Part H
BUSINESS AND ECONOMIC ISSUES
ACCOUNTANTS
Senate Bill 128 (passed) alters the degree requirements for applicants who wish to be licensed as certified public accountants. This bill includes members of the Association of Collegiate Business Schools and Programs among those institutions having degree programs in accounting that meet the educational requirements of the Board of Public Accountancy for certified public accountancy licensure.
In an effort to make Maryland Certified Public Accountants (CPAs) "substantially equivalent" to the 49 states and jurisdictions which currently require work experience for licensure, the General Assembly considered House Bill 637 (passed). The bill requires an applicant for a CPA license to satisfy a practical work experience requirement. As a result, Maryland CPAs will have the opportunity to be licensed by reciprocity in other jurisdictions.
ARCHITECTS
Under current law, architects who are licensed outside of Maryland may practice in Maryland after meeting requirements for waiver of examination. The Board of Architects may grant a waiver to applicants certified by the Council only if the applicant is of good moral character, pays the requisite fees and gives the board a certified copy of the certificate granted by the Council. Senate Bill 54 (Ch. 25) is intended to correct an error in current law by requiring out-of-state applicants to meet the same licensure requirements as in-state applicants. Additionally, the Act clarifies that applicants who are certified by the Council must also have a current license from another state or country to qualify for a reciprocal license. Because architects are required to take a national examination to achieve licensure, the current language has generated some confusion that the "waiver" exempts applicants (especially those who have experience in other countries) from taking the national examination.
Senate Bill 54 also extends the board's disciplinary authority to applicants or licensees who have had their license in another state revoked or suspended, if the grounds for disciplinary action would justify suspension or revocation in Maryland.
BARBERS AND COSMETOLOGISTS
Sunset Laws
The State Board of Barbers licenses individuals who practice barbering in Maryland and establishes health and safety standards for the operation of barber shops. Similarly, the State Board of Cosmetologists licenses individuals who practice cosmetology in Maryland and establishes health and safety standards for the operation of beauty salons. Senate Bill 216/House Bill 235 (both passed) and Senate Bill 218/House Bill 236 (both passed) extend the sunset date for both the State Board of Barbers and the State Board of Cosmetologists, respectively, from July 1, 2001 to July 1, 2011.
Practice Settings
Under current law, a licensed cosmetologist is authorized to practice cosmetology in the residence of a patron in a nursing home, hospital, or similar institution by appointment if the cosmetologist is sponsored by a beauty salon that holds a beauty salon permit and the patron is a customer of the beauty salon. House Bill 672 (passed) expands the ability of a licensed cosmetologist to practice cosmetology outside a salon on individuals confined to specified locations (i.e. nursing facility, hospice facility, assisted living facility) for health reasons. The bill also sets up a pilot program in Cecil County where cosmetologists can provide services to confined individuals without restrictions of salon sponsorship or previous customer relationship if the cosmetologist maintains a $50,000 liability insurance policy and records of patrons, subject to review by the State Board of Cosmetology. The bill is lifetime until September 30, 2001.
Educational Requirements
House Bill 781 (passed) increases the number of hours of instruction to become a licensed nail technician from 100 hours to 250 hours. The bill also increases the number of hours of instruction required to become a licensed esthetician from 300 hours to 600 hours.
Prohibition of Equipment and Substances in Beauty Salons
In an effort to protect the health and safety of Maryland residents, the General Assembly considered several bills that would prohibit certain equipment and substances in beauty salons. Methyl methacrylate liquid monomer (MMA), a toxic chemical, is used by some nail technicians to apply artificial nails. House Bill 15 (passed) prohibits the use or possession of MMA in beauty salons and authorizes inspectors to test products or take random samples. Violators are guilty of a misdemeanor and subject to a maximum $1,000 fine per day. Additionally, House Bill 1062 (passed) authorizes the State Board of Cosmetologists to prohibit or restrict the use or possession of lasers, which are used to remove tatoos and blemishes, in beauty salons.
FORESTERS
During the last licensing renewal process, the State Board of Foresters received requests from licensees who were leaving the State for a short period of time, or changing professions, but wanted to preserve their ability to renew their licenses without having to file a new application. Additionally, consumers have been uncertain as to exactly what services constitute forestry or the practice of forestry. Some consumers perceive that the mere cutting, harvesting, pruning, or hauling of trees is forestry. In an effort to address these issues, Senate Bill 52 (passed) alters the definition of "forestry" to clarify that the science of forestry differs from the services of a tree expert, landscape contractor, or other cutting or harvesting services. In addition, the bill creates an inactive license category and establishes a $25 fee for that category.
PLUMBERS
Senate Bill 50 (Ch. 23) allows plumbers in other states to obtain a license in Maryland by reciprocity. Specifically, the Act allows the State Board of Plumbing to waive the examination requirements for a master plumber license or a journey plumber license provided that the applicant: (1) holds an active license in good standing in another state in which the licensing requirements are at least equivalent to the Maryland licensing requirements; (2) otherwise meets the Maryland licensing requirements; and (3) pays the requisite fee. The board is only authorized to waive the examination requirements for applicants licensed in states with similar reciprocity legislation.
PROFESSIONAL LAND SURVEYORS
The State Board for Professional Land Surveyors has noted that its applicants lack the diversity of prelicensing experience that is essential both for the passage of the licensing examination and for providing competent services. In addition, current law does not provide for the disciplining of licensees who have had their licenses revoked in other states. In response to these concerns, Senate Bill 49 (Ch. 22) alters the requirements for licensure as a professional land surveyor. Under current law, there are five tracks to obtain a professional land surveyor license, each of which includes an education, experience, and examination component. The Act provides four licensing tracks, reduces the requisite years of work experience, and narrows the educational requirement to include land surveying and not civil engineering. Additionally, the Act authorizes the State Board for Professional Land Surveyors to deny, reprimand, suspend, or revoke a license if that license has been suspended or revoked in another state for a cause that would justify suspension or revocation in Maryland.
Moreover, under current law, land surveyors and property line surveyors are required to submit a renewal application and pay a renewal fee to renew their respective licenses. The current renewal fee is $60 for land surveyors and $40 for property line surveyors. There are currently no continuing education requirements or any other demonstration of continuing professional competency required for the license renewal of either a land or property line surveyor. Senate Bill 450/House Bill 226 (both passed) require the State Board for Professional Land Surveyors to adopt regulations to require a demonstration of continuing professional competency as a condition of license renewal. These bills are effective until September 30, 2001.
REAL ESTATE BROKERS
In order to streamline the continuing education process for real estate brokers, Senate Bill 565 (passed) clarifies that real estate licensees who have been licensed and practicing for ten or more years may renew their licenses if they complete six clock hours of continuing education instruction on relevant changes in federal, State, and local real estate law. Every two years, the continuing education instruction must include at least one 1.5 clock hour course on federal, State, and local fair housing and fair housing advertising laws. Commercial real estate brokers are exempt from the fair housing continuing education requirement.
SECURITY GUARDS
Senate Bill 443/House Bill 381 (both passed) add to the qualifications for certification as a security guard a requirement that an individual be of good moral character and reputation. The bill also establishes three-year staggered terms for security guard certification, and sets forth procedures for the renewal of certificates. Finally, the bills clarify that in addition to any other grounds, the Secretary of State Police may deny, suspend, or revoke a certificate if the holder pleads guilty or nolo contendere to any felony, or a misdemeanor directly related to the fitness and qualification of the holder to be certified as a security guard.
SECURITY SYSTEM TECHNICIANS
Senate Bill 786/House Bill 1203 (both passed) simplify the registration process for security system technicians by repealing the requirement for two written recommendations for registration applicants and requiring the Secretary of State Police to issue all registrants, except temporary registrants, a photo pocket identification card. The bills also establish a National Criminal records check as a basic registration requirement, thereby eliminating the need for a State background check. The Secretary of the State Police may waive the background check if one has already been conducted in another jurisdiction, and the applicant was recently licensed in another state. An applicant who has yet to meet the training requirements for registration may obtain a temporary registration if the Secretary determines that the applicant is not a threat to public safety. Finally, before final disciplinary sanctions can be imposed on a registrant, the bills require the Secretary to give the person a choice between a hearing before the Secretary or an advisory panel comprised of a member of the State Police, a representative of the industry, and three consumers.
SPECIFIC BUSINESS REGULATION
Cemetery and "Death Care" Regulation
Established in 1997, the Office of Cemetery Oversight issues registrations to individuals and permits to businesses that operate a cemetery or provide burial goods. While the Maryland Cemetery Act includes enabling language regarding the renewal of registration, which is required every two years, it fails to mention the renewal of permits. Other language in the Cemetery Act indicates, however, that a renewal process for permits is contemplated by the Act and is consistent with the original legislative intent.
Senate Bill 29 (Ch. 12) corrects an erroneous omission from the Maryland Cemetery Act regarding the renewal of permits. The Act authorizes the Office of Cemetery Oversight to renew permits every two years for business entities (partnerships, LLCs, and corporations) to operate a cemetery or provide burial goods in Maryland.
Under the law, a person that owns and operates a bona fide religious, nonprofit cemetery in the State and does not sell preneed goods is exempt from the registration and permitting provisions of the Maryland Cemetery Act. Except for a cemetery in which no burials have taken place within the previous five years, a bona fide religious, nonprofit cemetery that is exempt from the Act must file with the Office of Cemetery Oversight once every two years a statement that includes the name and address of: (1) the cemetery; (2) the religious organization that owns and operates the cemetery; and (3) the individual who is responsible for the oversight of the cemetery. The registration requirements for bona fide religious, nonprofit cemeteries that sell preneed goods are effective October 1, 1999.
House Bill 1031 (passed) exempts all bona fide religious, nonprofit cemeteries, whether or not they sell preneed goods, from the registration and permitting requirements of the Maryland Cemetery Act. The bill also repeals uncodified language that generally delayed the effective date of the registration requirements for such cemeteries until October 1, 1999.
Cigarette Regulation
In the "gray market", dealers buy cigarettes from foreign dealers at lower prices than the dealers would pay domestically. Foreign exporters get higher prices from the gray marketers than from their local customers. American consumers can buy the reimported cigarettes at a lower price than domestic cigarettes if wholesalers and retailers pass along the savings. The gray market injures states involved in the national tobacco settlement because the settlement payments are tied to domestic cigarette sales which do not include the reimported cigarettes. Wholesalers and retailers dealing exclusively in U.S. cigarettes lose because their customers are purchasing this cheaper alternative. In addition, smokers face risks from the imported cigarettes because the cigarettes are stronger and more dangerous because they generally contain more tar, nicotine, or other chemicals. According to some tobacco distributors, their sales have dropped 20 percent due to gray market sales.
House Bill 667 (passed) addresses the problems of the gray market. The bill prohibits a person from shipping, importing, or selling into, or within this State, any brand of cigarette unless that person: (1) is the owner of the brand; (2) is the United States importer for the brand; or (3) is a designated agent in Maryland of the owner or United States importer of the brand; and (4) holds any cigarette license required by law.
The bill requires a person who ships, imports, or sells cigarettes into or within this State to comply with federal and State requirements concerning the placement of warning labels or other required information on the containers or individual packages of cigarettes and to ensure that the containers or individual packages do not contain any information or markings that are false, misleading, or contrary to federal and state trademark and tax laws. A person who ships, imports, or sells cigarettes into or within this State in violation of this bill is subject to disciplinary action by the Comptroller. In addition, a person who willfully ships, imports, sells into or within, or transports cigarettes within this State in violation of this bill or Title 12 of the Tax - General Article of the Annotated Code is guilty of a felony and on conviction is subject to a fine not exceeding $50 for each carton of cigarettes transported or imprisonment not exceeding two years or both.
Heating, Ventilation, Air-Conditioning, and
Refrigeration Contractors
Under current law, the State Board of Heating, Ventilation, Air-Conditioning, and Refrigeration (HVACR) Contractors is authorized to issue master, master restricted, limited, journeyman, and apprentice HVACR licenses to qualified applicants. House Bill 1003 (passed) creates a journeyman restricted license to be issued to individuals to provide HVACR services under the direction and control of a licensed HVACR contractor in only one of the following areas: heating - forced air systems, heating - hydronic systems, ventilation, air-conditioning, or refrigeration.
