September 6, 2020

Senate Budget and Taxation Committee & House Appropriations Committee: September 3, 2020

September 3, 2020 – Senate Budget and Taxation Committee & House Appropriations Committee

Briefing regarding CARES Act Funding and an update on the Purple Line


David C. Romans, Fiscal and Policy Coordinator, Department of Legislative Services, DLS

Federal COVID-19 Funding

  • The Hogan Administration has submitted budget amendments authorizing expenditures of about $872 million of federal COVID-19 response funding.
  • The Coronavirus Relief Fund (CRF) is the primary source of the federal funds that have been added.
  • Many of these amendments were submitted utilizing the Governor’s emergency authority to bypass legislative review or as reimbursable amendments that do not require legislative review.
    • Reimbursable funds will come from the Maryland Department of Health (MDH) which will receive and allocate most of the dollars available from the CRF and federal Disaster Assistance Relief.
    • The federal CRF dollars and disaster funds have not been added to the MDH budget to date.
  • The budget amendments to date represent less than one-fifth of the roughly $4 billion of federal funds that will ultimately be incorporated into the State budget in fiscal 2020 and 2021.


Business Assistance

$180 million from the CRF

  •  $95 million for grants ($78 million awarded to date)
    • Capped at $10,000
    • More than 7,900 awards to businesses of 50 or fewer employees as of August 28
  • $5 million to Maryland Small Business Development Financing Authority
    • 5-year loans of $25,000 to $200,000
    • 0% interest for first 12 months and 2% for remaining 48 months
    • Support economically and socially disadvantaged businesses
  •  $5 million for Emergency Relief Manufacturing Incentives ($3.7 million awarded to date)
    • Grant awards to 52 companies of up to $100,000
    • Purpose is to spur production of PPE


Nonprofit Assistance

$50 million from the CRF

  •  $30 million though Department of Housing and Community Development (DHCD) for grants to nonprofit organizations engaged in the economic recovery, health and human services, and housing of underserved communities and underserved populations
    • Grant size: $5,000 to $50,000 depending on size of organization’s budget
    • Nonprofits less than 50 employees initially; now expanded to larger entities
    • First come, first serve
  • $10 million of grant funds reserved for providers licensed by Behavioral Health Administration or Developmental Disabilities Administration
  • $8 million through Department of Commerce for grants to nonprofits that applied for emergency grants but were not funded
  •  $3 million to Maryland State Arts Council for Emergency Grants
    • $1 million to county arts agencies
    • $435,000 for arts and entertainment district management agencies
    • $1.6 million for arts organizations and individual artists


Layoff Aversion Fund

  • $10 million in flexible funding to businesses and workers
  • Up to $50,000 grant for companies with less than 500 employees
  • Approved 445 of 1,654 applications
  • Eligible uses include equipment to allow employees to work from home, on-site cleaning and sanitation services, liability insurance, and other creative strategies to mitigate potential layoffs or closures in the business community


K-12 Education

  • $200 million from the CRF for technology and tutoring (discretionary State decision)
    • $100 million technology grant allocated based on enrollment with purpose of improving the district’s technology and connectivity shortages such that all students have equitable access to distance learning programs
    •  $100 million tutoring grant allocated based on Title I percentages. The Maryland State Department of Education (MSDE) reports that local school systems can use the funds to implement a tutoring program that meets certain ESSA evidence level criteria to compensate for the learning loss associated with time away from direct instruction as a result of the school closures due to the COVID-19 pandemic
  • $208 million from Education and Secondary School Emergency Relief Fund (ESSER)
    • $187 million distributed based on Title I allocations per federal requirements
    •  MSDE to retain about $20 million for a statewide learning management system, developing online courses/virtual school, and professional development
  • $36 million from Governor’s Emergency Education Relief Fund (GEER)
    • $15 million for broadband
    • $10 million for technology grants to remove barriers to remote learning
    • $10 million for competitive innovation grants
    • $0.7 million for the Maryland School for the Blind and the Maryland School for the Deaf



