News from Annapolis
2020 Session:                            Delegate Trent Kittleman - District 9A
Week six - Special Edition
   *  Paying for Investment Advice?
   *  The Kirwan Bill is here;
   *  Carroll & Howard County libraries earn 
            STAR ratings!
  *  Report on Howard Delegation Hearing
  *  Legislative Scholarship application & information
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Paying for Investment Advice ?
Taxpayers, hold onto your wallets!
        For several years, members of the General Assembly have been questioning the way in in which the State Retirement Agency has been investing the more than $50 Billion in the State's Pension Fund.
        This past Friday, the Appropriations Committee had a briefing from the State Retirement Agency that confirmed our concerns.  Here is what the DLS Report said:
        "The system's return of 6.46% was less than its acturarial target of 7.45% and its policy benchmark of 7.09%.  . . . Missing the benchmark indicates that the system's active management of its portfolio generates NEGATIVE RESULTS, net of fees. "
        "In additon to missing targets in fiscall 2019, the system's investment program also continues to underperform its public pension peers, based on rankings of the Wilshire Trust Universe Comparison Service (TUCS).  The TUCS analysis compares investment performance of similar large pension plans, where the one-hundredth percentile represents the lowest investment return, and the first percentile represents the highest."
        Below is a table from the Report showing how Maryland has ranked among its peers over the last 10-year, 5-year, 3-year, and 1-year periods.   Maryland ranks close to -- or at -- the bottom among its peers, and has done so for years!  

1 Year
81 57 95 75 60
3 Years
88 95 91 94 92
5 Years 84 88 95 87 84 88
10 Years 99 91 95 100 94 87

In the chart above, LOW numbers indicate the best returns.
        The Agency says that the reason its returns are so low is due to their taking aa cautious approach, to safeguard the funds from sudden market downturns.  Their rationale causes them to invest less in the stock market and more into safer investments that have lower returns.
        Certainly, making conservative investments sounds reasonable.  But I submit that failing to meet even their own target of 7.45% in a market that has increased more than 50% over the last three years is not "conservative" investing -- it's incompetence. 
        Although I would prefer our money managers to invest more in the stock market, I'm not suggesting that the State take on more risk.  Fortunately, it is not an either/or choice; we do not have to choose between taking more risk for higher returns and being so risk-averse that we severely limit the opportunity to grow our Pension Fund. 
Match the Market Returns
        Index funds can match the return of a specific stock index with low operating costs. The annual expenses of actively managed mutual funds average several times greater than the expenses of index funds. Over the longer term -- three to five years and longer -- only about one-third of actively managed mutual funds outperform a comparable index. Investors who want to go with the odds invest in the stock and bond markets using index funds.
        One of the best features of an Index Fund is the low cost of investing.  The fees and other expenses are lower than those of managed funds. 
        The State Retirement Agency is asking for a 3.8% increase in it's budget, bringing the total budget up to $46.6 Million.  In addition to its Investment Division, the Agency collects employer and employee contributions and and pays out retirement benefits.  It also handles all communication with retirees.
        However, the additional $1.7 million is for five new hires into the investments division, bringing the total number of employees in that division to 40.  Thirty-one of these employees are engaged in the business of investing.  Twenty-four of the 31 have salaries over $100,000.  The top salary is $336,600.
        It's time we did something about this.
Hold onto your wallets!
HB 1300: Blueprint for Maryland's Future - Implementation

       HB1300 became available this past week; the hearing on the bill was yesterday -- Monday, Feb. 17.  HB1300 has 172 pages.  Having been following this process since day 1, I couldn't wait to read, and understand, this momentous piece of legislation.
        So I did.  Much to my surprise and delight, the bill was impressive in several ways.  First, it was well-written and well-organized.  That is not my experience with bills of this length.
        The second thing that surprised me was the accountability sections of the bill.  I have been skeptical throughout this three-year process that the Commission didn't seem to be taking accountability seriously.  I am glad to say, I was wrong.
        One thing I have learned in life is that debating "big ideas" may be interesting, but it is not particularly useful.  It's only when you put these ideas down on paper and fill in the details, that the issues become clear.
        My skepticism regarding accountability came from observing so many efforts heretofore fail -- particularly in Baltimore City.
        This bill recignizes how hard it is for elected officials to so no, when immediate political pressure demands that an accountability standard be ignored.  HB1300 addresses that problem by (1) creating an independent "Accountabiity and Implementation Board" ("the Board") that has the power to influence not just one department, but all of the different departments and agencies that affect education, and (2) creating "Expert Review Teams" whose function is to go into the schools to take a hands on look at where the problems are and to make recommendations for ways to fix problems.
        In addition there are numerous checks and balances directed at all stakeholders to encourage compliance in implementing the various provisions of the "Blueprint."  The overarching consequence for failure to comply is the Board's power to withhold 25% of the State funding until compliance is achieved.  After reading the bill, I am convinced that it has to teeth to enforce true accountability.
Training Teachers
        Another piece of the blueprint is enhancing the teaching profession so as to attract the best and the brightest students into the field of teaching.  Part of achieving that goal is higher salaries.  But that, alone, won't do it.  The bill includes detailed provisions for creating a "career ladder" that all teachers will ultimately be on, and climbing this ladder requires that teachers obtain National Board Certification.  Specific salary benchmarks go along with each rung, and movement up the ladder is not guaranteed.  Advancement depends upon performance.  Teacher evaluations will have defined expectations, wil include documented observable evidene, and will be "linked to student learning and not solely consisting of simple checklists."
'Show Me the Money!'