The bill requires an applicant for a journeyman restricted license to have held an apprentice license for at least three years, to have completed at least 1,875 hours of training in providing forced air heating, hydronic heating, ventilation, air-conditioning, or refrigeration services under the direction and control of a licensed HVACR contractor, and to pass an examination administered by the Board. The Board is required to issue a journeyman restricted license without an examination to an individual who has successfully completed an applicable HVACR apprentice program approved by the Apprenticeship and Training Council. In addition, a journeyman restricted licensee is not required to obtain separate insurance while providing HVACR services under the control and supervision of a master, master restricted, or limited licensee.
Home Improvement Contractors
Senate Bill 51 (Ch. 24) repeals the authority of the Maryland Home Improvement Commission (MHIC) to issue temporary contractor, subcontractor, and salesperson licenses. Under current law, the executive director of MHIC is authorized to issue a temporary contractor, subcontractor, or salesperson license to an applicant who submits a proper application for the license and pays the required fee. According to MHIC, the temporary license system was set up: (1) to accommodate applicants who were unable to meet financial solvency requirements or pass the licensing examination; and (2) because the testing process was considered cumbersome. MHIC believes that the authority to issue temporary licenses is no longer needed because the testing and licensing process has been streamlined considerably. In addition, MHIC has not issued any temporary licenses in over 12 years.
Established in 1985, the Home Improvement Guaranty Fund provides compensation to homeowners for losses due to poor workmanship caused by licensed home improvement contractors. A limit of $50,000 on the maximum award that can be paid from the fund on behalf of one contractor has been in effect since the fund was established. To provide more protection for homeowners in the few cases in which justified claims from the fund exceed $50,000, Senate Bill 53 (passed) increases to $100,000 the maximum amount that may be awarded to all claimants for the acts or omissions of one contractor. The maximum award is limited to $100,000 unless, after the Commission has paid out $100,000, the contractor reimburses $100,000 to the Home Improvement Guaranty Fund. This bill has no effect on the policies and procedures of the Department of Labor, Licensing, and Regulation in determining the financial solvency of a home improvement contractor.
The Maryland Home Improvement Commission recognizes over 80 categories of work that qualify as home improvements for the purposes of requiring licensure by the Commission. Under the law, the definition of "home improvement" excludes:
House Bill 1045 (passed) alters the definition of "home improvement" to exclude shore erosion control projects, as defined in the Natural Resources Article, for a residential property. Shore erosion control projects include the erection or placement of bulkheads, groins, or other erosion control devices in order to halt or retard erosion of shorelines.
IN GENERAL
Public Service Commission Personnel and Funding
In the last several years, the Public Service Commission has lost many of its experienced employees. A recent salary survey revealed that the commission pays its senior employees less than every state and federal commission in the region. Senate Bill 171/House Bill 1012 (both passed) allow the commission to design a classification and compensation system tailored to the specific needs of the public utilities industry.
The bills provide that all commission personnel in the management service and the professional service are special appointments, as are all commission accountants, auditors, and engineers in the skilled service of the State Personnel Management System. Senate Bill 171/House Bill 1012 allow the commission to determine the compensation for these employees as well as special appointment attorneys in the Office of General Counsel. The bills give the commission authority to alter position classifications and salary ranges, subject to review by the Secretary of Budget and Management.
The funding mechanism for the commission requires the commission to assess a user fee on each public service company in the State, which is paid into the General Fund. The annual budget of the commission, and certain funding for the Office of People's Counsel, are then determined based on the amount of user fees paid into the General Fund.
Under Senate Bill 171/House Bill 1012, the commission will become a specially funded unit. Public service companies' assessments will be divided, with one portion to be paid into the General Fund for the costs and expenses of the Office of People's Counsel, and the remainder to be paid into the Public Service Commission Fund for the costs and expenses of the commission. The annual limit on gross assessments paid to the fund for the use of the commission is $10 million. Based on the current budget allowance of $9 million for the commission, and the commission's existing proposal to increase salaries for critical employee classifications by 6%, the expected annual fees to be paid into the fund are $9.2 million for fiscal 2001.
Higher Education Facilities
In this changing environment of restructuring and deregulation, the regulated status of institutions that provide their own utility services may be open to question. Without a clear legislative statement to the contrary, public institutions of higher learning might be considered public service companies subject to regulation by the Public Service Commission. Senate Bill 560 (passed) clarifies the status of these institutions that provide their own electricity or steam heating, stating that neither they nor their contractors or lessees are public service companies that are subject to the commission on account of owning, managing, or maintaining electric or steam generation or distribution facilities. The University of Maryland, College Park is currently replacing its energy infrastructure by allowing the Maryland Economic Development Corporation to finance the costs through the issuance of bonds and to operate the system through a private operator.
ELECTRIC UTILITIES
A holding company structure allows for the division of regulated and unregulated activities among separate subsidiary corporations of the holding company. Under former law, enacted in 1913, public service companies incorporated in Maryland were prohibited from forming holding companies. In order to afford more flexibility to Maryland public service companies in responding to deregulation and restructuring, Senate Bill 65/House Bill 3 (Chs. 2 and 1) allow Maryland public service companies to form holding companies through a corporate reorganization involving an exchange of stock.
At the time of enactment, Maryland was the only state that still prohibited its public service companies from forming holding companies. The Baltimore Gas and Electric Company (BGE) is the only remaining electric company operating in the State that is incorporated in Maryland. The Acts do not alter BGE's status as a public service company subject to the jurisdiction of the Public Service Commission. Existing commission regulations and orders governing affiliate transactions and the allocation of revenues among regulated and unregulated activities still apply to BGE, any holding company that it forms, and any affiliates that are created under the holding company.
The holding company structure allows a public service company access to capital through bond and stock offerings for unregulated affiliates without prior review and approval by the commission. This affords the public service company and its holding company greater flexibility and speed to react to changing market conditions, making the entity more competitive and responsive in restructured and deregulated utility arenas.
Restructuring of the Electric Utility Industry
After several years of debate in the legislature and in regulatory circles, the General Assembly enacted legislation to restructure the electric utility industry in Maryland. Senate Bill 300/House Bill 703 (Chs. 3 and 4) phase in customer choice for all investor-owned utility customers between 2000 and 2002, together with customer protections, a new universal service program for low-income customers, and environmental protections that address a restructured electric framework.
To date, 18 states have chosen to deregulate with legislation and several others have regulations in place. As a result, there is pressure on the remaining states to allow their locally based utilities and businesses to compete and benefit from a deregulated electricity generation market. Maryland's neighbors, Pennsylvania, Delaware, New Jersey, and Virginia, have each enacted legislation on this issue.
Moreover, Congress has re-opened the debate on several electricity deregulation bills recently. Most Congressional approaches would grandfather existing state laws on electricity deregulation. If electric deregulation legislation is enacted at the federal level, states prefer developing their own approaches, responding to their own local needs, rather than allowing the federal government to preempt State regulation and impose deregulation on a national model.
The primary feature of the electric utility industry restructuring is the introduction of customer choice. Unlike the current system in which a customer may only purchase electricity generated or otherwise supplied by the electric company that has a franchise to operate in the customer's service territory, customer choice allows the customer to purchase electricity generated by other sources, and have the electricity delivered over distribution lines of the local electric utility. Under Senate Bill 300/House Bill 703, however, a customer is not required to purchase electricity from another generator. The customer has the option to remain with the current supplier, under the "standard offer service," as described below.
Under Senate Bill 300/House Bill 703,
residential electric customers of investor-owned utilities will be offered customer choice
as follows:
For electric cooperatives, all customers will have access to customer choice by July 1, 2003. Municipal utilities may choose to allow customer choice for their customers, on a separate schedule to be adopted by the commission.
The commission may alter the implementation schedule within specified guidelines.
The Acts provide two comprehensive mechanisms to protect regulated rates for electric customers during the transition to electric restructuring, a rate cap and a mandated rate reduction. First of all, Senate Bill 300/House Bill 703 require a four-year rate cap for all customer classes of each electric company, starting on the first day that customer choice is available in the electric company's service territory. The cap includes any allowed transition costs that utilities may be allowed to collect and any fees for universal service.
For residential customers of investor-owned utilities, there is also a mandated four-year rate reduction beginning July 1, 2000. This rate reduction will be between 3% and 7.5% of base rates as measured on June 30, 1999. The commission will allocate the rate reduction among generation, transmission, and distribution components of residential electric rates, thereby allowing some of the reduction to benefit customers who choose a different generation supplier as well as those who remain with standard offer service. In achieving the rate reduction, the commission may consider a variety of factors.
Under the Acts, "standard offer service" is
electricity supply purchased from the electric company that distributes electricity to the
customer. Until July 1, 2003, each electric company must offer standard offer service to a
customer who does not choose a new electricity supplier, has not been offered customer
choice, contracts for outside electricity supply that is not delivered, or has been denied
service by an electricity supplier. After July 1, 2003, if the electricity supply market
is not competitive or the commission has received no acceptable competitive proposal for
supplying standard offer service, the commission shall extend the obligation to serve at a
market price that allows the electric company to recover verifiable, prudently incurred
costs to procure or produce the electricity plus a reasonable return.
Whether or not an electric company forms a holding company
under Senate Bill 65/House Bill 3 discussed above, Senate
Bill 300/House Bill 703 require each electric company to implement
functional, operational, structural, or legal separation between the electric company's
regulated and unregulated businesses or unregulated affiliates by July 1, 2000.
One of the most complex issues in enacting electric utility industry restructuring has been the issue of how to treat transition costs or benefits, the difference between the book value and market value of an electric company's generation assets, subject to adjustments for reasons of public policy. Although Senate Bill 300/House Bill 703 may allow an electric company an opportunity to recover certain prudently incurred transition costs, it may only do so under a commission-approved transition plan, developed in accordance with fact-finding and evidentiary proceedings, and subject to full mitigation.
If approved by the commission, an electric company with verified recoverable transition costs may institute a competitive transition charge that applies generally to customers located in the electric company's service territory. There is an exemption for customers with on-site electric generation under certain circumstances.
Under the Acts, an electric company may transfer any of its generation facilities or generation assets to an affiliate, but the transfer may not affect or restrict the commission's determination of the value of a generation asset for purposes of transition costs or benefits.
Senate Bill 300/House Bill 703 require the commission to consider, in determining transition cost relating to investment in a generation asset, the following factors:
The current regulatory structure provides little assistance to the low-income other than a few federally funded programs. The bills create a statewide program to assist low-income households with their electric energy needs. The purpose of this universal service program is to help these households with bill assistance, energy conservation measures, and retirement of arrearages in existence as of July 1, 1999. The Department of Human Resources will be responsible for administering the program through the Maryland Energy Assistance Program.
Funding for the universal service program is set at $34 million a year for the first three years. Any funds not expended will go back to ratepayers. All customers will contribute to the funding of the universal service program through a charge collected by each electric company. Statewide, the Acts require the initial funding to be borne $24.4 million by the industrial and commercial customer classes, and $9.6 million by the residential customer class. Starting in the fourth year, the commission will recommend universal service program charges on an annual basis, subject to review and approval by the General Assembly.
The General Assembly has recognized that the key to success of customer choice is consumer education. Experience in other states suggests that major industrial and commercial enterprises have little difficulty in obtaining and evaluating information on available electricity options. However, residential customers and small commercial customers typically have had a more difficult time obtaining accurate information for comparing different electricity supply options.
Senate Bill 300/House Bill 703 mandate the commission to order each electric company to implement a consumer education program for customer choice at an estimated cost of $6 million for the first year. A board or other group may be formed to administer the program, and must include public members. The Acts require the commission to report to the Governor and the General Assembly by September 1, 1999 and 2000 on recommended funding levels and methods for the consumer education program. The program, which will be in effect until June 30, 2002, must develop and maintain readily understandable information on rates and services for small commercial and residential electric customers, through the Consumer Protection Division of the Office of the Attorney General.