  • $10 million from the CRF to provide internet access to students who lack access due to economic factors or the lack of infrastructure
    • 20 counties and Baltimore City have received $8 million
    • Baltimore County recently applied and Somerset County is evaluating needs
    • Frederick County did not apply to date
  • $15 million from GEER to build a network in Southern Maryland, Western Maryland, and the Eastern Shore


Higher Education

  • $90 million from the CRF to public higher education institutions to offset policing and other COVID-19 costs, which effectively provides budget relief to institutions
  • $10 million from GEER for community colleges
  • $230.6 million of direct aid from federal government to all higher education segments



  • Of $654 million available through the State budget, the Maryland Department of Transportation (MDOT) estimates $372 million in fiscal 2020 spending and $215 million in fiscal 2021, with residual spending through fiscal 2024
  • $696 million is for transit grants, in addition to $877 million in operating support allocated directly to WMATA
    • $345 million for urban area bus and rail systems
    • $178 million for MTA state of good repair projects
    • $153 million for Maryland-based MPOs with operating jurisdictions across multiple states
    • $19 million for rural area grants


Active Amendments

  • Currently $235 million in fiscal 2020 COVID-19 related budget amendments under legislative review
    • $124 million to partially backfill $157 million from the Rainy Day Fund used for COVID-19 procurements, child care for essential workers, and small business grant and loan assistance, along with $7 million for the Layoff Aversion Program (BA 069-20)
    • $59 million to the University System of Maryland for COVID-19 testing, PPE, and increased financial aid (BA 064-20)
    • $28 million to DHCD for rental and housing assistance (BA 063-20)
    • $18 million to the Maryland Department of Aging for nutrition, caregiver, and other supportive services (BA 059-20)
    • $6 million to the Maryland Department of Labor to supplement the Layoff Aversion Program (BA 067-20)




Delegate Geraldine Valentino-Smith: Where are we right now in respect to what we did before we left session with availability of the Rainy Day Fund? What is available still in the Rainy Day Fund or what has been spent with respect to what we allowed when we left session?

David Romans: At the end of session the governor very quickly acted to use quite a bit of the Rainy Day Fund money. Over $150 million to address various problems including grants to businesses. He actually used his emergency authority and took more money than the legislature had authorized. Since then the CARES Act came along and we understood how we could use it. So they’re putting all the money back into the Rainy Day Fund and using these various federal pots of money. The Rainy Day Fund is back to whole at $1.1 billion dollars for the moment.

Delegate Geraldine Valentino-Smith: That means then that we have not tapped into the Rainy Day Fund with respect to the impact from the pandemic?

David Romans: Correct.



Chair Guy Guzzone: I have a clarifying question about the dollars. The money that came to the state was in the order of $4 billion dollars, is that correct?

David Romans: Correct.

Chair Guy Guzzone: Of that there was what I consider the flex dollars, the $2.3 billion dollars of which $1 billion of it was essentially sent to the localities. In terms of the $1.3 billion dollars, that was simply state flex dollars. What percentage of budget amendment do we have on that $1.3? What percentage do we have when all those specified programs the other $3 billion dollars that were directed to various agencies? What percentage do we have in that large set of money?

David Romans: About half of the Coronavirus Relief Fund, that flexible pot that actually would be used for state purposes has been brought in. The rest of the pots of money a very small percentage of the other funding sources has been brought in.


Chair Maggie McIntosh: Follow up regarding Transportation Cares Act money. Do we know how much of that has been encumbered or spent?

David Romans: I do not know the answer to that, I know Steve McCulloch is on this meeting and he might have more information. He is our transportation expert.

Chair Maggie McIntosh: We can ask the Secretary when he comes forward.




David R. Brinkley, Secretary, Department of Budget and Management


Coronavirus Relief Fund Spending

  • The CARES Act provided Maryland $2.344 billion through the Coronavirus Relief Fund (CRF).
  • Spending from the CRF may only be used for the following:
    • Necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);
    • Expenditures not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and
    • Expenses incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.