        That doesn't mean I support the bill, as is.  Nothing has changed the fact that this Blueprint for Maryland's Future is going to cost far more money than we have ever put into education -- significantly more even than the 43% funding increase that was made pursuant to the recommendations of the Thornton Commission. 
        Nor am I sure that some of the most critical provisions of the bill will pass muster with the teachers union.  During yesterday's hearing, I questioned the panel of union members whether they could accept that teacher promotions would now be based on merit rather thn seniority.  The response was not all that I hoped for.  "There are certainly parts of the bill we want to work on together," was what they said.
        The bill also creates the opportunity for full-day pre-kindergarten built around both public and private providers, significant wraparound services, College and Career Readiness, as well as a Career and Technical Education program.
        At this point, I really want to believe in this effort.  There is so much extraordinary work that has gone into this plan, I am convinced of the good it could do.
        But then, there is the extraordinary cost.  Spending mandates permeate the bill, providing not only for initial funds, but establishing ongoing spending commitments.  Here is just one example.  The Office of Student Financial Assistance provides students with loan repayment assistant.  Currently, $2 million is the annual appropriation.  The bill increases that amount over four years, to $4 million, to $8 million, to $12 million, and finally to $18 million each fiscal year thereafter.
        The bottom line for Kirwan?  'Show me the Money!'

[More to come on the Kirwan Blueprint as the bill progresses.]
District 9-A News
Mt. Airy Public Library.
Carroll County Reads!
      I like to brag that I represent the two counties with the best school systems in the State!  I now have another outstanding accomplishment by Carroll and Howard to add to my brag bag.
        The  Library Journal reviewed 6,333 libraries in the U.S.  Only 261 of them merited a star rating.  Carroll County earned a 4-star rating for the 10th time; only 31 libraries achieved that rating in consecutive years. 
Miller Branch Public Library.
Howard County Reads!
        The Howard County Library System received a five-star rating, as it has since 2010.  Fewer than 1% of public libraries in the U.S. are rated five-star.
        Maryland has a third star-rated llibrary system in Harford County which was also rated a four-star system.   Congratulations to all three counties!
Howard County 
District 9-A News
        The Howard County Delegation heard testimony on many different topics from a number of citizens last Thursday evening.  Of immediate concern to Howard County was the testimony given by Cory Hughes, president of Lincoln Tech, opposing a bill, as written, that would put the school out of business.  Lincoln Tech has a significant presence in Howard County and has been in operation for over 60 years.
        The bills in question are HB 593 and HB 470.   There has been an issue recently with private for-profit colleges and career schools that have enticed veterans to enroll and then failed to provide an education of any value.   The reason that veterans are the target of these solicitations is because they are able to pay for their entire education bill with 90% federal subsidies and  can pay the final 10% with military education benefits.
         This makes veterans immune to the 90/10 rule that says students must pay at least 10% of the tuition with non-federal funds. The intent of the 90/10 rule is to show that institutions can attract funding from sources other than solely from the federal government, as a proxy for quality.
        Because the law only applies to federal Title IV education funds, veterans benefits are exempt from the 90/10 rule. 
        The bills proposed by the legislature eliminates this "loophole."  Unfortunately, that approach affects all schools, not just the unscrupulous ones.
        In his testimony, Mr. Hughes testified about the effect this legislation would have on Lincoln Tech: "Unfortunately, our internal calculations confirm that our institution would fail the threshold leaving us with no choice but to teach out and close.  His testimony included a cogent explanation of why the existing law is fair, particularly to veterans and others who receive no family contribution to their education.
        Mr. Hughes proposed several amendments to the law, and our delegation seemed inclined to help.
Delegate Kittleman Scholarship
District 9-A Residents:
        High school seniors, current undergraduate students at a 4-year college, a community college, or a private career school are eligible to apply for a Legislative Scholarship.

  For questions regarding the application process, call my Annapolis office and speak with Chelsea Leigh Murphy, my Legislative Aide, at 410-841-3556.
Please be sure to have your completed application postmarked 
by April 1, 2020     
Delegate Trent Kittleman
District 9A, Western Howard County and Southern Carroll County (Sykesville)
Room 202, Lowe House Office Building
6 Bladen Street,   Annapolis, MD 21401
410-841-3556  *   Trent.Kittleman@House.State.MD.US
Interim Office
3000 Kittleman Lane,  West Friendship, MD 21794
301-661-3344  *
Administrative AideChelsea Leigh Murphy