In addition to the four-year rate cap and mandated rate reduction, the Acts establish new consumer protection measures appropriate for a restructured environment. On the analogy of telecommunications services, Senate Bill 300/House Bill 703 prohibit electricity suppliers from making unauthorized changes in a customer's electricity supplier or service options. The Acts prohibit racial and other discrimination as well as redlining. Any electricity supplier who does business in the State must be licensed by the commission, and will be subject to disciplinary action for violations of the Acts.
In order to assist electric customers in selecting electricity generation based on environmental and cost criteria, each electricity supplier must disclose to its customers every six months, in a uniform manner, information about the fuel mix and associated emissions for the electricity purchased by customers. The commission may require an electric company or an electricity supplier to provide documentation supporting the disclosures.
Senate Bill 300/House Bill 703
require the commission to develop regulations to protect consumers, electric companies,
and electricity suppliers from anti-competitive and abusive practices. The Acts allow the
commission to require electric bills to include the identity and phone number of the
electric supplier, sufficient information to evaluate prices and services, and information
identifying whether the price is regulated or competitive.
In addition to the required disclosure of an electricity supplier's fuel mix and emissions profile, Senate Bill 300/House Bill 703 establish a number of environmental protection measures. The Acts require the commission, in consultation with the Maryland Department of the Environment (MDE), to adopt appropriate measures to maintain environmental standards, adapt existing programs, and develop new programs as appropriate to ensure compliance with federal and State environmental protection standards.
The Acts require an investor-owned electric company to continue to provide at least the same percentage of electricity from available renewable energy resources, at a reasonably comparable cost, as the electric company provided in 1998. In addition, electric companies in the State must conduct a study that tracks shifts in generation and emissions as a result of restructuring the electric industry. This study must be submitted to MDE and the commission one year after the initial date of implementation of customer choice. If necessary, in consultation with the commission, MDE shall study the appropriateness, constitutionality, and feasibility of establishing an air quality surcharge.
On or before February 1, 2001, the commission, in consultation with the Maryland Energy Administration, shall report to the General Assembly on demand-side management programs and funding. In determining whether a program or service encourages and promotes the efficient use and conservation of energy, the commission must consider criteria specified in the Acts.
The Acts require competitive billing and metering services
to be available on a set schedule. These services may allow an electricity supplier to
combine electricity services with energy conservation measures and other services.
Competitive billing in a local jurisdiction that has a local energy tax may only be
available in accordance with requirements of the local jurisdiction, which may include
licensing by the jurisdiction.
Several of the provisions of Senate Bill 300/House Bill 703 dealing with low-income assistance and environmental protection first appeared in Senate Bill 557/House Bill 578 (both failed). Although these bills failed, they brought several critical issues to the attention of the General Assembly.
One other issue that has been addressed in California and
a few of the other states that have restructured is the securitization of stranded costs. Senate
Bill 705/House Bill 1055 (both failed) would have provided a mechanism for
creating and perfecting securities based on transition costs arising from the electric
utility industry restructuring.
One of the most electricity-intensive industries in the State is aluminum smelting. The Alcoa Eastalco Works in Frederick County has a contract with its local electric utility, Allegany Power, under which Allegany may require Eastalco either to reduce its load or purchase power that Allegany acquires on the spot market in order to avoid a shortage. House Bill 1178 (passed) allows Eastalco to purchase electricity on the open market from the effective date of the bill through December 1, 2000 during on-peak periods when Allegany is purchasing this supplemental power. The bill allows Eastalco to plan for these on-peak periods when purchasing on the spot market can result in significant price increases. At these times, Eastalco could purchase from its own affiliate that generates electricity. This industrial customer uses about 2 billion kilowatt hours of electricity annually.
Under Senate Bill 300/House Bill 703, the availability of electric customer choice was made contingent on the enactment of legislation by the General Assembly to restructure Maryland taxes to address the State and local tax implications of restructuring the electric utility industry. To address the tax issues associated with electric competition, the General Assembly enacted Senate Bill 344/House Bill 366 (Chs. 5 and 6), satisfying the contingency under Senate Bill 300/House Bill 703. Senate Bill 344/House Bill 366 generally provide property tax relief for electric generation facilities in the State and replace the gross receipts tax on revenues from sales of electricity and gas with a tax based on kilowatt hours of electricity or therms of natural gas delivered for final consumption in the State. The bills also impose the income tax on electric and gas utilities, among other changes. See, the discussion of Senate Bill 344/House Bill 366 in Part B - "Taxes", Subpart "Miscellaneous Taxes" of The 90 Day Report.
Solar Generation
To promote environmentally responsible electricity generation, the General Assembly enabled homeowners and farmers through 1997 legislation to install net energy metering in connection with solar electricity generation. Net energy metering allows the user to be billed and pay for only the net electricity that the user purchases from the local electric utility, offset by the electricity that the user has generated on-site. Senate Bill 271 (passed) allows public and private schools and educational institutions as well to use net-energy metering, and generate electricity on-site using a solar-electric generating system.
GAS UTILITIES
Senate Bill 28 (passed), increases the civil penalties that the Public Service Commission may assess against a gas company or gas master meter operator that violates a commission safety standard or regulation. Instead of the current limit of $10,000 per violation per day, and $500,000 for a related series of violations, Senate Bill 28 allows the commission to assess any civil penalty that does not exceed maximum penalties under the Federal Natural Gas Pipeline Safety Act.
STEAM HEATING COMPANIES
Steam heating companies manufacture, sell, or distribute steam for use or sale. Steam heating as a public utility service was originally regulated as one of the monopoly services provided by the Baltimore Gas and Electric Company (BGE). Throughout most of this century there has been only one steam heating and cooling company in the State. In 1985, BGE sold its steam heating service to a predecessor of Trigen Energy, Inc., now the sole regulated steam heating company in the State. Steam heating competes with other forms of heating, including hot water, electricity, gas, and oil.
Senate Bill 236/House Bill 126 (both passed) eliminate the jurisdiction of the Public Service Commission over steam heating companies. In order to provide some protection for existing customers of regulated steam heating, the bills require the formerly regulated steam heating company to be bound by the rate structure in effect on September 30, 1999 as a maximum, and to notify its customers of the provisions of these bills. A customer who alleges that the steam heating company has violated the bills may file a written complaint with the Consumer Protection Division of the Office of the Attorney General. The Division may proceed with the complaint under the Consumer Protection Act, Title 13 of the Commercial Law Article.
TAXI AND FOR-HIRE DRIVING SERVICES
Criminal History Records Checks
Under Chapter 705 of the Acts of 1997, the Public Service Commission was required to obtain a criminal history records check for each initial applicant for a for-hire driver's license. These are drivers of sedan services as well as taxicab drivers licensed by the commission. In order to clarify the applicable procedures for obtaining a criminal history records check from the Criminal Justice Information System (CJIS), Senate Bill 69 (passed) incorporates standard CJIS practices into the for-hire driving statute. The legislation includes notification to the commission and the subject of the records check if the record is updated after the initial records check is made. Senate Bill 69 includes procedures for the subject to contest the contents of the records check. It also requires the commission periodically to verify a list of licensed for-hire drivers. Finally, the bill explicitly allows the commission to suspend or revoke the for-hire driver's license of a licensee who has been convicted of a crime that bears a direct relationship to fitness to serve the public.
When Chapter 705 of the Acts of 1997 required all for-hire drivers to obtain a license from the Public Service Commission, it encompassed governmental units and not-for-profit agencies that provide transportation along with support services for clients of health and welfare programs. Because these providers are not commercial transporters competing for business of the general public, they are not the type of entity normally regulated by the commission as a utility service, with rate-of-return regulation and an exclusive service territory. House Bill 318 (passed) eliminates the need for these transportation providers to obtain a for-hire driver's license from the commission.
However, due to increased public concerns over the character and background of individuals serving the elderly and others with special needs, House Bill 318 requires drivers that are employed by governmental units and not-for-profit agencies providing support services transportation to obtain a criminal history records check from CJIS. Consistent with Senate Bill 69, CJIS will provide updated information to the governmental units and not-for-profit agencies and their drivers.
House Bill 318 does not affect existing requirements for obtaining a motor carrier permit that may otherwise apply to a governmental unit or not-for-profit agency, nor does it exempt drivers who provide other for-hire driving services from the requirement to obtain a commission license.
TELEPHONES AND TELECOMMUNICATIONS
Slamming and Cramming
As the number of long-distance telephone providers has increased following the breakup of the Bell System, and the federal Telecommunications Act of 1996 has encouraged competition in all telephone services, consumer complaints about telephone providers have increased. In particular, some providers have been known to switch a customer's long distance service, or to add unwanted options to the customer's service for a charge. These practices, known respectively as "slamming" and "cramming", have come under federal and State legislative and regulatory scrutiny. In particular, resellers of telephone services have come under fire for slamming and cramming, in hearings on Capitol Hill and throughout the country. The issue is complicated by the overlapping jurisdictions of the Federal Communications Commission (FCC) and State utility regulators over long-distance telephone and telecommunications services. Also, another practice involving the switching of a customer's billing arrangement, known as "jamming", has begun to occur.
In an effort to strengthen State oversight of telecommunications services under the jurisdiction of the Public Service Commission, and to prohibit slamming, cramming, and jamming Senate Bill 299/House Bill 960 (both passed) explicitly require resellers of telecommunications services to obtain authorization from the commission to provide service in the State. The bills prohibit a telephone company or a reseller from switching a customer's telecommunications provider, service options subject to a charge, or billing arrangements except in compliance with federal and State law and regulations. Senate Bill 299/House Bill 960 require a telecommunications provider that makes one of these changes for a customer to provide conspicuous notice to the customer that the change was made. In accepting change orders, a telecommunications provider may not discriminate in favor of one or another provider.
To address specific instances of slamming, cramming, and jamming the Public Service Commission may require a telephone company or reseller to offer a hold order or freeze, under which a customer may direct the company not to make any change in service provider, service options, or billing arrangement without express authorization from the customer.
Commission regulations must be consistent with FCC provisions. The commission may exercise all of its authority in enforcing this legislation. In particular, the commission may order payment of reparation to a customer or another telecommunications provider, and may impose a civil penalty for violations of this legislation, regulations adopted under this legislation, or corresponding federal law or regulations. Consistent with the commission's existing authority, civil penalties are general funds.
Taxation of Telecommunications
One consequence of telecommunications reform has been the widespread availability of prepaid telephone calling cards and related calling arrangements. Under current law, the State has taxed the underlying telephone service that the cards and arrangements represent, using the 2% gross receipts tax. This has required telecommunications providers to track the usage of services through these cards and arrangements, which may be quite fragmented.
Senate Bill 726/House Bill 1130 (both passed) impose the 5% State sales tax on these cards and arrangements at the time of sale, instead of the gross receipts tax at time of use. This is a much simpler means of taxing what the consuming public now regards as a tangible good rather than a right to obtain regulated service. Maryland joins at least 22 other states that have switched to a sales tax from a gross receipts tax on prepaid telephone calling cards and arrangements. In the process, the State expects to realize nearly $2 million in new general and special fund revenues each year based on the difference in the respective tax rates. Senate Bill 726/House Bill 1130 take effect January 1, 2000, to coincide with the gross receipts tax year.
The federal Telecommunications Act of 1996 requires television stations to phase in broadcasting of digital signals, beginning in 1999 and proceeding through 2006. Compliance with the federal Act involves replacing a significant portion of television broadcast equipment, and may impact radio stations that use common broadcasting facilities with television stations. Because of these significant expenditures, House Bill 1131 (failed) would have granted a ten-year exemption from the sales and use tax for machinery or equipment used by television and radio stations to comply with the federal Act.
For a more complete discussion of taxation of telephone, telecommunications, and other utility services, see Part B - "Taxes", Subparts "Sales Tax" and "Miscellaneous Taxes", of The 90 Day Report.
