Fact checked Maryland State of the State Address

For those of you who missed it Gov. O'Malley gave his State of the State address last week. The full text is available here. It's a quick read but I'll sum it up for you... Essentially O'Malley began with the economy, claiming Maryland has to once again overcome challenges and that he understands the plight of Maryland families in facing 1% wage increases while the price of day-to-day staples is increasing as much as 100%.

The Governor is comparing apples to (no, not oranges, more like) jellyfish. There aren't even in the same family of statistics One is a national level number the other a single local commodity. It ain't that simple, and it's misleading to say something like this in your most important speech of the year.

Why the glum outlook? Why the somber tone of the speech as reported by foes and allies alike?
Probably to correct for the over exuberance of completing last November's special session without gridlock. Or maybe to justify the tax increases of the special session by citing such "hard times".

Fact Check

However, he's overstating Maryland's economic problems by comparing national real wage increases of 1% over the past seven years (corresponding to the Bush presidency I suppose) to a single commodity such as bread, milk or gasoline (100%). That's because Maryland's real wages have increased more than 1% over the past seven years especially in the certain counties. And according to Federal Government annual retail gasoline price statistics, the increase in the price of gasoline for the Central Atlantic region since 2000 was 83%, not 100%. That's a lot of rounding (up)!

O'Malley also spent time mentioning budget cuts so as to re-emphasize that cuts in the budget did take place by stating to the legislature that they "restrain spending and restore fiscal responsibility". He failed to mention the many areas of spending increases (this Sun article puts the increase at the bottom so scroll down) however.

Quickly the speech moved on to important by politically less interesting topics such as improving transportation infrastructure, reducing crime (who would oppose that), and then touching on a variety of topics from workforce development to energy conservation.

Had the recent tax increases been tied to law enforcement, infrastructure improvements, environmental conservation and energy conservation I believe more Marylanders have accepted more modest tax increases. I wasn't so much what was done, but how it was done.

Fostering competition is part of the answer to rising energy costs

If the legislature wants to do something about high energy prices then they should focus on increasing competition and reducing barriers (such as high corporate tax rates) to businesses. One concrete way to do this is repeal the divorcement laws (mentioned below).

How about some creative thinking like establishing a consumer energy web portal (as California did)with efficiency information, contact info for local energy companies,
state programs for alternative energy, all in one place and setup by
web professionals so the site is easy to use?

Helping consumers shop around is also a key component to reducing energy costs. Today, I reduced my fuel oil bill by 12% or $148 dollars for the rest of the winter by calling various Oil companies in the area
to compare prices. The cheapest I found ($2.88/gal for No. 2 Heating Oil) today was with Griffith Energy Services and tell them I sent you!

More on Energy and Bad Delegates

In keeping with the Energy theme since this is an issue critical to all of us, the House of Delegates Economic Matters Committee held hearings last week on Gasoline price gouging in Maryland. Now if we all had a nickel for everytime a state committee held hearings on price gouging we could buy all the fuel we wanted!

As no transcript is available to the public (no it’s not on the website) on what happened during the hearings, I emailed the Committee chair Dereck Davis and sub-chair David Rudolph to ask for a brief comment. Delegate Davis failed to respond at all while Delegate Rudolph sent a terse message, “While I appreciate the opportunity, I must decline simply due to time constraints.”

Well at least he responded to the email request in the first place but isn’t there something wrong with Delegates who won’t even provide a scrap of info to the public on what they are doing? As I’m not a constituent of either I don’t expect so much but my own delegate, Ron George also was non-responsive to phone calls and emails during last year’s session.

Back to the Energy issue at hand, namely Gasoline Pricing. First we have to understand how it works in general and all the factors that influence price.

One factor is legislation currently in force. In Maryland (and Delaware and Virginia), due to previous “divorcement” legislation, refiners are not allowed to own fueling stations. This adds price pressure to fuel products and as a simplistic explanation more middlemen are involved which results in higher prices than in other states without divorcement laws. So thanks to the legislature, Marylanders already pay an extra 3 cents per gallon. On top of that, gasoline taxes in Maryland are higher than those of all neighboring states except Pennsylvania. So if you’re in Virginia, you might want to fill up the SUV!

Then there’s the wholesale pricing debate which was the subject of last week’s hearings. How are wholesale prices determined you may
wonder? Doesn’t it have to do with travel distance from the wholesale location? Nope!

Pricing at your local fuel station is determined by a mysterious process called Zone Pricing.
Zone pricing explains why fuel 10 miles away might be 5-10 cents more or less than in your neighborhood. So while there is wide variation in price it’s not due to conspiracy but rather due to competition among stations, just as the price of any other goods is determined. While price volatility has increased in recent years, the overall margin at the retail level has not increased much and any increase is probably due to the fact that retailers costs have increased over time as well.

For an upcoming post we will show you the numbers…

Maryland Energy issues

First let’s give an “atta-boy” to Governor O’Malley for at least paying attention to the State’s Energy Issues, specifically Electricity Generation and Consumption. He swore in Malcolm D. Woolf as Director of the Maryland Energy Administration last year and Mr Woolf seems very competent and qualified for the position. The MEA Strategic Electricity plan is a thoughtful and practical document, however I’m skeptical of many of the recommendations including the legislation of consumption reduction goals. That time and effort would be better spent on a public relations campaign aimed at Marylanders with tips on how to reduce their electricity consumption.

Now let’s recall the O’Malley campaign promises regarding energy policy. They include “Defending Maryland Against Rising Energy Prices”. However in a turnabout from defending to abandoning, the Governor proposed creating a $100 million “Strategic Energy Fund” ostensibly funded by energy companies. Alas most agree they will in turn pass the charge on to customers and there will very likely be yet another cost increase to Maryland electricity customers. This is particularly painful for BGE customers still reeling from last summers 100% plus increase.

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Regards,

Peter