CRF Spending –Local Government

  • Of the $2.344 billion allocated to Maryland, the State received $1.653 billion while local governments with a population over 500,000 received $691 million.
  • The following jurisdictions received about $691 million directly:
    • Montgomery County $183.4 million
    • Prince George’s County $158.7 million
    • Baltimore County $144.4 million
    • Baltimore City $103.6 million
    • Anne Arundel County $101.1 million
  • Governor Hogan distributed $364 million to the remaining 19 county governments that did not receive funding directly.
  • Funding was allocated proportionally to local governments based upon population.
  • As a general rule, half of the $364 million was distributed to local health departments while the other half was distributed to the county government.
  • Local health department funding was done on a reimbursement basis; County government funding was distributed directly after an indemnity waiver was signed.
  • To date, the State does not have much information on how local jurisdictions have spent their CRF dollars.
  • The 5 largest jurisdictions have reported that they have spent between 13% and 49% of their funding through June 30.
  • The State has requested local governments to submit spending reports to DBM by September 9 (for period ended June 30).
  • We do know that based upon FY 20 spending, local jurisdictions have spent less than half of their local health department funding.


CRF Spending –State Government

  • The State prioritized health spending during the early portions of the pandemic..
  • The State has assumed that most PPE spending is eligible to be reimbursed under FEMA public assistance.
  • The State has assumed that the CRF is eligible to be used as a match for FEMA public assistance. This allows the State to extend its CRF dollar further than expected.
  • As CRF spending became clear, the State shifted business assistance funding away from the Rainy Day Fund.
  • After the CRF was deemed eligible to match FEMA public assistance the Governor announced additional funding initiatives totaling more than $400 million:
    • K-12 Education                                    $210 M
    • Business & Non-profit assistance      $100 M
    • Higher Education                                 $90 M
    • Rental Assistance                                 $10 M


State Spending Summary

(preliminary submission through 6/30)

Transfers to Local Governments                                    $364 M

Public Health & Safety Payroll                                      $143 M

Medical Expenses                                                         $114 M

Economic Support                                                        $106 M

Other                                                                           $105 M

Total*                                                                         $833 M


* Represents 50.4% of $1.653 billion allocated to the State


State Spending Summary

(current allocation)

Transfers to Local Governments                                    $364 M

Public Health & Safety Payroll                                      $328 M

Economic Support                                                        $239 M

Medical Expenses                                                         $198 M

Distance Learning                                                        $110 M

Other                                                                           $297 M

Total*                                                                         $1,536 M


* Represents 92.9% of $1.653 billion allocated to the State


State Spending Summary Detail

Public Health & Safety Payroll                          $328 M

  • Includes local public health, state agency police, and higher education police salary fund swaps.


Economic Support                                            $239 M

  • Includes small business assistance and non-profit assistance programs.


Medical Expenses                                             $198 M

  • Includes all types of PPE and medical equipment. This represents $600+ million in FY 20 expenses plus and an estimated $180+ million in outstanding DGS invoices. CRF share is 25%.


Distance Learning                                            $110 M

  • Includes $100 million for K-12 technology and $10 million for Rural Broadband.


Other                                                               $297 M

  • Includes the following:
    • K-12 Targeted tutoring ($100 M)
    • Response Pay ($75 M)
    • Higher Education PPE ($43 M)
    • DPSCS non-personnel costs ($18M)
    • UMB School of Medicine ($15 M)
    • Food Assistance ($10 M)
    • Rental Assistance ($10 M)
    • Substantially diverted salaries ($6 M)
    • Telework Technology ($5 M)
    • Other ($15 M)


CRF Fund Balance   $117 M

  • The Administration is proceeding cautiously with additional CRF spending at this time.
    • To make sure sufficient resources are available in case of another wave of the virus
    • To serve as a hedge against ever changing federal guidance as described in the following slides
  • The Administration is committed to ensuring that all CRF funding is spent.