Use of Public Rights-of-Way
The increase of new telecommunications service providers spawned by the federal Telecommunications Act of 1996 has created new demand for placing their facilities in public rights-of-way. Local governments across the country have reacted by imposing new fees and taxes on private users of public rights-of-way, and by requiring elaborate conditions and exactions for local telecommunications franchising. This, in turn, has increased public discussion of the traditional and appropriate roles of local, state, and federal governments in regulating the use of public property by private entities for an indirect public benefit. Senate Joint Resolution 10 (failed) would have established a Task Force to Study Use of Public Rights-of-Way. The Task Force would have reviewed current law and court decisions, studied the impact of use of public rights-of-way on local roads and the rights-of-way, considered equities and reimbursement strategies, and forwarded recommendations for the 2000 Legislative Session.
PROPERTY AND CASUALTY INSURANCE
Regulation of Insurance Products Issued by Motor Vehicle Rental Companies
Due to disputes in 1997 as to whether motor vehicle rental companies are authorized under law to offer or sell insurance policies, Chapter 746 of 1998 was enacted to temporarily allow the motor vehicle rental companies to continue these activities until a permanent solution was in place.
Under the temporary provisions, a rental company may offer or sell an insurance policy if: (1) the policy has been filed and approved by the Commissioner and issued by an authorized insurer; (2) the rental company provides to each renter covered by a rental company's policy disclosures approved by the Commissioner; (3) the rental company files with the Commissioner a list of the approved policies to be offered to renters; and (4) the rental company employs or contracts with a qualified agent for property and casualty insurance who must review the policies, develop a training program for the employees of the rental company, review disclosures available to consumers, and perform any other duties that the Commissioner may require. The rental company or its employees may not advertise, represent, or otherwise hold itself out as an authorized insurer, reinsurer, agent, or broker.
Chapter 746 of 1998 required the Commissioner to conduct a study of current industry practices and other states' regulation of rental car companies. A report was presented to the General Assembly in November 1998. Senate Bill 511/House Bill 372 are the result of the recommendations of that study. Senate Bill 511/House Bill 372 extend the termination of Chapter 746 of 1998 from May 31, 1999 until December 31, 1999.
Effective January 1, 2000, Senate Bill 511/House Bill 372 (both passed) require a motor vehicle rental company to hold a special restricted certificate of qualification before the company or its employees may sell or offer policies of insurance to a renter in connection with a rental agreement. The certificate of qualification authorizes a rental company to offer or sell insurance policies that are: (1) in excess of or optional to the coverages required under Title 17 of the Transportation Article and related regulations; and (2) for bodily injury liability, property damage liability, uninsured motorist insurance, and other coverage approved by the Insurance Commissioner. Under the bill, a policy sold in connection with the rental of a motor vehicle is primary to any other valid and collectible coverage, except for the insurance limits mandated under § 17-103(b) of the Transportation Article.
Senate Bill 511/House Bill 372 require the Commissioner to issue to a rental company, or its franchisee, a certificate of qualification if the rental company pays the required fees, submits to the Commissioner any additional information or documentation required by the Commissioner, and meets certain requirements, including: (1) filing approved policies with the Commissioner; and (2) providing a training program for employees who offer, sell, or solicit insurance policies. Prior to completing the rental transaction, the rental company must provide the renter with disclosures approved by the Commissioner that: (1) summarize the material terms of coverage clearly and correctly; (2) identify the authorized insurer or insurers; (3) specify that the policies offered by the rental company may provide duplication of coverage; and (4) specify that the purchase of an insurance policy from the rental company is not required in order for the renter to rent a vehicle.
Under Senate Bill 511/House Bill 372, a rental company with a certificate of qualification is not required to treat premiums collected from a renter as funds received in a fiduciary capacity if: (1) the insurer has consented in a written agreement signed by an officer of the insurer that the premiums do not need to be segregated from other funds; and (2) the charges for insurance coverage are itemized, but not billed, separately.
Senate Bill 511/House Bill 372 permit the Commissioner to suspend, revoke, or refuse to renew a certificate of qualification, after notice and opportunity for a hearing, under certain circumstances. Instead of or in addition to suspending or revoking a certificate, the Commissioner may impose on the rental company a penalty between $100 and $2,500 for each violation of the subtitle. The Commissioner may also require that restitution be made to any person who has suffered financial injury because of a violation.
Finally, the bills require the Commissioner to report to the Senate Finance Committee and the House Economic Matters Committee by February 15, 2002, on the types of employee compensation and incentive packages used by motor vehicle rental companies, during the two years following the enactment of the bill.
Residential Property Insurance
House Bill 44 (passed) requires each insurer in Maryland to file annually with the Maryland Insurance Administration data about the amount of the residential property premium written by the insurer in the preceding calendar year. The bill is effective January 1, 2000, and sunsets June 30, 2004. Under the bill, "residential property premium" means the direct written premium derived from the sale of residential property insurance policies in a calendar year.
According to the Administration, the data on geographic distribution of residential property insurance premium will provide the Commissioner with information useful for investigating complaints and identifying patterns of behavior by insurers in certain geographic areas of the State. Insurers that sell motor vehicle insurance are currently required to provide the same geographic distribution information. Under current law, geographic distribution data must detail the amount of private passenger premium written by the insurer and by the Maryland Automobile Insurance Fund, and the number of policies represented by that premium in the State as a whole and in Baltimore City. The data must be submitted by each rating territory, each zip code, or both.
Premium Financing
There are currently 100 licensed premium financing companies in Maryland. Much of premium financing business is related to financing the premium for individuals who obtain insurance through the Maryland Automobile Insurance Fund (MAIF). Because MAIF, which collects a full year of premiums in advance, is prohibited by law from financing premiums or accepting premiums on an installment basis, most MAIF policyholders finance their premiums through a premium finance company.
Senate Bill 370 (passed) prohibits an insurer that markets through independent agents from: (1) refusing to issue a policy if premiums are received by a premium finance company that is not affiliated with the insurer; (2) requiring an insured to use a particular premium finance company; and (3) discriminating against an agent, broker, or insured that uses premium financing by denying the same rights accorded to other agents, brokers, or insured who pay premiums in a different manner.
Senate Bill 370 applies these prohibitions to all types of insurance, while current law only applies them to commercial automobile, fire, or liability insurance. For personal lines automobile insurance, if the independent agent has a direct or indirect ownership interest in a premium finance company, the bill requires the agent to provide a disclosure to the insured comparing the costs and terms of premium financing with the insurer's alternative payment plan.
Prohibited Terminations and Refusals
Senate Bill 523 (passed) prohibits an automobile liability insurer or homeowner's insurer from canceling, refusing to renew, or refusing to underwrite an automobile or homeowner's insurance policy because of a claim that occurred more than three years before the effective date of the policy, renewal, or application. The limitation on using a prior claim does not apply if a claim involved a conviction of the insured or applicant for fraud or arson.
Motor Vehicle Liability Insurance
House Bill 1032 (passed)
increases from $10,000 to $15,000 the minimum property damage coverage required on all
automobile liability insurance policies. The bill also increases from $10,000 to $15,000
the maximum amount payable from the Maryland Automobile Insurance Fund (MAIF) for
unsatisfied claims for property damage arising from one accident.
Senate Bill 107 (passed) concerns an insurer that issues, sells, or delivers a motor vehicle insurance policy that covers a vehicle that is specially equipped for the transportation of or operation by an individual with a disability. If the policy includes a vehicle rental cost reimbursement provision, the policy must provide a daily rental reimbursement of up to $100 per day, for a maximum of $1,500 per policy period, for the rental of a vehicle equipped similarly to the covered motor vehicle. The insurer may charge an appropriate premium for this coverage.
LIFE INSURANCE
Group Life Insurance
Senate Bill 461/House Bill 729 (both passed) broadly revise current statutory language related to the issuance of group life insurance policies. The bills generally conform Maryland law regarding the issuance of group life insurance policies to the National Association of Insurance Commissioners (NAIC) model.
The bills expand the availability of group insurance, which is often more affordable, by: (1) increasing the categories for permissible groups; (2) removing certain limitations on permissible participants; (3) eliminating certain contribution requirements for employer, union, and other group policyholders; and (4) eliminating certain minimum participation requirements for the establishment and sale of group insurance. The bills provide increased flexibility for employees, union members, and participants to select the amount of insurance appropriate to their needs. Lastly, the bills allow for continuity in the state approval process because many group policies are sold to large multi-state employers, unions, and other associations.
The one deviation from the NAIC model occurs in the change to current Maryland law (which is similar to current NAIC model language) regarding the limit on a spouse's or dependent's ability to obtain coverage. Currently, a spouse or dependent may obtain coverage for 50 percent of the amount held by the employee/primary insured; Senate Bill 461/House Bill 729 allow a spouse or dependent to obtain 100 percent of the coverage held by the employee/primary insured.
Preneed Burial Contract and Pre-Need Contracts
A "preneed burial contract" is a written contract with a registered cemetarian under which preneed goods or preneed services are to be sold and delivered or performed. A "pre-need contract" is made by a licensed mortician or funeral director prior to the time of the buyer's death for goods and services regarding the final disposition of the buyer's body after death.
Senate Bill 578/House Bill 425 (both passed) authorize preneed burial contracts and pre-need contracts to be funded with life insurance policies or annuity contracts with certain requirements: (1) the seller (mortician, funeral director, surviving spouse, or owner or operator of a cemetery) is not the owner of or the beneficiary under the policy or annuity contract; (2) the assignment of benefits may be revoked by the owner of the policy or annuity contract; (3) the seller must accept the benefits payable under the policy or annuity contract as payment in full for the services and merchandise agreed to in the contract; (4) benefits payable in excess of what is needed to pay for the services and merchandise are paid to the beneficiary; and (5) a contract that is funded by a policy or annuity contract terminates if the owner revokes or transfers the assignment of benefits.
Preneed burial contracts and pre-need contracts, if funded by life insurance or annuities, are not subject to escrow requirements governing the deposit of preneed funds.
MISCELLANEOUS INSURANCE ISSUES
Holocaust Victims - Inheritance and Income Tax - Insurance Policies
Senate Bill 229/House Bill 177 (both passed) create an income tax subtraction modification for: (1) income related to recovered Holocaust assets; and (2) reparation/restitution payments made to a Holocaust victim, or the victim's spouse or descendant. The bills also create an exemption against the State inheritance tax for such assets and distributions. The exclusion from the State income tax and inheritance tax includes interest on the proceeds receivable on specified insurance policies. Current law would subject the income related to the recovered assets of Holocaust victims and the distribution of those assets to the income tax and the inheritance tax.
Senate Bill 229/House Bill 177 require the Insurance Commissioner to provide a toll-free telephone number to assist Holocaust victims seeking to recover proceeds from an insurance policy as a result of an occurrence arising between January 1, 1929 and December 31, 1945. The Commissioner must report to the Governor and the General Assembly based on reports relating to insurance policies issued to Holocaust victims and any claims filed under those policies that are reported to the Commissioner. An insurer is subject to monetary penalties for violating specified provisions of the bill.
Insurance Commissioner
Chapter 112 of the Acts of 1998 requires health insurers, nonprofit health service plans, dental plan organizations, and health maintenance organizations to establish an internal grievance procedure for their enrollees. Except in certain cases, the carrier's internal grievance process must be exhausted before a complaint may be filed with the Commissioner. The Commissioner may make a decision on a question of medical necessity when a carrier determines that a health care service is not medically necessary, appropriate, or efficient.
Under current law, a demand for a hearing stays an order of the Commissioner pending the hearing and an order resulting from it if the Commissioner receives the demand before the effective date of the order or within 10 days after the order is served. These provisions do not apply, however, to an action taken or proposed under an order resulting from a hearing or based on impairment of assets or unsound financial condition of an insurer.
House Bill 1019 (passed) adds an exception to the instances in which a demand for a hearing stays an order of the Insurance Commissioner. If the Commissioner takes or proposes an action under an order resulting from a final decision on an emergency case under the appeals and grievances process, the order cannot be stayed pending a hearing.
Financial guaranty insurance insures timely payment of principal and interest on financial instruments, such as municipal bonds and asset-backed securities, which are generally payable over a long period of time. Should the insurance need to kick in from a missed payment, the insurer would only pay the missed payment and not the full amount at once as is the case for property and casualty or life insurance. Therefore, the risk and reserve requirements can be different for financial guaranty insurance, as determined by the Commissioner.
