, both bills passed, clarify the number of personal exemptions a taxpayer can deduct for State income tax purposes.

Single Sales Factor Apportionment

After being proposed a few years ago by a Commission examining Maryland’s business climate and tax structure, Senate Bill 1090/House Bill 1794 passed to phase-in a single e sales factor formula to be used to calculate  a corporation’s corporate income tax. This will be phased-in over a five-year time frame beginning in tax year 2018. By tax year 2022, all corporations, with limited exceptions, must allocate to the State the part of the corporation’s Maryland modified income derived from or attributed to being carried on in the State using an apportionment formula in which Maryland modified income is multiplied by 100% of the sales factor.  Under current law, unless engaged primarily in manufacturing activities, corporations must use a three factor formula that incorporates property, payroll, and a double-weighted sales factor.

Firearms/Gun Violence

Recent mass shootings at schools and concert venues, and gun violence against oneself or others, led to the introduction and passage of the several bills below to prohibit access to rapid fire trigger activators (bump stocks) and limit access to firearms under certain circumstances.

Bump Stocks

Senate Bill 707/House Bill 888 prohibits a person (1) from transporting a device defined as a “rapid fire trigger activator” into the State or (2) manufacturing, possessing, selling, offering to sell, transferring, purchasing, or receiving a rapid fire trigger activator. A bump stock device was used in the mass shooting in Las Vegas where a gunman opened fire into a crowd during a concert.

Domestic Violence – Transfer/Surrender of Firearm

House Bill 1646 establishes a process by which an individual convicted or who pleads guilty of a crime involving domestic violence must transfer his or her firearms to law enforcement or a federally licensed firearms dealer. The bill requires the State’s Attorney to provide notice relating to prohibitions on possession of a firearm to a defendant, defendant’s counsel, and the court if the defendant is charged with a disqualifying crime and the facts support a finding that the crime was domestically related. On conviction or a plea of guilty, a court must order the defendant to transfer, either personally or through a representative, all regulated firearms, rifles, and shotguns as specified in the bill. The transfer must occur within two business days after conviction and written proof of the transfer is to be provided to the individual or representative. The court is authorized to issue a search warrant if there is probable cause to believe the individual did not surrender all firearms, rifles, or shotguns.

Extreme Risk Protective Order

House Bill 1302 establishes a process by which certain medical professionals, law enforcement, and family or household members may seek an interim, temporary, or final court order to prevent a respondent from possessing or purchasing a firearm or ammunition for a limited time frame if the respondent is found to be in danger of causing personal injury to himself or others.   A petition for an extreme risk protective order can be filed with the District Court, or a District Court Commissioner if the Court is closed. The bill also establishes a process for the surrender of the firearms and ammunition and a process for the return.        

Business and Regulatory Issues

Breweries and Alcohol Regulation

In response to legislation that passed during the 2017 session (Ch. 813, Acts of 2017) making changes to laws regulating Class 5 breweries, several bills were introduced to either expand or limit the privileges of breweries in the state. Ch. 813, which applies to small craft breweries and a Guinness brewery that recently opened in Baltimore County, (1) increased the number of barrels a brewery may sell for on-premises consumption; (2) authorized a brewery to contract to brew and bottle beer with and on behalf of other classes of breweries; and (3) changed the hours of operation for sales and serving privileges of an on-site consumption permit.

Legislation introduced this session, all of which failed, would have modified these changes. House Bill 1052 would have partially repealed the bill from last year to just apply to the Guinness brewery. House Bill 518, the Reform on Tap Act of 2018, the product of a workgroup led by the State Comptroller, would have significantly expanded the production limits, onsite sale and sampling, and distribution for any type of brewery. Other bills, Senate Bill 839/House Bill 1015 would have removed limits on the number barrels for a brewery that obtained a limited wholesaler’s license; and several other bills (Senate Bill 1044/House Bill 1176Senate Bill 1017/House Bill 1148Senate Bill 609, and Senate Bill 406) would have expanded Class 5 brewery privileges related to the onsite sampling and sale of beer.

However, legislation did passHouse Bill 1316, to establish a 21-member Task Force to Study State Alcohol Regulation. The Task Force, whose report with findings and recommendations is due to the General Assembly by December 1, 2018, is charged with examining whether the Comptroller’s Office is the most appropriate agency to ensure the safety and welfare of Maryland residents, or whether those tasks should be assigned to another State agency or to one created specifically to carry out those tasks.

