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Maryland’s Budget Deficit May Hinder Business Improvements

Maryland association
Cailey Locklair

While holiday spending has been bolstered by lower food prices in Maryland, the state’s upcoming legislative session could bring major changes, according to Cailey Locklair, president of the Maryland Food Industry Council. 

MFIC is focused on three major issues for the upcoming session, which begins in January. Across the 90-day session, it hopes to see alcohol regulation revisions, stronger laws targeting organized retail crime and regulation of merchant cash advance organizations. In addition, lobbyists will have to see how the state government handles the budget deficit.

“The report [from the non-partisan Department of Legislative Services] projects an over $1 billion structural deficit in levels that we haven’t since the Great Recession,” Locklair said. 

She added that this will be a test for Gov. Wes Moore, whose first anniversary in office will coincide with the start of the session. 

“[It] is going to be a big struggle for lawmakers. And so the questions become, ‘Are we going to see tax increases? Are we going to see cuts? Are we going to see a combination of both?’ Or are they going to identify a new revenue source?”

Most talk has involved finding new ways to raise revenue. According to Locklair, spending cuts are “unlikely,” so businesses may be tapped first. For large grocers, that could mean implementing combined tax reporting and the “throwback rule.” 

“They’re basically different calculations for how corporations calculate their tax here in the state and [is] potentially huge increases for them,” she said. 

The deficit has come as a “shock” to Locklair, as there was a  $5.5 billion budget reserve when Moore took office. 

The State Business Tax Climate Index ranks Maryland as the 46th business-friendly state. Locklair attributed the low showing to the overall tax burden on retailers, something she doesn’t expect to change. 

In an effort to create a better business environment, MFIC is hoping to secure for food retailers the ability to sell beer and wine. Maryland is one of just four states that do not allow them to do so. Lobbyists have been working since 1978 to change that, according to Locklair. 

“That’s been a fascinating problem here. The liquor three-tiered system is just deeply entrenched in politics,” she said. “And there are concerns I think that have changed over time … many package store owners are first- or second-generation immigrant families and minorities. And so that’s a sensitivity. 

“The concern that has played out over time is the expansion will cause health issues in communities … those are the two main arguments.”

Organized retail crime is also a challenge. Thirty-four states have implemented laws addressing the issue within the past year. Locklair said Maryland will not be the 35th. 

“Maryland is a state that has done nothing in this area – and we’ve been working on it for 10 years,” she said. “Numerous companies have come out and said very publicly that they will no longer be able to operate stores in certain areas because of the levels of organized retail crime.”

MFIC has made appeals to the governor, attorney general’s office and state leadership. 

“Maryland is a state that typically does not create any sort of new felony charges … it’s also careful about the creation of new misdemeanor charges,” Locklair said. 

A few years ago, Maryland passed the Justice Reinvestment Act that, among other steps, increased the felony theft threshold from $1,000 to $1,500. In the past two years, Locklair said legislation targeting organized retail crime passed unanimously in the state Senate but not the House. 

Finally, MFIC hopes to improve the life of businesses by making online commercial lending more transparent. Many financial technology companies, also known as FinTechs, have been able to “take advantage” of business owners through unclear lending policies. 

“Banks have very strict guidelines about how they lend and so this whole booming industry has cropped up … it’s not like a fixed-rate loan,” Locklair explained. “What retailers do is they sell a future percentage of their receivables to them and then end up paying 300 percent in interest. It’s so easy to get taken advantage of.” 

California and New York have passed measures regulating the practice. Likewise, congressional legislation has been introduced, according to Locklair. One of the most recent examples of the federal government’s efforts to wrangle in FinTech is the Federal Trade Commission’s settlement with Voyager Digital, a cryptocurrency company, and bringing charges against its former CEO, Stephen Ehrlich. 

“It’s an issue that’s really starting to gain traction,” Locklair said. “It’s a relatively unregulated type of lending. And they don’t have to disclose in the way that you have to with a personal loan … you don’t realize what the actual terms of the loan product are.”

Nevertheless, little is being done on a federal level. 

“This is why you see action predominantly [in] the states. Not only in this space but in every space now because nothing is passed at the federal level. Nothing is happening there.”

She went on to note the FinTech bill MFIC is proposing is “really straightforward. And it’s almost laughable that this bill has not passed.” 

The main objective is to require loan stipulations to be presented at the time of lending. 

“What is the total cost? What does the repayment schedule look like? What fees are associated with it if you repay? Or if you pay late? Those basic things that come along with a lending product. What the industry fights us on is we’re asking for an estimated APR,” Locklair said. 

Much like organized retail crime legislation, the MFIC-backed FinTech proposal has cleared the Senate only to fail in the House. Locklair said groups such as the Maryland Consumer Rights Coalition, the Maryland Cash Campaign and the Maryland Banker’s Association have joined its push.

Read more market profiles from The Shelby Report.

About the author

Sommer Stockton

Web Editor

Sommer joined The Shelby Report in January 2022 after graduating from Brenau University in Gainesville, GA with a B.A. and M.A. in Communications and Media Studies. Sommer is excited to learn about the grocery industry and share her findings with The Shelby Report's readers!

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