Under current law, an insurer may only retain a risk on any one subject of insurance in an amount that does not exceed 10 percent of the insurer's capital and surplus to policyholders.
Senate Bill 679/House Bill 919 (both passed) provide that the Insurance Commissioner may establish by regulation limits on the risk retained by an insurer for a subject of financial guaranty insurance, including requirements for contingency reserves used in determining compliance with the established limits.
Regulation of Insurance Agents
Under current law, certification as an agent or broker for life or health insurance requires an applicant to be of good character and trustworthy and, before taking an examination, completion of at least 60 hours of study and instruction as required by the Maryland Insurance Administration. Senate Bill 31 (passed) provides the same requirements for life and health agents and brokers that are currently provided for agents and brokers in the property and casualty area.
Specifically, Senate Bill 31 provides that an applicant for qualification as an agent or broker for life or health insurance, annuities, nonprofit health service plans, dental plan organizations, or health maintenance organizations must, for the type of insurance for which the applicant wants to be qualified: (1) successfully complete a program of studies approved by the Administration; (2) have been employed regularly for periods totaling at least one year of the past three years by the Administration or an insurer, agent, or broker; or (3) have been employed regularly for periods totaling at least one year of the three years immediately preceding the date of entering or immediately after discharge from the armed forces by an insurer, agent, or broker in the type of insurance for which the applicant wants to be qualified.
Surplus Lines Insurance
Most surplus lines market is comprised of hard-to-place risks that do not fit the current underwriting guidelines of the standard market due to their unique characteristics and needs. In practice, when insurance agents or brokers cannot find coverage for a unique or high-risk insured in the standard market (e.g., wind damage in Ocean City), they turn to the surplus lines market. Because surplus lines companies are unauthorized insurers, they are able to use unregulated policy forms and premium rates, giving their underwriters more flexibility than regulated authorized insurers in writing these unusual or difficult risks. Although they are not regulated by the Insurance Commissioner, surplus line insurers need to be approved by the Commissioner to offer insurance in the State.
House Bill 1179 (passed) prohibits the procurement of surplus lines insurance to replace coverage on residential property that is insured by an authorized insurer and for which a renewal offer has been made on substantially the same terms and conditions as the current coverage.
FINANCIAL ASSISTANCE TO THE HORSE RACING INDUSTRY
The 1999 legislative session continues several financial relief measures for the Horse Racing Industry that were first enacted during the 1997 Session, and continued in the 1998 Session, as part of a significant financial package provided to the racing industry to improve its viability.
Senate Bill 298 (passed) combines two initiatives that were enacted in the 1998 Session - Chapter 366 and Chapter 519 of the Acts of 1998. The bill continues the distribution of $500,000 from uncashed pari-mutuel tickets to the Maryland Million for marketing, purses, and promotional activities related to the running of Maryland Million races. This provision was originally a component of the 1997 financial package and was scheduled to terminate on June 30, 1999. Senate Bill 298 extends the sunset date to June 30, 2001.
In addition, Senate Bill 298 requires the one-time distribution of $10 million of net fiscal 1999 lottery revenues in excess of $352,175,000 (that would otherwise be paid to the general fund) to a special fund to increase purses at race tracks and to supplement existing bred funds. If the lottery revenues do not provide the $10 million, the Governor may request a deficiency appropriation during the 2000 Session to make up the difference. The distribution of the $10 million to the bred funds and to purses is outlined in the table below. Funds will only be provided to the racetracks if the racetrack licensee submits to the Governor and the General Assembly, by June 15, 1999, a detailed plan for substantial improvements in track facilities, management, and marketing; and the plans have been reviewed by the Legislative Policy Committee and approved by the Governor.
Dedicated Purpose - $10 Million |
|||
Purses (89%) |
Bred Funds (11%) |
||
| Thoroughbred | Harness | Thoroughbred | Harness |
| (70%) | (30%) | (70%) | (30%) |
| $6,230,000 | $2,670,000 | 770,000 | $330,000 |
Finally, Senate Bill 298 authorizes a mile thoroughbred racing license in Allegany County and modifies the number of racing days for which the Maryland Racing Commission may authorize a licensee to conduct thoroughbred racing. A track in Allegany County may be a sending track only on days when the track is licensed to conduct and live races are actually conducted. The Commission may authorize up to the number of days requested by an applicant for a racing license. The bill repeals the current limitations that specified no more than 266 regular racing days (158 per licensee), with the possibility of 80 additional days under certain conditions.
Tax relief for the racing industry was also continued for another year with House Bill 1110 (passed). The bill extends the 0.32 percent State wagering tax rate to June 30, 2000. The rate was scheduled to increase to 0.5 percent after June 30, 1999. Thus, wagering tax revenues would be maintained at their current levels of about $1.8 million for fiscal 2000. In addition, House Bill 1110 provides that any funds remaining in the horse racing special fund be distributed to the Maryland-Bred Race Fund and the Standardbred Race Fund rather than to the General Fund, which decreases General Fund revenues by $1.17 million in fiscal 2000.
OTHER RACING MATTERS - Harness Racing
There are currently two harness racing tracks in the State: Rosecroft Raceway in Prince George's County and Ocean Downs on the Eastern Shore.
House Bill 730 (passed) authorizes the Maryland Racing Commission to award up to the number of racing days requested by an applicant for a harness racing license and repeals the current limitations that specify no more than 310 racing days per licensee and no more than 620 racing days for all licensees.
Senate Bill 446/House Bill 979 (both passed) allow each harness racing track to have a representative on the Maryland Standardbred Race Fund Advisory Committee by eliminating the five-member requirement for the committee and requiring the chair of the Racing Commission to nominate one member to represent each harness racing licensee. Under current law, only one member on the five-member committee represents a harness racing licensee.
LOCAL GAMING REGULATION
In Charles County, a fund-raising organization or educational organization may conduct bingo games for the benefit of charity in Charles County or in furtherance of the purposes of the organization. House Bill 383 (passed) increases the total amount of cash that may be awarded as prize money for bingo in Charles County from $3,500 to $5,000 on any given day of operation. The provision that a single player may not win a cash prize of more than $1,000 in a bingo game in Charles County remains unchanged.
DISTRIBUTION OF REVENUES TO MARYLAND AGRICULTURAL FAIR BOARD
The Horse Racing Special Fund consists of the State share of daily licensee fees, pari-mutuel taxes, impact aid for intertrack betting, money from uncashed tickets, and simulcast betting permits. The Fund is used for operating costs, impact aid, and other purposes such as grants. Senate Bill 122/House Bill 313 (both passed) require that the annual grant from the Horse Racing Special Fund that is paid to the Maryland Agricultural Fair Board to promote State and county agricultural fairs and exhibits be increased from $600,000 to $825,000. As a result, the board's revenues will increase by $225,000 annually beginning in fiscal 2000.
ECONOMIC AND COMMUNITY DEVELOPMENT
NEW ECONOMIC DEVELOPMENT PROGRAMS AND FUNDS
Economic development legislation from the 1999 Session attempted to target areas of the State and businesses whose concerns are not specifically addressed by existing State mechanisms for economic development.
One Maryland Economic Development Program for Distressed Counties
To provide loan assistance to qualified distressed counties for infrastructure projects and improvements, House Bill 5 (passed) creates a Smart Growth Economic Development Infrastructure Fund within the Department of Business and Economic Development (DBED). The bill requires the Secretary of DBED to administer the fund by providing financial assistance to: (1) qualified distressed counties, including Baltimore City; (2) the Maryland Economic Development Corporation (MEDCO) as a co-applicant with a qualified distressed county; and (3) a municipal corporation in a qualified distressed county under certain circumstances.
A qualified distressed county is one which has a local strategic plan approved by the Secretary and for which the average rate of unemployment is greater than 150 percent of the average unemployment rate for the entire State during the same 18-month period or for which the average per capita personal income for the most recent 24-months is 67 percent or less of the average per capita personal income for the entire State during the same period. Based on the definition of "economically distressed county", seven jurisdictions would currently qualify for assistance: Allegany, Baltimore City, Caroline, Dorchester, Garrett, Somerset, and Worcester Counties. House Bill 5 authorizes the Secretary of DBED to make loans to qualified distressed counties for specified types of infrastructure projects, including land acquisition, improvements, and rehabilitation for industrial sites, water and sewer line development, and shell buildings.
In order to qualify, projects must be located in Smart Growth areas. House Bill 5 also requires that an application for a loan from the fund include a marketing plan and a statement of planned marketing expenditures as a percentage of the total loan amount requested, and a site plan consistent with the county's strategic economic development plan. These plans would be required to be approved by the Secretary before a loan from the fund may be approved. If a county did not develop a plan, or developed a plan but did not actively pursue assistance from the fund, the bill authorizes a municipal corporation in that county to receive assistance from the fund. It also authorizes DBED to develop a local strategic economic development plan in consultation with a municipal corporation in a distressed county under those circumstances.
House Bill 5 would target economic development infrastructure funding to those counties with the highest unemployment rates or lowest average per capita personal income in the State. The fiscal 2000 budget includes $10 million in PAYGO general funds to capitalize the fund. The bill is effective July 1, 1999 and sunsets June 30, 2004.
House Bill 5 has a companion bill, House Bill 4 (passed), which creates a tax credit for qualified project costs and a credit for qualified start-up costs for specified categories of businesses that establish or expand business facilities in a "qualified distressed county" when the business activity creates 25 or more new full-time positions. See the discussion under the heading "Income Taxes" Part B - "Taxes" of The 90 Day Report.
Maryland Competitive Advantage Financing Fund
To stimulate the development and expansion of small businesses in the State, Senate Bill 136/House Bill 185 (both passed) create the Maryland Competitive Advantage Financing Fund within DBED. The Fund consists of: (1) appropriations; (2) federal or private contributions; (3) premiums, fees, penalties, interest payments, and principal payments; (4) proceeds from the sale, disposition, lease, or rental of collateral; (5) application or other fees; (6) investment earnings; and (7) moneys from other sources. The Fund may be used to provide financial assistance to eligible applicants and to pay expenses for administrative, actuarial, legal, and technical services for the program. The financial assistance allowed by the bills includes loans, loan guarantees, interest subsidies, and incentives to private lenders or any other financial assistance designed to secure business loans from financial institutions.
The Fund may finance the costs incurred for: (1) the acquisition or construction of a building or real estate; (2) acquisition, construction, or installation of machinery, equipment, furnishings, fixtures, leasehold improvements, or site improvements; or (3) working capital. The amount of financial assistance for each recipient business must not be less than $10,000 or more than $100,000. DBED may set the terms and conditions for loans, loan guarantees, and other financial assistance, although the bill specifies that the term of a loan may not exceed ten years and the applicant must provide at least 10 percent of the total project costs or capital needed. The term for a working capital loan is one to three years.
In addition to the above mentioned requirements, to qualify for assistance from the Fund, a business must have net revenues of less than $1 million annually and employ fewer than 100 full-time employees. The bills also specify the financial assistance application requirements. The bills further establish that projects to be funded are "growth related projects" as defined under the Smart Growth provisions.
DBED must convene and staff a study panel during the 1999 interim which will review the consolidation of DBED's current financing funds and the financing models in use in local jurisdictions of the State. DBED must report on the study panel's findings by December 1, 1999. The fiscal 2000 budget includes $1 million in PAYGO general funds to capitalize the Fund. Senate Bill 136/House Bill 185 are effective July 1, 1999 and sunset June 30, 2001.
Maryland Economic Development Assistance Authority and Fund
As a means to provide financial incentives to businesses that undertake projects that have strong potential to create and/or retain jobs in the State, Senate Bill 134/House Bill 188 (both passed) create the Maryland Economic Development Assistance Authority and Fund. The Fund will provide long-term fixed rate loans to businesses in eligible industry sectors. The nine-member Maryland Economic Development Assistance Authority established by the bill must: (1) establish a list of industry sectors that will be eligible for loans; (2) evaluate requests for loans that have been first evaluated by DBED staff; (3) determine whether to approve loan requests; and (4) set the terms and conditions of loans.