Internet Privacy and Net Neutrality

In response to Congress approving and the President signing a resolution nullifying Federal Communications Commission rules on internet privacy and net neutrality, House Bill 1654 was introduced to establish requirements at the State level.  This bill, which did not pass, would have established privacy requirements for (1) the use, disclosure, sale, or provision of consumer data; (2) the protection of consumer data; and (3) enforcement provisions by the Consumer Protection Division in the Office of the Attorney General. The bill also would have prohibited the use of state funds to procure services from an ISP that engaged in certain activities.

Medical Cannabis Licensing

Following the failure of legislation during the 2017 General Assembly session and increasing support from the Legislative Black Caucus, legislation was again introduced this session to enhance diversity in the medical cannabis industry.  House Bill 2, which passed, (1) requires outreach to encourage industry participation by small, minority, and women owned businesses; (2) the promulgation of regulations based on a recent disparity study; (3) raises the cap on the number of licensed growers up to 22, subject to certain reductions; (4) requires the issuance of licenses to two growers that were initially ranked, but not awarded; (5) establishes a cap of up to 28 processors, subject to certain reductions; (6) establishes a compassionate care fund to provide free or discounted medical cannabis to individuals enrolled in Medicaid or the Veterans Administration Health Care System; and (7) makes changes to the membership of the Natalie M. LaPrade Medical Cannabis Commission.

Paid Sick and Safe Leave

During the 2017 session, the General Assembly passed, House Bill 1, Maryland Healthy Working Families Act, 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 vetoed this bill and the General Assembly overrode the veto during the 2018 session. The bill became law in February 2018.

To assist small businesses with providing paid sick and safe leave as specified in the bill, the General Assembly passed Senate Bill 134 to provide a refundable credit against the State income tax for a small business that employs 14 or fewer employees.  The tax credit applies to an employee who earns 250% or less of the annual federal poverty guidelines for a single person household.

Drug Cost Review Commission

Legislation to address concerns with the cost of prescription drugs was introduced again this session. As introduced, Senate Bill 1023/House Bill 1194 would have (1) established a Commission to review prescription drug costs and value with the goal of setting price controls for the drug supply system; (2) mandated a 30-day advance price notification of wholesale acquisition cost (WAC) for branded, generic sole, source off-patent drugs in certain circumstances; and (3) required the disclosure of pricing information.  As amended by the House, the bill established a Drug Cost Commission to determine how to make prescription drugs more affordable after reviewing, evaluating, and assessing the pharmaceutical distribution and payment system, among other requirements.  Although the bill was heard and voted favorable in the Senate Finance Committee on the last day of the session, the bill was not reported out of Committee and failed on Sine Die.

Health Insurance

Affordable Care Act and Market Stabilization

In response to concerns that the repeal of the federal mandate for health coverage under the Affordable Care Act (ACA) would cause premium rates to increase significantly, result in healthier individuals discontinuing benefits, and jeopardize the viability of the individual market, several bills were introduced and passed to stabilize the market. This was a bi-partisan effort and all bills have already been signed into law by the Governor.

Senate Bill 1267/House Bill 1795 (Chs. 7 and 6, Acts of 2018) requires the Maryland Health Benefit Exchange, in consultation with the Insurance Commissioner, to submit a State Innovation Waiver application for a Federal Section 1332 waiver to establish a program for reinsurance and seek federal pass-through funding. The program authorized under this bill must provide reinsurance to carriers that offer individual health benefit plans and meet the requirements of the waiver. The program must also mitigate the effects of high-risk individuals on the rates in the individual market.

Senate Bill 387/House Bill 1782 (Chs. 38 and 37, Acts of 2018), a companion bill, identifies revenue streams to fund the reinsurance program authorized under SB1267/HB1795, upon receipt of the 1332 waiver. This bill establishes a 2.75% state health insurance provider fee assessment on health insurers, including nonprofit health service plans, health maintenance organizations, managed care organizations, and others  for calendar year 2019. This fee is in place of the fee that would have been assessed under the ACA, but was temporarily suspended for that year due to federal action. This bill also establishes limitations for association health plans, as well as short term limited duration insurance.

More specifics on each of these bills can be found by clicking on links above or in the Health and Human Services section of the DLS 90 Day Report.

Education

A broad range of legislation passed affecting funding levels for K-12 education and education policy.  An overview of all education policy and funding initiatives, including State Aid to Public Schools, Nonpublic Schools, and school construction, is summarized in the Education Section of DLS 90 Day Report.  A summary of several education policy and funding initiatives that passed are listed below.

Constitutional Amendment to Supplement State Funding for Education

Senate Bill 1122 proposes a constitutional amendment to be placed on the ballot for the 2018 general election to require after a four-year phase-in period, 100% of the gaming revenues dedicated to public education be used as supplemental funding.  If approved, general fund expenditures for education will increase by $125 million in fiscal 2020 and increase to $522 million in fiscal 2023.

