Donald Fry: Legislative impacts on Maryland’s business climate

By Donald C. Fry

Governor Martin O’Malley’s proposal to increase funding for transportation infrastructure – a major priority for statewide business advocates – is stalled as the Maryland General Assembly enters the last week of its 2011 session. But lawmakers are moving a number of other bills that would have a positive impact on Maryland’s business climate.

Here are summaries of some key legislation and their potential impacts:

Maryland Innovation Initiative. Administration companion bills to promote technology transfer from Maryland research institutions to the private sector have passed their respective houses. The Senate passed SB 239 with amendments on March 17. The bill is in the House before Economic Matters and Appropriations committees. Its companion bill, HB 442, passed the House with amendments on March 21 and is before the Senate Finance Committee.

The legislation would create a pool of grant funding, from participating universities and other sources to be potentially awarded to university initiatives and private-sector entrepreneurs to promote the commercialization of university-developed technology. Converting Maryland’s wealth of research into marketable products and businesses must be a top priority for strengthening our state’s business climate.

Public-private partnerships. Legislation to promote the development of public-private partnerships to bring private-sector resources to bear in meeting the state’s capital project needs, HB 576, has passed the House and will be heard on April 4 by the Senate Budget and Taxation Committee. This is a concept that promotes constructive partnerships between government and the private sector that experts estimate could generate as much as $3 billion annually in private funding for state capital projects. Government and business partnership is a core pillar of a competitive business climate.

Tax credits for research and development. Legislation passed by the Senate, SB 570, would increase the amount of annual tax credits available for research and development expenses to $18 million – up from $6 million previously. The bill will be heard April 3 before the House Ways and Means Committee. This strengthens a highly effective state tax credit that supports growth in Maryland’s technology sector.

Biotech tax credits. The budget now before a conference committee would retain the existing $8 million in annual tax credits available for investment in Maryland biotechnology companies. This is another extremely effective method that leverages tax credits into private investment in growing the state’s biotech industry sector, an important element in strengthening Maryland’s business climate.

Convention center expansion planning. The capital budget bill, SB 151, which has passed the Senate and is now before the House, includes $2.5 million in preliminary planning funds for expanding the Baltimore Convention Center. The House Capital Budget Subcommittee recently approved the funding. The proposed convention center expansion would generate between $235 million and $308 million in annual direct and indirect spending and would yield the city and state between $19 million and $25 million in new combined annual tax revenues, according to a recent consultant’s report to the state.

Security clearances. Obtaining security clearances has been identified as a major barrier to national security operations and to federal contractors. Companion bills in both the House and the Senate, HB 1248 and SB 296, which would offer Maryland companies tax credits to defray the costs related to obtaining clearances, have passed each chamber and are before their respective opposite chambers. In light of the sizable number of federal contracting jobs in Maryland that require security clearances, our state’s business climate would be enhanced by this legislation to ease barriers to federal contractors and to potentially expand our defense workforce.

These are just a few updates on legislation that could positively impact Maryland’s competitiveness for economic growth and job creation.

Two major potential legislative outcomes would detract from Maryland’s business climate – proposed increases in personal income tax rates and continuing legislative inaction in addressing our state’s crisis in funding transportation infrastructure.

Regardless of which provisions emerge from the budget conference committee, personal income tax rates will likely increase significantly for many Maryland business owners and employees to as much as 8.95 percent in counties with the highest piggy-back taxes.

Increasing the state’s income tax rates to this level does not improve Maryland’s competitive environment for business growth. It runs counter to a fundamental core pillar of a good climate for economic growth and job creation – a competitive tax structure.

Meanwhile, it appears that, for the 20th consecutive year, state lawmakers will fail to increase Maryland’s primary source of transportation funding – the gas tax. But a decade of advocacy by the GBC and statewide business leaders to address our growing crisis in funding roads and transit has clearly identified the following serious issues that block state legislators from acting:

The “rural versus urban” dichotomy. Lawmakers have consistently been unable to reconcile these two diverse interests, which boils down to a frustrating “roads versus transit” debate where lawmakers representing rural and urban constituencies typically talk past each other.

The issue of farebox recovery. Maryland has been beset with a legislative mandate that its commuter services recover a seemingly unattainable share of operating costs from riders.

Use of gas tax revenues. Lawmakers seem to be having increasing difficulty, as a body, in justifying transit investments from gas tax revenue, the traditional staple of all Maryland transportation funding.

Accounting for inflation. There is no inflation component to Maryland’s principal transportation funding mechanisms.

Overcoming a general lack of political fortitude. After 20 years of increasingly stagnating transportation revenue that has resulted in a massive backlog of unfunded road and transit projects, the General Assembly continues to habitually balk at enacting revenue increases for transportation assets.

State lawmakers must find a way to resolve these issues if Maryland’s transportation infrastructure – a core pillar of our state’s business climate – is to again be adequately funded.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Recent Center Maryland columns by Donald C. Fry:

Mayor’s summer jobs program is opportunity-driven

Facing the tide of opposition to transportation funding

Governing between fiscal extremes in Annapolis

Transportation legislation not the only issue on business radar in Annapolis

Protecting transportation fund: not a magic bullet, but still needed

MDOT’s $12 billion list: top transportation priorities of Maryland counties

Better rail connectivity could drive residential rebound in Baltimore City

Talking past each other in Annapolis

Government and business teamwork: an essential prerequisite for economic growth