The Fund may consist of: (1) appropriations; (2) federal or private contributions; (3) investment income; (4) repayments of principal and interest from loans; (5) proceeds from the sale, disposition, lease, or rental of collateral related to loans; (6) application or other fees; and (7) any other moneys made available to the Fund. DBED may use the money in the Fund to provide loans to eligible applicants and to pay expenses for administrative, actuarial, legal, and technical services for the program.
Applicants eligible for loans under the program must be either the Maryland Economic Development Corporation (MEDCO) or an individual or business entity that: (1) is primarily engaged in a business in an eligible industry sector; (2) intends to use the Funds for a project that has a strong potential for expanding or retaining employment opportunities in the State; and (3) submits an application containing all information deemed necessary by DBED or the authority. The bill further establishes that projects to be funded are "growth-related projects" as defined under the Smart Growth provisions.
Recipients of the loans may only use the Funds for: (1) acquisition or construction of a building or real estate; (2) acquisition, construction, or installation of machinery, equipment, furnishings, fixtures, leasehold improvements, or site improvements; or (3) working capital. Loans from the Fund may not be less than $250,000 if the Fund balance is less than $10 million. Loans from the Fund may not exceed the lesser of $10 million or 20 percent of the Fund balance. While the authority has the ability to set terms and conditions of loans, the bill sets maximum terms and specifies that the interest rate must be below the market rate of interest. Unless the borrower is MEDCO, the amount of the loan may not exceed 70 percent of the project being financed.
The administration believes that this Fund could be a vehicle for consolidation of its financial assistance funds. DBED must convene and staff a study panel during the 1999 interim which will review the consolidation of DBED's current financing funds and the models in use in local jurisdictions of the State. DBED must report on the study panel's findings by December 1, 1999. The fiscal 2000 budget includes $4.8 million in PAYGO general funds to capitalize the Fund. Senate Bill 134/House Bill 188 are effective July 1, 1999 and sunset June 30, 2001.
CHANGES TO DEPARTMENTAL PROGRAMS
Many of the economic development policy initiatives considered during the 1999 Session involved changes to programs within the Department of Business and Economic Development (DBED).
Enhanced Businesses that Create New Jobs Tax Credit
Senate Bill 779/House Bill 1148 (both passed) provide tax credits to business entities that substantially expand their business in the State. If a business entity meets the specified requirements in the bills, the entity will be granted a local property tax credit equal to 58.5 percent of the amount of property tax imposed on the assessment of the new or expanded premises for 12 years, beginning in the tax year following the date on which the credit requirements are met. In addition, the business may claim a credit against certain State taxes equal to 31.5 percent of its property tax amount for 12 years. To qualify, the entity must obtain at least 250,000 square feet of new or expanded premises. Also, the entity must (1) continue to employ at least 2,500 individuals in existing positions and hire at least 500 individuals in new positions; or (2) hire at least 1,250 individuals in new positions.
Enterprise Zones
House Bill 877 (passed) authorizes political subdivisions to designate focus areas within specified areas in the State and provides tax incentives for economic development projects within the focus areas. The bill (1) doubles the existing Enterprise Zone tax credit for development in focus areas; (2) allows a sales tax credit equal to the value of the sales and use tax paid on the purchase of tangible personal property used in constructing, expanding, or rehabilitating a commercial real property if the personal property becomes an integral component of the real property; and (3) enhances the existing Enterprise Zone property tax credit allowed in the sixth through the tenth year by eliminating the phase-out during the relevant period. House Bill 877 applies to all taxable years beginning after December 31, 1998.
Job Creation Tax Credit
The Job Creation Tax Credit Program was established in 1996 to provide tax credits to businesses that establish or expand a facility and create a specified number of new jobs. House Bill 75 (passed) extends the sunset date for the Job Creation Tax Credit Program from January 1, 2002 to January 1, 2007. DBED has indicated that the current sunset date is undermining their ability to engage in the long-term recruiting and development of potential business enterprises. It is estimated that this program has aided in the creation of over 19,000 new jobs in the State.
HOUSING AND COMMUNITY DEVELOPMENT
Hippodrome Performing Arts Center
The Maryland Stadium Authority is working in conjunction with the Baltimore Center for the Performing Arts in developing the Hippodrome Performing Arts Center. The new Hippodrome is planned to be a state-of-the-art theatrical facility larger than other theater facilities in the City that will attract larger Broadway touring shows. The facility will be capable of accommodating 420,000 theater patrons annually. The Hippodrome project is seen as a major component of the West Side Revitalization Initiative. The West Side Task Force was formed in 1997 and includes members from the Greater Baltimore Committee, Baltimore Development Corporation, Downtown Partnership, The Weinberg Foundation, the University of Maryland, Baltimore, the University of Maryland Medical System, and area business leaders. The West Side revitalization effort encompasses an 18-block district including the Eutaw, Lexington, and Baltimore Street corridors. Senate Bill 702/House Bill 1091 (both passed) establish a Hippodrome Performing Arts Center Financing Fund from which the Stadium Authority must pay expenses related to the Hippodrome project. The bills authorize the Stadium Authority to acquire property related to the development of the Hippodrome Performing Arts Center by means of negotiation and purchase after prior approval of the Board of Public Works. The bills also authorize the Stadium Authority to exercise powers of ordinary or quick take condemnation if attempts to negotiate purchase are unsuccessful after prior approval of the Board of Public Works and review by the Legislative Policy Committee (LPC).
The Governor included $1.8 million in the fiscal 2000 budget to complete design of the project, provided that the funds would not be released until a preliminary plan is completed. The plan, which is to be submitted to the LPC for review and to the Governor for approval, must address the organization structure for the West Side initiative, proposed City and private funding for the project and a schedule, and a revenue forecast for the Hippodrome that does not rely on State operating subsidies.
The General Assembly appropriated $1.7 million to the Stadium Authority in fiscal 1999 for preliminary design. The total cost of the project is an estimated $53 million. The State's contribution is expected to be $25 million.
Down Payment Assistance Program
To support a new effort within the Department of Housing and Community Development (DHCD) to assist homebuyers in meeting closing costs and down payment requirements, the fiscal 2000 budget includes $650,000 in State funds. According to the department, the funds will be in large part available to persons receiving mortgage assistance under other State programs. This will allow for greater monitoring and tracking of the loans and repayments than under previous similar programs.
The specifics of the program are still under development by DHCD, but it is envisioned that the program will make small loans (generally less than $5,000) at favorable interest rates. Committee narrative adopted by the budget committees encourages DHCD to give priority to assisting homebuyers in those local jurisdictions which also offer closing cost and downpayment assistance.
Community Development Projects
Certain State-funded community development projects must be majority occupied (51 percent or more) by families of limited income. House Bill 137 (passed) exempts the State's Live Near Your Work program from the requirement that a majority of the housing in participating designated neighborhood revitalization areas be occupied by families of limited income.
As a Smart Growth initiative, the State's Live Near Your Work program provides a cash incentive for employees to live near their work in targeted revitalization neighborhoods. Participating employees receive a grant for a minimum of $3,000 for the costs associated with the purchase of a home in a qualified area. By eliminating the current income requirements for certain housing developments, House Bill 137 increases the number of employees qualified for the Live Near Your Work program.
Heritage Areas
Senate Bill 507 (passed) provides that a business entity or an individual may elect to receive a historic rehabilitation mortgage credit certificate issued by the Director of the Maryland Historic Trust in lieu of the heritage structure rehabilitation tax credit for a "qualified purchased heritage structure" or for any other certified rehabilitation. This will allow someone whose income level is too low to take advantage of the credit to receive an equal benefit. Under current law, the credit is 25 percent of the taxpayer's qualified rehabilitation expenditures for the rehabilitation. The entity electing the certificate may transfer the certificate to a lending institution subject to Maryland tax for purposes of securing a loan. A lending institution that accepts the certificate may claim a tax credit in an amount equal to the discounted face value of the certificate. The credit may be carried forward for ten years beginning after the taxable year the certificate is issued.
In addition, the bill extends the time period within which rehabilitation expenditures may be treated as qualified expenditures to the end of the year in which the rehabilitation is completed and the building is designated as a certified heritage structure.
Bainbridge Development Corporation
The Bainbridge Naval Training Center in Cecil County was vacated by the U.S. Navy in 1973. In an attempt to develop the center and accelerate the transfer of the center's facilities and sites to the private sector, House Bill 1152 (passed) establishes the Bainbridge Development Corporation. The corporation is constituted as a public instrumentality of the State to be managed by a 15-member board of directors and an executive director. In order to finance or refinance projects, the corporation may borrow money or accept grants from federal, State, or local governments or from private sources. Obligations of the corporation are not a debt, liability, or pledge of full faith and credit of the State. The corporation may set rates or charges for the use of services, and may not be required to pay any taxes or assessments on its properties or activities or on any resulting revenues. However, when the corporation sells or leases land or facilities to any private entity, the land or facilities are then subject to State and local property taxes. The Maryland Economic Development Corporation (MEDCO) may issue bonds on behalf of the Bainbridge Development Corporation.
PORT DEVELOPMENT
Maersk/Sea-Land Proposal
The port industry has become extremely competitive, with all ports striving to attract and retain shipping lines, cargo shippers, and other opportunities related to the movement of cargo. The Port of Baltimore is under consideration as the United States Northeast load center for the global containership partnership of Maersk Inc. and Sea-Land Services, Inc., two ocean carriers that operate jointly through a vessel sharing agreement. Maersk and Sea-Land, which compose the largest container operator in the United States, have indicated they would handle volumes reaching as many as 550,000 containers annually, with some ten ship calls weekly at their Northeast load center.
Senate Joint Resolution 6 (passed) expresses the General Assembly's support for the Port of Baltimore's initiative to grow cargo by securing Maersk/Sea-Land's business. The joint resolution states that, to the extent possible, sufficient funding should be allocated to the port to make necessary physical improvements to accommodate the substantial increase in business generated by Maersk/Sea-Land. The General Assembly also formalizes its support of the Governor, the Maryland Department of Transportation, DBED, and the port in their negotiations with Maersk/Sea-Land to grow the port's and Maryland's economic vitality.
INSURANCE
Subsequent Injury Fund
The Subsequent Injury Fund is a special fund that compensates injured workers whose preexisting injuries, diseases, or congenital conditions are substantially worsened by the current injuries. Employers or their insurers are only liable for damage caused by current injuries. The Fund is liable for damage from the combined effects of any injuries and conditions.
A 6.5% assessment is charged on all workers' compensation permanent disability or death awards and settlements approved by the Workers' Compensation Commission. Revenue from the 6.5% assessment provides the sole source of funds for benefit claims (nonbudgeted) and the agency's budgeted administrative expenditures. The fund collected approximately $15.8 million in revenues in fiscal 1998 from the assessment and paid approximately $12.9 million in claims. Expenditures (fiscal 2000 budget allowance) are $1.5 million in special funds. The 6.5% assessment has been in place since 1987. Prior to 1987, the assessment was 5%.
Senate Bill 32 (passed) extends the 6.5% assessment to fund the Subsequent Injury Fund from June 30, 1999 to June 30, 2003. Without the passage of this bill, the assessment to the Fund would have fallen to 5%.
Uninsured Employers' Fund
The Uninsured Employers' Fund compensates injured workers employed by uninsured employers who default in payment, pays experts or witnesses hired to assist the Attorney General in defending a claim, and pays the obligations of a self-insured employer who has become insolvent. The Fund currently receives revenue from four sources: (1) an assessment on all insurers by the Workers' Compensation Commission for the administration of the Commission and the Fund; (2) a 1% assessment on all workers' compensation permanent disability or death awards and settlements approved by the Commission; (3) income from investments that the State Treasurer makes for the Fund; and (4) interest on deposits or investment of money from the Fund. The 1% assessment occurs if the Fund's balance drops below $1 million and suspends if the balance is at least $2.5 million. June 5, 1996 was the last suspension of the 1% assessment. The assessment resumed May 1, 1998.