Cautionary Closing Notes

  • Treasury has provided guidance several times on the eligible uses of spending for the CRF that have proven to be difficult to follow and at times contradictory.
  • FEMA has been slow to provide guidance about what is eligible and the information provided to states also appears contradictory.
    • PPE purchased for some State agencies like Public Safety and Higher Education institutions may not be eligible for reimbursement.
    • Expenses originally paid with CRF dollars may not be swapped to FEMA public assistance to draw down additional match.
    • Medical equipment purchases may not be fully matchable, only the depreciated costs.
  • OIG guidance released last Friday appears to contradict Treasury guidance with regard to presumptive eligibility of public health and safety payroll expenses.
    • This is particularly problematic for Maryland as we expect more than $325 million in this category of spending, much of which would help balance the General Fund




Senator Jim Rosapepe: Back in a previous presentation was reference to money that the university campuses received for testing. One of the issues I’ve been working with the university systems with is trying to minimize the extent to which we are using university or state money for testing and instead making sure that it is covered by insurance. I am not sure if you have the answer today, but it seemed like there were $10’s of millions of dollars you were reporting as being used for testing at universities. It is my strongly held view that that can all be covered by insurance. I’d like to get some information on that to pursue that. The money could then be used for other things, instead of paying for testing.

David Brinkley: We will find out. That might be something we direct through the health department. I also saw at one portion that we dissected there was a small portion that went to the University of Maryland Baltimore that was to help set up the state lab that is doing some of the testing. You might be right, there might be some insurance reimbursement possibility as a result of that.


Delegate Shaneka Henson: When we last convened I asked about the governor’s mobilization of the $30 million dollars in CARES funding for assistance. I know many are aware that the DHS and CDC issued a moratorium on evictions. So it is going to be more important now than ever to make sure that resources are a part of what is available to our landlords and renters as well. I noticed that the $10 million that was in the presentation, and I believe that’s because the additional 20 went for the block grants. Can you give an update on the mobilization of that money and how close it is to being in the hands of landlords and renters?

David Brinkley: I will turn that over to Marc Nicole because I know we had DHCD involved.

Marc Nicole: We will have to follow up with DHCD on that, I know there were 2 different streams of funding. One that was going through to the local governments, and one that was going through to landlords of projects that had been state funded. We will follow up in quick order and get that information back to you.

David Brinkley: Some of the locals I saw on some of the reports we have that those that have large agriculture community use some for agriculture aspects but they can also use it for rental assistance. But we will get back to you on where that went.


Senator Sarah Elfreth: Rental assistance is clearly an issue that is relevant and important to all of us. In July I know Deputy Secretary Nicole had mentioned perhaps going after FEMA money for possibly $120 million dollars to add to that pot. We appreciate that the feds are changing their rules or drafting them as they go. Are there any plans to increase that $30 million dollar pot of rental assistance money? It’s going to continue to place pressure on our constituents who are unable to pay their rents. When the eviction moratorium is lifted we’re going to see real problems in our communities. What is the plan moving forward? $30 million is a great investment but it’s not going to be enough to help our constituents.

David Brinkley: We have a lot of different requests that are coming in to help deal not just with that. The performing arts venues have made a $25 million dollar request to help them out. We might have identified another poll of money that we could utilize that are already state funds. We’re trying to compile all the requests we are getting in, that will be one of the items we lay out for the governors’ consideration as we’re trying to ascertain where we’re headed with it. We acknowledge that rental assistance is going to be a challenge. That was why one of the criteria was to insure that those property owners that are in state programs that are providing some type of an agreement with the state. The money was going to the property owners to relieve the rent burden that was due. They have already satisfied certain criteria that they are eligible for that type of assistance. We are trying to grant a broad spectrum of relief in many different areas that we see we have needs. We’re painfully aware of those needs and those demands.


Delegate Jared Solomon: I urge you all to consider putting relief into childcare providers. Anything you can do to push MSDE and the governor, we really want to make sure we have a childcare system in place to help people go back to work.

