Maryland’s disparity grant program was created more than two decades ago to provide state aid to less wealthy areas of the state.
The policy was aimed at giving counties that have lower revenues from local income tax an opportunity to get money from the state, according to the state’s Department of Legislative Services.
Washington County’s legislative delegation is concentrating this year on how to get the county on the list of jurisdictions receiving the disparity grant, something it has been locked out of the last three fiscal years because of a change in the rules used to calculate the aid.
The grant is distributed according to a formula where counties with per-capita income tax revenues of less than 75 percent of the state average would be eligible for a state grant.
The lower the per-capita income tax revenues of a county, the higher the grants would be.
In fiscal year 1992, the total amount of disparity grant aid to counties was $8.5 million. By fiscal year 2010, that amount had ballooned to $121.4 million.
“So what was a comparatively small amount became a major line item in the budget,” said Del. Andrew A. Serafini, R-Washington, chairman of the Washington County delegation to the Maryland General Assembly.
That’s when the state stepped in and froze the program, restricting the amount of aid available in the future to 2010 levels.
But that year, Washington County was not eligible for the grant because it was less than a percentage point over the 75 percent threshold that decided whether a county gets the grant or not.
And because the county was not eligible that year, it has been locked out ever since, losing millions of dollars even as its per-capita income tax revenue declined because of the region’s declining economy.
“Our economy is manufacturing, construction, transportation ... and those areas got affected more than the others,” Serafini said.
If the county doesn’t get any disparity grant money in fiscal year 2014, it would have lost out on more than $20 million from fiscal year 2011 to 2014, money it would have been eligible for had the program not been frozen in 2010.
A budget analysis by the state’s Department of Legislative Services concluded that freezing the program at 2010 levels was having some unanticipated consequences.
“For practical purposes, any jurisdiction that received $0 in the 2010 grant cannot receive any funding in any future year if its income tax disparity falls below 75 percent, making it eligible for the program,” the analysis concluded.
The other consequence: The gap between grant-eligible counties and the statewide average has widened because of some economic recovery in the better-off counties, but the funding remains frozen at 2010 levels.
“The program is not equalizing local income tax revenues to the extent it was intended for,” said Hiram Burch, a manager specializing in local government research and analysis with the Department of Legislative Services.
The cap, he said, was not working for some jurisdictions even though the intent of the program was to equalize local income tax revenues.
Last year, the department recommended that “eligible jurisdictions” such as Washington County be added to the program again, and the county get $2.7 million, about 40 percent of what it might have received without the program being frozen.
But efforts by the local delegation to get a part of the grant were not successful.
Another grant sometimes referred to as the supplemental disparity grant, or the teachers retirement supplemental grant, was given to counties last year where teacher pensions costs were transferred to local counties. But these grants mostly were given to counties that already received disparity grant money, according to a previous Herald-Mail story.
Serafini said this week that “politics is a problem when people just want for my county and not the other.”
The disparity grant works well when it is allowed to work, he said.
“It is blind to where the county is. It’s blind to anything. It simply says that wealth is not distributed equally across the state, so let’s recognize that and let’s say we will help those that are collecting a lower than 75 percent of the tax average from the rest of the state,” he said.
The county delegation’s strategy this time around is to band together with other counties affected by the 2010 freeze.
Wicomico County, for example, has lost close to $22 million.
But Serafini admitted that the chances of recouping the entire amount — $7.7 million for the 2014 fiscal year for Washington County — is unlikely.
“... the opportunity to recover a portion of it, I hope there is a chance for it,” Serafini said.
Serafini plans to introduce a bill that would seek to alter the formula for how the grant is calculated so that the county gets some money. Another option would be to try and get the money by an amendment to the budget process.
A lot depends on how federal fiscal cuts will affect the state, he said.
“I think that is why we are seeing some reticence on all programs for expansions,” he said.
The disparity grant money comes to the county with no strings attached and it can be used to improve roads or provide for capital projects.
Gregory B. Murray, administrator for Washington County, said he was hoping to get a part of the grant this year.
“Anything would be better than what we get now,” Murray said.
He added that he hopes that the county’s economy would improve substantially “so that we could work our way out of eligibility of the disparity grant.”
The following shows what funding 11 jurisdictions in Maryland might lose as a result of the freeze on disparity grants in fiscal year 2014:
Wicomico County — $8.9 million
Washington County — $7.7 million
Prince George’s County — $4.6 million
Allegany County — $4 million
Dorchester County — $2.4 million
Carroll County — $1.9 million
Somerset County — $1.8 million
Cecil County — $1.5 million
Garrett County — $800,000
Baltimore City — $400,000
Kent County — $350,000