Commission on Innovation and Excellence in Education (Kirwan Commission)

House Bill 1415 extends the deadline of the Commission and implements and mandates funding for several preliminary policy recommendations.  Policy initiatives include: (1) a comprehensive teacher recruitment and outreach program; (2) the Maryland Early Literacy Initiative; (3) the Learning in Extended Academic Programs (LEAP) grant program; (4) Public School Opportunities Enhancement Program; (5) the Teaching Fellows for Maryland scholarship program; and (6) the Career and Technology Education (CTE) Innovation grant program.

21st Century School Facilities Commission

House Bill 1783, as introduced, made several comprehensive changes to the school construction process as proposed by the 21st Century School Facilities Commission.  As amended and passed by the General Assembly, among other changes, the bill expands the membership and changes the name of the Interagency Commission (Committee) on School Construction (IAC) and transfers the authority to grant final approval for school construction projects from the Board of Public Works (composed of the Governor, Comptroller, and Treasurer) to the IAC.  This transfer of authority led the Governor to veto the bill, but the General Assembly overrode the veto during the 2018 session and the bill became law.

Healthy School Facility Fund

In response to a lack of heat and closures of Baltimore City schools due to extremely cold weather, Senate Bill 611 was introduced to establish the Healthy School Facility Fund within the IAC to provide grants for facility improvements. Priority for awarding is given to schools based on the severity of issues including air conditioning, heating, mold remediation, temperature regulation, plumbing, and windows. The Governor is required to appropriate $30 million to the fund in fiscal 2020 and 2021 and no jurisdiction may receive more than $15 million in a fiscal year.

Maryland Safe to Learn Act of 2018

Following recent school shootings in Maryland and other parts of the country, several pieces of legislation were introduced that took a comprehensive approach to ensuring Maryland’s schools are safe. These bills ranged from requiring threat assessment teams and school resource officers (SRO) located at all schools, to enhancing the security of school buildings and providing school safety drills. All of these bills were consolidated into one piece of legislation, Senate Bill 1265 – Maryland Safe to Learn Act of 2018. This bill, among other requirements  (1) establishes a School Safety Subcabinet; (2) requires the Maryland Center for School Safety to develop training, gather data, and review and comment on school safety plans; (3) requires school safety evaluations of all  public schools; (4) requires school resource officers to complete a specialized training; and (5) requires local school systems, working with local law enforcement, to identify which public schools have an SRO and for those schools without, the adequate law enforcement coverage that is provided to the school. This requirement applies to high schools for the 2018-2019 school year and to all public schools for the 2019-2020 school year. A total of $40.6 million is being provided in the fiscal 2019 budget to provide grants to local school systems and law enforcement agencies. Of this amount, $2.5 million will be used to staff the Maryland Center for School Safety. Beginning in fiscal 2020, the bill mandates $10 million in annual grants to assist with providing SRO/ law enforcement coverage.

A more detailed overview of the legislation listed above and other legislation that passed or failed during the 2018 General Assembly session can be found in the Department of Legislative Services 90 Day Report.

Walker uses veto power to increase sales tax holiday

The following comes by way of Dentons50 partner Nick Probst of Capitol Consultants–editor

Wisconsin Governor Scott Walker has signed the $100 per child tax rebate and sales tax holiday along with a veto change that will increase the sales tax holiday to five days from August 1st through the 5th this fall.

The sales tax holiday was a contentious late session negotiating point between GOP leaders in the Assembly and Senate. The compromise resulted in a scaled back version of the plan; however, Walker has now increased the tax savings available to back to school shoppers this fall.

“This rebate and sales tax holiday will help Wisconsin families with the costs of raising children,” Governor Walker said. “A couple hundred dollars more in the family budget could really make a difference, particularly when getting ready for the next school year. It could mean a new pair of shoes, a winter coat, activity fees at school, or a co-pay at the doctor or dentist. We are giving this money back to the hardworking taxpayers because it is their money to begin with, and we want them to spend it on their priorities, not Madison’s priorities.”

Anyone who is a resident of the State of Wisconsin is eligible to receive $100 for every dependent child living at home under the age of 18 as of December 31, 2017.

Beginning May 15, 2018, through July 2, 2018, eligible citizens can claim their $100-per-child tax rebate on a Department of Revenue website that will be announced prior to May 15. Please note claims cannot be submitted prior to May 15. Those who claim the rebate will receive the money before school starts this fall and have the option to receive it through a check in the mail or direct deposit.