Senate Bill 66 (passed) makes the Uninsured Employers' Fund a special fund. The bill eliminates the maintenance assessment imposed by the Commission on all insurers for the administration of the Fund. The Uninsured Employers' Fund will continue to receive funds from the 1% assessment that is imposed on employers and insurance companies for workers' compensation permanent disability or death awards and settlements approved by the Commission. The bill also alters the triggers for the 1% assessment to $5 million for suspension of the assessment and $3 million for resumption of the assessment.
PERMANENT TOTAL DISABILITY CLAIMS
Cap on Awards
Senate Bill 313/House Bill 792 (both passed) increase the average weekly wage paid by an employer or an insurer to an amount equal to 1/3 of the average weekly wage of the covered employee but not exceeding $114, if a covered employee is awarded workers' compensation for a permanent partial disability for less than 75 weeks in a claim arising from events occurring on or after January 1, 2000. Current workers' compensation law sets the maximum compensation for these minor tier permanent partial disability claims on or after January 1, 1993 at $94.20 per week. The average weekly wage in Maryland is $602. According to the Injured Workers' Insurance Fund who serves about 22% of the workers' compensation insurance market in Maryland, claim costs under this bill could increase by $1.3 million per year. This figure is based on the number of awards of less than 75 weeks (1,238) during 1998. This increase will be offset through the collection of additional premiums.
Cost of Living Adjustments
The United States Department of Labor has discontinued the publication of two separate consumer price indices for the Washington and Baltimore metropolitan areas. A single Consumer Price Index, called the Washington-Baltimore Consolidated Metropolitan Statistical Area, will be published for the combined region.
Senate Bill 34 (passed) alters the reference to Consumer Price Index information used in calculating the cost of living adjustment for permanent total workers' compensation benefits. The bill also codifies existing practice by providing that the responsibility of determining and reporting the rate of change in the Consumer Price Index is with the Department of Business and Economic Development and not the Department of Labor, Licensing, and Regulation.
WORKERS' COMPENSATION BENEFITS
Lyme Disease
Under current law, an employer must provide compensation to a covered employee for a disability resulting from an occupational disease. An occupational disease is defined as a disease contracted by a covered employee as the result of and in the course of employment that causes the covered employee to become temporarily, partially, or totally incapacitated. Individuals engaged in certain occupations are, in some cases, entitled to a presumption that they are suffering from an occupational disease. For instance, a police officer who is employed by a county or a municipality and who suffers from heart disease or hypertension resulting in a disability or death is presumed to have an occupational disease.
Senate Bill 420 (passed) specifies that a paid law enforcement employee of the Department of Natural Resources is a covered employee for workers' compensation purposes and establishes a presumption that the paid law enforcement employee has an occupational disease if the employee: (1) is suffering from Lyme disease; (2) was not suffering from Lyme disease before assignment to a position that regularly places the employee in an outdoor wooded environment; and (3) demonstrates that the employee had any Lyme disease vaccination required or made available to the employee by the Department of Natural Resources. The bill exempts from the immunization requirement an individual who does not receive the Lyme disease vaccination because of a conflict with a religious belief. Any workers' compensation benefits paid under this proposal would be in addition to any disability retirement benefit, although the combined weekly benefit cannot exceed the employee's weekly wage.
Offset of Benefits
Until 1998, Section 9-610(a) of the Labor and Employment Article was interpreted to mean that a workers' compensation award to a government employee could not be offset by a normal service retirement of that employee. In 1991, the word "similar" was deleted from this section during the Code revision process (formerly Article 101, Section 33(d)).
In 1998, the Court of Special Appeals ruled, in Wills v. Baltimore County, 120 Md. App. 281 (1998), that a public employer could offset workers' compensation benefits based on normal service retirement benefits, not just a disability allowance. In its ruling, the Court stated that, in deleting the word "similar," the General Assembly intended to make a substantive change. In Blevins v. Baltimore City, CSA Nos. 579 and 668, the Court specified that any permanent partial disability payments payable after the petitioner's retirement were offset by his pension benefits.
The Maryland Court of Appeals recently reversed (February 11, 1999) the decision of the Court of Special Appeals in the Wills case, stating that the offset provision does not allow the offset of ordinary service-based retirement benefits paid to local government employees. Senate Bill 314/House Bill 763 (both passed) clarify that workers' compensation benefits for covered governmental unit or quasi-public corporation employees or their dependents may be offset only for payment of similar disability retirement benefits.
SELF-EMPLOYMENT ASSISTANCE PROGRAM
In response to a provision in the North American Free Trade Agreement (NAFTA) that authorizes states to amend their unemployment insurance laws to allow certain categories of claimants to work full-time toward starting their own businesses rather than actively seek full-time work, the Self-Employment Assistance Program allows individuals to receive an allowance from the Unemployment Insurance Trust Fund while participating in self-employment assistance activities such as entrepreneurial training, business counseling, and technical assistance. The program has been in effect in Maryland since 1995, and has assisted numerous entrepreneurs to establish new businesses ranging from telecommunications to pet day care. However, the program is due to expire on June 1, 1999. Senate Bill 27 (passed) extends the program for another year and requires the Unemployment Insurance Office to report to the Senate Finance Committee and the House Economic Matters Committee by December 1, 1999, on a proposal to use available alternative sources of funds for the program in the event that the federal government discontinues funding.
UNEMPLOYMENT INSURANCE BENEFITS
Eligibility for unemployment insurance benefits is determined by the circumstances of an individual's dismissal, employment history, and workforce participation. The amount of weekly benefits an individual is entitled to receive is calculated according to a formula based on the individual's earnings during the first four of the last five completed calendar quarters prior to filing a claim. Currently, the maximum weekly benefit amount that an individual may receive is $250. House Bill 1182 (failed) would have phased in an increase in the maximum weekly unemployment insurance benefit from $250 to $310 over three years. The bill also would have placed a one-year moratorium on the imposition of a surtax. A surtax is added to each employer's basic rate when the ratio between the Unemployment Insurance Trust Fund balance and the total taxable wages for the four completed calendar quarters immediately preceding September 30, 1999 is less than 4.7%. There is no surtax for 1999. Although the House of Delegates passed the bill, the Senate did not act on it.
OCCUPATIONAL HEALTH AND SAFETY - ESTABLISHMENT OF A BLOODBORNE PATHOGEN STANDARD FOR HEALTH CARE WORKERS
Bloodborne pathogens are pathogenic microorganisms present in human blood that can cause disease in humans and include, but are not limited to, the Hepatitis B virus (HBV), the Hepatitis C virus (HCV), and the Human Immunodeficiency virus (HIV). Hazards presented by the transmission of bloodborne pathogens can be very serious and include infections, illness, and death.
Currently, Maryland follows the same standards on bloodborne pathogens as adopted by the federal Occupational Safety and Health Administration (OSHA). However, OSHA has compiled statistics from studies that show needle stick injuries can be decreased by 50 percent with the use of "engineered" products. "Engineered" products reduce the risk of exposure to bloodborne pathogens by the use of mechanical barriers, blunting, encapsulation, withdrawal, retraction, destruction, or other means.
House Bill 287 (passed), also known as the "Health Care Workers' Safety Act", requires the Department of Health and Mental Hygiene to hold hearings and prepare a report by January 1, 2000 on the establishment of a standard governing occupational exposure to bloodborne pathogens. In preparing the report, the Department must consider:
(1) the percentage of existing needleless systems and sharps with engineered sharps injury protection;
(2) training and education requirements;
(3) the increased use of personal protective equipment;
(4) the economic costs and benefits associated with a bloodborne pathogen standard; and
(5) specified established guidelines, requirements, and recommendations.
USE OF EMPLOYEE SICK LEAVE FOR ADOPTION
The federal Family and Medical Leave Act (FMLA) of 1993 entitles certain employees to take 12 workweeks of unpaid leave for the birth or adoption of a child. The FMLA does not prohibit employers from allowing the substitution of paid accrued vacation, personal, or sick leave for any otherwise unpaid FMLA leave needed. The substitution of the paid leave must meet the employer's normal leave requirements. House Bill 1204 (passed) requires an employer who provides paid leave to an employee following the birth of a child to provide the same benefit to an employee who adopts a child. The bill applies to private employers and certain State and local government units and is effective until June 30, 2002.
ALCOHOLIC BEVERAGES - STATEWIDE BILLS
INTERSTATE SHIPMENT - FELONY
Although the direct shipment of alcoholic beverages to consumers is illegal in Maryland, the Comptroller's Office in the past year has issued over $50,000 in fines for violations of the direct shipment prohibition, indicating that some out-of-state suppliers are ignoring the State prohibition. Under current law, direct shipment of alcohol to consumers is a misdemeanor punishable by a fine of up to $1,000 or imprisonment up to two years or both. The Comptroller's Office has expressed two main concerns regarding direct shipment: (1) direct shipment circumvents the State's three-tier system, making tax collection on the alcohol shipped difficult; and (2) direct shipment increases the availability of mail order alcohol to minors by phone or over the Internet.
In an effort to address these problems, House Bill 278 (passed) makes it a felony for out-of-state shippers of alcoholic beverages to ship, cause to be shipped, or deliver alcoholic beverages to a person in this State. This prohibition includes alcoholic beverages that are ordered or purchased through a computer network. A violation is punishable by a fine of up to $1,000 or imprisonment up to two years or both.
MUNICIPAL REGULATION OF ALCOHOLIC BEVERAGES IN PUBLIC PLACES
House Bill 301 (passed) authorizes the governing body of a municipal corporation to adopt ordinances or resolutions to regulate the possession or consumption of alcoholic beverages in public places located within the municipal corporation. A public place is defined as a parking lot, common area, or general common element in: (1) a leased residential property, including attached single-family homes or a multifamily dwelling unit; (2) a condominium; or (3) a homeowners association. (See the discussion of this bill under the "Municipal Governments" heading of Part D - "Local Government" of The 90 Day Report.)
BAN ON DRIVE-THROUGH FACILITIES
Current law allows a retail alcoholic beverages licensee to sell alcoholic beverages through a drive-through window in every jurisdiction in the State except Carroll County. Senate Bill 671 (failed) would have extended the prohibition statewide, except for existing drive-through windows and the transfer of existing drive-through windows to another licensee.
ALCOHOLIC BEVERAGES - LOCAL BILLS
ALLEGANY COUNTY
Disposition of License Fees
House Bill 252 (Ch. 83) requires the Allegany County Director of Finance, the local collecting agent for alcoholic beverages license fees, to credit to the County 5 percent of the license fees received for licenses that are issued to a place of business located in a municipal corporation. The Director of Finance is required to pay 50 percent of the remaining license fees received for these licenses to the municipal corporation, and the County may retain the remainder.
Special Festival License
House Bill 362 (Ch. 87) authorizes the Allegany County Board of License Commissioners to issue one special festival license annually. A special festival licensee may display and sell wine and beer brewed by a brewer who makes less than 60,000 barrels of beer annually, if the wine and beer displayed and sold is distributed in Maryland at the time the application is filed. A festival licensee may also display and sell beer and wine for consumption on or off the licensed premises during the days and times designated for the festival. The Act authorizes the Board to establish a festival license fee, the times and dates for the festival (but not 14 days on either side of the Maryland Wine Festival), and a location for the festival. The Board must ensure that the primary focus of the festival is the promotion of Maryland beer and wine.
BALTIMORE CITY
License Restrictions - 46th and 47th Alcoholic Beverages Districts
Senate Bill 456 (Ch. 39) requires a beer, wine and liquor restaurant licensee in the 46th and 47th Alcoholic Beverages Districts of Baltimore City to have at least 51 percent of its average daily receipts derived from the sale of food. The Act also requires these licensees to file annually with the Board of License Commissioners for Baltimore City a statement of the average daily receipts and an affidavit from a certified public accountant verifying that the licensee has met the ratio requirements. In addition, the Act increases from $250,000 to $500,000 the required capital investment and establishes a maximum seating capacity of 150 for a licensed restaurant in these districts. Finally, the Act clarifies that a license may not be transferred from the location where it was first issued, and that a new license may not be issued to a fast-food restaurant.
Licenses - 10th and 45th Alcoholic Beverages Districts
Senate Bill 369 (passed) adds the 10th and 45th Alcoholic Beverages Districts to those jurisdictions in Baltimore City that prohibit the issuance of a new or the transfer of an existing alcoholic beverages license. Also, the bill excepts a licensed drug store from the prohibition against transferring a license into the 45th district.