David Brinkley: You’re right, there’s two aspects to what you talked about. One is the childcare profession as an industry and ensuring that they can keep workers coming in and operating. Ensuring they have the resources to ensure they have a clean and safe environment. Let’s face it they don’t get paid a whole lot to start with, a lot of people who do it do it because they love kids. The other aspect is there’s a lot of families and single parents whose income is based on being able to have that type of availability. It’s even more critical because now you have schools that are distance learning or may have alternative schedules. I know the governor is very keenly aware of that.


Senator Cory McCray: I have a question regarding MDOT specifically. $392 million is what’s been discussed in reference to the federal funds. When we looked at the budget this past session, $60+ million dollars were there in federal funds and $800 million in special funds specifically from TTF. Could you let us know how much of that $392 million is going to FY2020 and FY2021? Currently what would the budget look like out of that $800 million?

David Brinkley: Are you talking on the transportation side? Because I don’t have access to some of that off the top of my head. I think MDOT will be able to take care of that.


Delegate Geraldine Valentino-Smith: In addition to the contracts that are awarded, will we be better able to understand how the decisions were made to award the contracts and who was in charge of making those decisions and who was establishing the criteria necessary? Will we be able to see who developed the criteria and made the decisions for awarding the contracts?

David Brinkley: The new office of procurement was very diligent working with our team, DBM, and the Department of Health created a special workgroup to deal with some of this. I think that question is something we all want to know more about and would be better directed to the procurement team.

Delegate Geraldine Valentino-Smith: Follow up regarding rental assistance. Is there an analysis going on right now with each of the jurisdictions with respect to the pending number of evictions that may or may not be sitting with the sheriffs and court systems? What do you think the extent of the problem is and can you keep us briefed on that?

David Brinkley: The agency that would have their finger on the pulse would be DHCD. I will find out from Ken what he’s got and also combine any other resources we have. I’m sure the attorney general is concerned about it; he’s reached out on one level about where we stand on that. We had a request here for $5 million dollars to help with legal defenses for some of these same people, so that’s another item we have. Let me reach out to Ken to see what he has. I think they would be very much on top of it.


Chair Guy Guzzone: Do you have a running total or sense of the magnitude of where the $117 million is going to get us in terms of what has been asked of you?

David Brinkley: We’re keeping a running total of some of the requests that we have. We have another cabinet meeting coming up which means I’ll hear from a few other secretaries regarding some other issues that they have. We’re certainly starting to hear concerns. We’re keeping a running tally on it. We still have things that are ongoing such as response pay. I didn’t exactly answer your question there but the key is as we get requests we are trying to compile them, see if there are other venues or resources that could be brought to the fore.

Chair Guy Guzzone: Would you say that it’s by a significant magnitude above the $117 million available?

David Brinkley: It certainly is potential. It has a great potential to do that.


Delegate Michael Jackson: There are a number of funding mechanisms in place regarding K-12 dealing with MSDE’s learning management system dealing with broadband. Are there any cyber security dollars?

David Brinkley: I don’t know if there is anything specifically designated for cyber security. That certainly would be a key part of it. that should be part of the conversation as they are doing other internet build outs in expansions along the way.


Senator Jim Rosapepe: So the local have not spent or documented spending a material amount of the money they have got? Do you have an impression as to whether they really haven’t spent it or they’ve spent it and haven’t documented it?

David Brinkley: That’s accurate. It’s along the lines of what we said we sent a letter to them with a September 9th deadline saying, what have you done subsequent to that?


Delegate Marc Korman: In regard to the MEDCO College Park situation. I wanted to flag that Towson also has a similar issue. Would you be able to provide the committee with more detail about what we’re looking at? Are you aware that it is also an issue at Towson?

David Brinkley: Nope, I can’t. Not yet. I am aware it is a MEDCO thing which would apply to any of the facilities they might have.


Senator Johnny Salling: Is regard to our businesses is there somewhere in the state where they can find ways to get help financially?

David Brinkley: I think Commerce is the best avenue for you to talk to.