Along with the child tax rebate, the legislation creates a back-to-school sales tax holiday in August. Governor Walker’s partial veto of the legislation expands the duration of the holiday to a total of five days, August 1 – 5, 2018. This means the state sales tax will not be charged for those days on school supplies where each item is $75 or less, clothing where each item is $75 or less, computers where each item is $750 or less, and computer supplies where each item is $250 or less.

“This sales tax holiday will provide additional relief to parents and grandparents as their children go back to school in the fall,” continued Governor Walker. “As the parents of two sons, Tonette and I know these back-to-school items can really add up, and we also know that every little bit helps.”

Governor Walker thanked the Legislature for passing this legislation with bipartisan support. The bill passed the Senate on a vote of 17-15 and was concurred by the Assembly on a vote of 59-31. It is Act 367.

Walker released the following veto message relating to the sales tax holiday:

“I have also exercised the partial veto in Section lf, as it relates to s. 77.54 (67) (b), because I object to limiting the sales tax holiday to only two days, which may deny hardworking taxpayers with children the chance to take advantage of this sales tax holiday. This partial veto would extend the sales tax holiday to the period starting on August 1, 2018, and extend it to the following Sunday, August 5, 2018. By extending the period of the sales tax holiday to these five days instead of two days, more parents and students will have the flexibility to save on critical purchases during the back-to¬ school season. Extending the applicable period by three days is estimated to reduce general fund tax revenues by an additional $3 million relative to the bill’s initial fiscal estimate of $11.8 million

“With these vetoes, all taxpayers with dependent children under age 18 will be able to claim this year’s sales and use tax rebate, providing meaningful tax relief to familieswith children, and taxpayers will have a longer period to benefit from the sales taxholiday this August.”

Northam’s vetoes survives reconvened session

The following Va. leg. session speed-read comes by way of Dentons50 partner Shawn Day of Capital Results–editor

In his first year as governor of the Commonwealth of Virginia, Democrat Ralph Northam’s 10 vetoes survived the legislature’s reconvened session this week.

Northam had vetoed bills addressing myriad topics, including immigration enforcement, more regulation of local government contractors’ wages, prohibition of market-based efforts to promote clean energy and reduce carbon emissions, changing the frequency of redistricting and imposing new mandates on local officials to investigate registered voters.

Republicans, who hold a tenuous one-seat majority in the House and Senate, attempted to override Northam’s veto of a bill banning localities from becoming “sanctuary” cities for illegal immigrants but failed to come close to the two-thirds of seats needed in each chamber.

Northam led a Democratic wave in November that resulted in all three statewide offices being won by Democrats, and significant change in the House of Delegates. Republicans salvaged a one-seat advantage in the chamber – where they previously enjoyed a nearly two-thirds majority – after a drawing of lots determined the Republican candidate won a House district race that had ended in an electoral tie.

Republican legislators did succeed in defeating the governor’s amendments to a measure pertaining to funding for the Washington area’s Metro transit system. Northam had amended the bill to raise deed and lodging taxes in Metro localities to fund improvements to the system, and he needed a simple majority in the legislature to approve. While Northam and fellow Democrats were able to win approval in the Senate, they failed to persuade a single Republican in the House to support the plan.

Virginia’s General Assembly remains in special session, which the governor called after delegates and senators failed to negotiate a new two-year budget during the regular session.

Republicans and Democrats in the House of Delegates have approved a budget proposal that aims to reform and expand Medicaid under provisions of the federal Affordable Care Act; Senate Republicans have remained steadfast in refusing to accept a budget that accepts federal tax dollars to cover Medicaid expansion.

The fiscal year ends on June 30.

Elizabeth Esty Won’t Seek Re-Election

The following elections speed read comes by way of Dentons50 partners James Woulfe and Jim O’Brien of The Connecticut Group–editor.

U.S. Rep. Elizabeth Esty announced last Monday that she will not seek re-election in November in the wake of a scandal that has fellow lawmakers calling for her resignation.

Esty’s former chief of staff, Tony Baker, was accused of domestic violence against a coworker, and was not fired or put on administrative leave by Esty when she learned of the incident. Months later, after an internal investigation was completed, Baker received a severance package worth thousands of dollars and a letter of recommendation from Esty that landed him another job.

The calls for her resignation have come from State Senator Mae Flexer, followed by Majority Leader Bob Duff and Senate President Martin Looney. Duff criticized her for her lack of transparency and poor judgement:

“The calls for Elizabeth’s resignation by many in the political world might have been avoided had there been more concern for the victim and better judgment shown from the day this all happened in a Congressional office up and until the story broke in the media.”

Democrats will now turn their focus to making sure Esty’s seat does not go to a Republican in the upcoming election. They need 24 seats to flip the U.S. House of Representatives, and can’t afford to lose the 5th district.