Club Licenses
Senate Bill 23 (Ch. 11) authorizes the issuance of new Class C beer, wine and liquor licenses in Ward 26, Precinct 12 of Baltimore City, where currently new licenses may not be issued. The new licenses may only go to tax-exempt organizations that have members of a union representing the freight and shipping industry as the majority of its membership, and may only be used on a Friday, Saturday, or Sunday. The Act sunsets on May 31, 2000.
Special Entertainment Licenses
Senate Bill 765 (Ch. 49) creates a special entertainment license at no cost for issuance to an on-sale alcoholic beverages licensee in Ward 26, Precinct 7 of Baltimore City. A special entertainment license authorizes the holder to provide entertainment in the form of singing, dancing, music, floor shows, acrobatic acts, theatricals, or moving pictures, but not adult entertainment, to its patrons on the licensed premises. A special entertainment licensee may not transfer the underlying alcoholic beverages license or the special entertainment license to another person or location. This Act sunsets on May 31, 2001.
Adult Entertainment
Senate Bill 440 (failed), an emergency bill, would have required the Baltimore City Board of License Commissioners to:
Current law prohibits an alcoholic beverages licensee in Baltimore City from providing adult entertainment on the licensed premises or on adjacent premises, but grandfathers adult entertainment business establishments that existed before May 31, 1993. The Board's regulations, adopted before the current law was enacted, prohibit a licensee from allowing on the licensed premises nudity or the conduct, exhibition, or performance of an obscene act. See Liquor Board Rule 4.17(b).
This bill responded to a recent decision of the Circuit Court for Baltimore City, which held that the Board is not authorized to regulate a grandfathered adult entertainment business establishment with respect to conduct that is prohibited by State law when the State law explicitly does not apply to the establishment. See Krisher v. Board of Liquor License Commissioners for Baltimore City, C.A. No. 98139106/CC4392 (Jan. 21, 1999). Under this decision, the Board may not regulate or prohibit nudity or the conduct, exhibition, or performance of an obscene act at a grandfathered, licensed adult entertainment business establishment. This bill would have addressed this issue by providing the Board with express authority to regulate the operation of all adult entertainment business establishments.
BALTIMORE COUNTY
Class B (SB) Licenses
Senate Bill 185 (Ch. 35) extends the sunset date for the authorization to convert up to 10 of any class of alcoholic beverages license, except a Class C license, in Baltimore County into a Class B (SB) license until September 30, 2004. The Act also provides that a Class B (SB) license may not be issued for use on premises or at a location that had been licensed within two years of the Class B (SB) license application date. The Class B (SB) licenses may only be used in an area designated as the "Pikesville Revitalization Area" or the "Pikesville Town Center."
Special Wine Festival - Micro-Breweries
House Bill 1194 (passed) authorizes a special beer and wine festival licensee in Baltimore County to display and sell micro-brews brewed in Maryland on the days and for the hours designated for the festival. The bill also allows a Class 5 brewery licensee or a Class 7 micro-brewery licensee to obtain a special beer and wine festival license.
CALVERT COUNTY
Licenses
House Bill 114 (Ch. 67) requires
the Calvert County Board of License Commissioners to:
The Act also requires an applicant for a new license or a transfer of an existing license in Calvert County to pay the Board a $250 fee, in addition to any other required fee, sets the term of a license at one year, and establishes a late fine of $50 per day for renewal applicants, up to a maximum of $500. The Act also requires a renewal application to be accompanied by a statement of the hours of operation, the name of the manager, the average monthly sales of food and alcoholic beverages, and a copy of the current tax statement showing that all applicable taxes are paid.
DORCHESTER COUNTY
House Bill 1078 (passed) alters various provisions of law regarding alcoholic beverages in Dorchester County. The bill:
GARRETT COUNTY
Service by Persons Between 18 and 21
House Bill 1079 (passed) authorizes a restaurant licensee in Garrett County to employ a person at least 18 years of age to serve or sell alcoholic beverages in a restaurant in connection with the serving of a meal. Under current law, in Garrett County a person between the ages of 18 and 21 may only serve alcoholic beverages from a service bar.
Wine Tasting License
House Bill 514 (Ch. 99) authorizes the Garrett County Board of License Commissioners to issue a wine tasting license to a beer, wine and liquor licensee, or a beer and wine licensee for tasting or sampling purposes only and for which consideration may not be charged. The Act also authorizes the Board to regulate the quantity of wine that may be served to each person and the number of bottles of wine from which this quantity may be served. The annual wine tasting license fee is $100.
Special Multiple Event License
Senate Bill 666 (Ch. 47) creates a special Class C multiple event license that authorizes a licensee in Garrett County to hold up to 24 special events per year, and creates a graduated fee system from $125 to $500, based on the number of events held per year. The Garrett County Board of License Commissioners may issue a license to an organization that would otherwise qualify for a special Class C license. The Board may not issue more than 1 multiple event license per organization per year. A multiple event licensee must notify the Board in writing 7 days before an event is to be held.
HARFORD COUNTY
Liquor Control Board - Disclosure
Senate Bill 308/House Bill 354 (both passed) subject the members of the Harford County Liquor Control Board to the provisions of State ethics law regarding financial disclosure, conflicts of interest, and lobbying activities, and the employees of the Board to the provisions of State ethics law regarding conflicts of interest and lobbying activities. The bills require members of the Board to file a statement disclosing financial information with respect to interests, gifts, compensated positions, and liabilities that may create a conflict under law between the person's personal interests and duties for the Board.
The Harford County Liquor Control Board is created by State law. According to the Harford County government, the County does not have the authority to govern a State-created agency, and therefore has not subjected Board members or employees to its ethics provisions. Because State law has not subjected Board members or employees to State ethics laws, Board members and employees are not covered by any ethics provisions. A recent Opinion of the Attorney General stated that members or employees of local alcoholic beverages boards were intended to be subject to local ethics provisions. This Opinion also stated, however, that there is no legal problem with legislation to subject Board members and employees to State ethics laws.
HOWARD COUNTY
Golf Course License
House Bill 39 (Ch. 56) authorizes the Howard County Board of License Commissioners to issue a 7-day Class GC (golf course) beer and light wine license to an organization that owns or manages a golf course with a minimum of 18 holes, at an annual fee of $350. Under current law, in Howard County a golf course with a minimum of 18 holes may obtain only a golf course beer, wine and liquor license, at an annual fee of $1,500.
MONTGOMERY COUNTY
Theater License
House Bill 412 (Ch. 92) authorizes the Montgomery County Board of License Commissioners to issue a special theater (on-sale) beer and wine license for use in a movie theater that is operated by a bona fide nonprofit organization or performing arts theater. A licensee is authorized to sell beer and wine for consumption on the premises for one hour before and after the entertainment begins, when snacks are served, and during intermissions, cast parties, or receptions. The Act prohibits the transfer of a theater license to another location.
PRINCE GEORGE'S COUNTY
Pub-Brewery License
House Bill 826 (passed) authorizes the Comptroller to issue a Class 6 pub-brewery license in Prince George's County. A Class 6 license may only be issued to a Class B beer, wine and liquor (on-sale) licensee for use on restaurant premises. A Class 6 licensee may brew up to 2,000 barrels of malt beverages at a brewery located adjacent to the restaurant where it is sold. The bill also authorizes limited off-sale privileges to a Class 6 licensee.
The bill also allows the Comptroller to issue a Class 7 micro-brewery license for use on Class D licensed premises that are located in the triangle formed by Route 1, Alternate Route 1, and Charles L. Armentrout Drive in Prince George's County. A Class 7 licensee may brew, bottle, or contract for up to 22,500 barrels of malt beverages annually, of which 4,000 barrels may be sold for on-premises consumption.
SOMERSET COUNTY
Retail Sale of Wine
House Bill 1146 (passed) authorizes the Somerset County Board of License Commissioners to issue a Class A (light wine) license for the retail sale of wine to a Class 3 or Class 4 licensed winery. A licensee may sell on the licensed premises wine produced at the winery.
ST. MARY'S COUNTY
Noise Regulation
House Bill 197 (Ch. 75) authorizes the Alcoholic Beverage Board of St. Mary's County to regulate the noise level and playing time of a mechanical music box, live music, or a sound making device on the licensed premises if the sound disturbs the peace, tranquility, safety, or health of the surrounding neighborhood.
Felony Conviction
House Bill 198 (Ch. 76) requires the Alcoholic Beverage Board of St. Mary's County to deny an application for a new alcoholic beverages license if the Board determines that the applicant has been convicted of a felony. The Act also authorizes the Board to deny a license renewal application if the licensee or a stockholder of the corporation that uses the license has been convicted of a felony. The Board must hold a public hearing to examine the relevant facts and circumstances of the felony before renewing or revoking the license.
Disciplinary Proceedings Against Licensees
House Bill 200 (Ch. 77) authorizes the Alcoholic Beverage Board of St. Mary's County to undertake administrative proceedings against a licensee or an employee of a licensee who was granted probation before judgement for violating current prohibitions on the sale of alcoholic beverages to a minor or to a person who is visibly intoxicated. In general, if a licensee or employee is found not guilty or receives probation before judgment, the local licensing authority is barred from taking regulatory action against the licensee.
Hotel/Restaurant License
House Bill 201 (Ch. 78) authorizes the Alcoholic Beverage Board of St. Mary's County to issue an on-sale Class B beer, wine and liquor hotel/restaurant license for $1,000 annually to an establishment that is for the accommodation of the public, provides ordinary hotel services, has 25 or more rooms, a lobby with a registration and mail desk and seating facilities, and a dining room that serves full course meals at least twice daily.
Bottle Clubs
Senate Bill 598 (Ch. 45) provides that a person who operates a business that does not have an alcoholic beverages license may not allow a customer to bring alcoholic beverages onto the premises for consumption. The Act also clarifies that a bottle club may not attempt to evade the alcoholic beverages license laws, including those laws relating to hours of operation and the sale and possession of alcoholic beverages, setups, or other component parts of mixed alcoholic beverages. A person who violates these provisions is guilty of a misdemeanor and is subject to a fine not exceeding $1,000.
WORCESTER COUNTY
Class I License
House Bill 522 (passed) creates a 6-day and 7-day Class I beer, wine and liquor license in Worcester County authorizing sales for on-premises consumption only. The license may only be issued within: (1) the corporate limits of Ocean City; (2) the 10th election district; or (3) the 2nd precinct and specified areas of the 1st precinct of the 3rd election district. The annual license fees are $2,500 for the 6-day license and $3,000 for the 7-day license.
Special Sunday Club Licenses
House Bill 523 (Ch. 101) increases from 8 to 20 the number of special Sunday club licenses that may be issued in Worcester County during a calendar year to a bona fide club that already holds a Class C beer, wine and liquor license. A special Sunday club license entitles the holder to exercise its Class C beer, wine and liquor license privileges while providing entertainment.
Golf Course Licenses
House Bill 524 (Ch. 102) creates a Class C (golf course) beer, wine and liquor license in Worcester County. To be eligible for a license, a golf course must have a minimum of 18 holes, be open to the public, own property in Worcester County, and be operated for profit. The annual license fee is $2,625. A licensee, subject to the approval of the Worcester County Board of License Commissioners, may sell beer, wine and liquor for consumption only on the land and in the buildings that are part of the golf course.
Working Capital/Borrowing Limit
House Bill 506 (Ch. 96) increases the maximum size of the reserve fund maintained by the Worcester County Liquor Control Board from $300,000 to $400,000. House Bill 510 (Ch. 97) increases the maximum aggregate amount that the Board may borrow from a banking institution from $500,000 to $1,000,000.
House Bill 506 increases the reserve fund to give the Board adequate working capital to facilitate the buying or leasing of alcoholic beverages, warehouses, vehicles, etc. Moreover, to obtain the best prices for its customers, the Board purchases its alcoholic beverages in large quantities directly from distilleries. Thus, House Bill 510 increases the Board's credit line to help the Board maintain an adequate inventory level.