Steven McCulloch, Policy Analyst, Department of Legislative Services

Purple Line Update


Project Background


  • Availability Payment public-private partnership (P3)
  • Purple Line Transit Partners (PLTP) selected to be the concessionaire responsible for:
    • Finishing design of, financing, constructing, equipping (including light rail vehicles), operating, and maintaining the Purple Line Project
    • 36-year contract comprising 6 years of construction and 30 years of operations and maintenance


Project Background Estimated Cost and Funding

  • Planning, Design, and Construction: $2.4 billion
  • Sources
    • $900 million: Federal Section 5309 New Starts
    • $36 million: Federal Section 5307 Urbanized Area Formula Funds
    • $450 million: State/Local
    • $1,021 million: P3 Concessionaire (private equity, borrowed funds (including federal loan))


Notices to Terminate P3 Agreement

  • May 1, 2020: Purple Line construction firms notified PLTP of intent to terminate design-build contract with PLTP.
  • June 23, 2020: PLTP notified MDOT/MTA of intent to terminate P3 Agreement for Extended Delay.


PLTP Stated Basis for Notice (Disputed by MDOT/MTA)

  • Delay of 976 days increasing project cost by at least $519.1 million related to:
    • Record of Decision vacated during litigation with project opponents
    • Right of way not provided timely
    • Changes to design criteria for portions of the project in and around CSX-owned property
    • New and changing requirements for environmental permits through the Maryland Department of the Environment


MDOT/MTA Response

  • June 24, 2020: provided PLTP with Notice of Concessionaire Default
  • August 10, 2020: received a temporary restraining order from the Circuit Court for Baltimore City enjoining PLTP from demobilizing until expiration of the order on September 14, 2020
  • Seeking a preliminary injunction restraining and enjoining PLTP from abandoning the project unless and until it has established that an extended delay exists by and through its compliance with dispute resolution procedures set forth in the P3 Agreement


If the P3 Agreement Terminates

  • Due to Extended Delay, MDOT/MTA would have to pay the concessionaire to cover
    • Project debt
    • Outstanding committed investment
    • Reasonable contract termination costs (e.g., demobilization)
  • Due to Concessionaire Default, payments to concessionaire would not fully cover project debt nor committed investment and there would be no termination cost payments due to the concessionaire
  • MDOT/MTA may take over project construction, operations, and maintenance responsibilities (lenders also have rights)





Senator Cory McCray: I have a question regarding MDOT specifically. $392 million is what’s been discussed in reference to the federal funds. When we looked at the budget this past session, $60+ million dollars were there in federal funds and $800 million in special funds specifically from TTF. Could you let us know how much of that $392 million is going to FY2020 and FY2021? Currently what would the budget look like out of that $800 million?

Steven McCulloch: The special fund you are referencing are the Transportation Trust Fund dollars that are supporting the operating portion of the MTA budget along with the rest of the modes of transportation. The trust fund revenue projections are down from the pandemic levels and that is what is being addressed through the CARES Act funding. The total operating budget in 2021 for MTA is about $944 million dollars, most of that is the special funds.


Delegate Trent Kittleman: If the court constrains the Concessioner from abandoning the project what exactly does that mean? What would change from what’s happening now?

Gregory Slater: It means they have to continue construction until we complete the dispute resolution process. What we have today is a temporary order and a hearing for the injunction next week. we have to complete the dispute resolution process before they are able to exit the project.


Senator Jim Rosapepe: If we lose the next time we go to court what happens?

Gregory Slater: There are a variety of paths that we can take to protect the state and keep the project moving.


Delegate Marc Korman: Could you describe in more detail what that would look like in terms of short-term costs that the department would face?

Gregory Slater: If the P3 dissolves the state is on the hook for outstanding bonds and costs. The money that’s been expended has been using the state money first. All of those costs have to do with outstanding bonds and some of that debt. That would all be subject to litigation. The project is done with activity bonds and the bonds are backed by transit revenues across the state. We would issue the same kind of bonds that were issued by the private sector.


Delegate Michael Jackson: How concerned are you that this thing could spiral?

Gregory Slater: There is concern about the serious harm to project if they were to pull out. That is hard to reverse. That’s why we’re trying to push back in keeping the project going. My focus is really trying to get the project done. 



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