Annapolis expectations

Electricity regulation, economic woes are sure to crop up again in 2010 session

November 25, 2009|By Gabriel J. Michael

Each year for 90 days, our elected state senators and delegates meet in Annapolis to debate the state's budget woes, important initiatives on health care and education, and hundreds of bills you do not see on the newspaper's front page. Unless you have spare time to pore over their work, it's hard to get a sense of what really happens in the State House. Single-issue interest groups can help alert you if something you particularly care about is on the agenda, but for the big picture, you would need to wade through thousands of pages of dull material.

As author of "The Annapolis Report," I spent a few months combing through all that legislative material so you don't have to. I found that many of the issues that have haunted state government in years past - such as electricity regulation, Medicaid fraud and, of course, the perennial problem of balancing the state's books - will rear their heads again in 2010.

Rather than single out individuals like a traditional legislative scorecard, The Annapolis Report looks at the session as a whole. By understanding the major issues in last year's session, we can get a better idea of what's likely to be important in the upcoming session.

Here is some of what we can expect in 2010:

Budget. State budget concerns will produce a spate of balance transfers destined for specific purposes - such as highway construction, equipment replacement and professional oversight - into the general fund, a practice known as "fund raiding." The O'Malley administration has also highlighted its "strategy" of issuing debt to pay for projects meant to be paid out of the general fund. The state's Spending Affordability Committee warns that this practice will make it harder for the state to meet its debt service requirements.

Electricity regulation. Efforts at electricity re-regulation failed earlier this year, so we can expect this to be a major issue in 2010. The conventional wisdom is that deregulation was a mistake and is responsible for the significantly higher prices we have faced for years. True or not, the important question is whether re-regulation will solve the problem. The Public Service Commission has clearly indicated it will not.

We also face capacity problems, and if suppliers won't meet consumer demand efficiently in a deregulated environment, then it seems even less likely that they will do so in a regulated environment that is shaped by Annapolis politics. Instead, we should focus on how to reduce demand, the other side of the equation. The General Assembly should look carefully at smart grid proposals and ways to encourage variable pricing and more programs like BGE's Peak Rewards.

State employee benefits. Another issue has so far remained under the radar: state contributions for post-employment benefits such as health, dental and life insurance premiums that the state pays for its retirees. Last year, new accounting rules forced the state to estimate the total cost of these benefits; over 30 years, they add up to nearly $15 billion. To pay for these, the state would have to sock away more than $1 billion each year into a special trust fund. Needless to say, this has not happened. The trust fund was supposed to receive $140 million over the next five years, but this year's budget erased that contribution. As of now, the trust fund is less than 1 percent funded, and the state is continuing to pay for these benefits out of the general fund every year. If this continues, in the long run we will spend billions of dollars more than necessary to pay for these benefits.

False Claims Act. We might see yet another try at passing a false claims act. Last year's attempt was focused on Medicaid fraud and was defeated in the state Senate by a single vote. According to the Maryland Department of Health and Mental Hygiene, 10 cents of every Medicaid dollar are wasted because of fraud or abuse, which is why the department supported the false health claims act.

The Annapolis Report includes links to the General Assembly's Web site, so you can easily learn how your elected representatives voted on the issues that are important to you. The more informed and involved Maryland's citizens and taxpayers are, the better the chance of our legislators effectively serving the public interest.

Gabriel J. Michael is a senior fellow at the Maryland Public Policy Institute. His e-mail is gmichael@mdpolicy.org. The Annapolis Report is available online at www.mdpolicy.org/research/detail/the-annapolis-report.

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