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State lawmakers seek to reform Maryland Environmental Service after revelations of lavish spending

Maryland lawmakers are aiming to reform the Maryland Environmental Service after learning that the agency’s former director spent lavishly and negotiated a significant payout when he left to become the governor’s chief of staff over the summer.

The Maryland Environmental Service Reform Act is designed in part to make the agency’s governing board independent from its executive director — who currently is its chair and appoints three of the board’s nine members.

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The legislation being drafted by top Democrats would also set limits on executive salaries and perks, the bill’s sponsors say. And it would require the agency’s board to undergo ethics training and make its meetings more transparent.

“We need to make sure they are properly stewarding tax dollars,” said Del. Marc Korman, a Montgomery County Democrat and a lead sponsor of the legislation.

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The agency came under scrutiny after The Baltimore Sun reported in August that the ex-director, Roy McGrath, was paid more than $238,000 by the independent agency when he departed to join Republican Gov. Larry Hogan’s team. McGrath called it “severance” pay, though he voluntarily left the agency to take the chief of staff job in the governor’s office paying the same salary.

Subsequent reporting by The Sun and a legislative investigation revealed that McGrath and agency executives routinely earned five-figure bonuses, that he was paid more than $55,000 in expense reimbursements after he left the agency, and that he tried to influence how his former agency responded to The Sun’s report.

Members of the board of directors testified that they felt pressured to approve the payout to McGrath after he insinuated that it was endorsed by Hogan. The governor has said McGrath told him he had financial matters to work out as he changed jobs. But Hogan said he didn’t know about or endorse a payout.

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The lawmakers hope to prevent the types of problems that have been uncovered at the environmental service over the last several months.

“MES, while it does a lot of important work, has not always acted in a manner consistent with an arm of the state government,” Korman said.

Korman said the bill, if passed, would help prevent “the type of misbehavior that it appears Mr. McGrath partook in.”

It explicitly bans severance payments to top MES employees who move to other positions in state government, such as the six-figure payment McGrath received last May. And if a departing MES executive takes another state job within one year, he or she would be required to pay back the severance.

The Maryland Environmental Service performs public works and environmental projects such as operating landfills and dredging waterways. Its primary customers are local and state government agencies, and those contracts with other governments make up 95% of the environmental service’s budget.

McGrath initially defended the severance payout and other spending as customary and necessary at an agency that he said operated much like a private business. As an independent agency, MES is not part of the state personnel system and sets its own standards for some practices, including compensation.

He’s been more circumspect about his comments recently, including when he testified before lawmakers Dec. 16. Taking his lawyer’s advice, invoked his Fifth Amendment right against self incrimination more than 170 times.

Korman and others maintain that MES needs to watch its finances just as carefully as any other part of state government. The MES budget is part of the overall state budget that is annually reviewed by the General Assembly’s budget committees.

“It’s our local and county government agencies that are paying them,” Korman said.

Sen. Cory McCray, a Baltimore Democrat, is the lead sponsor of the bill in the Senate.

“With anything, there are always opportunities to take a look at it and make it operate better,” McCray said. “Roy McGrath hyperfocused it.”

Officials at the Maryland Environmental Service declined to comment on the bill.

“MES management is reviewing the proposed legislation, but is not able to offer a comment at this time,” Dan Faoro, an MES spokesperson, said in a statement.

The bill from Korman and McCray has been given the designation as House Bill 2 and Senate Bill 2, a symbolic indication that General Assembly leaders see the legislation as among their priorities for the annual session, which begins Jan. 13.

The bill includes 20 pages of detailed changes that would be required of the Maryland Environmental Service, ranging from the composition of the board to a requirement to hire a diversity officer, according to a draft of the bill provided to The Sun. The full text of the proposed bill is not yet posted for public review.

The board currently includes the executive director and multiple subordinates of the executive director, allowing the director to have influence.

The new board would be composed of seven members, mostly appointed by the governor and confirmed by the state Senate. One of the members must come from a list provided by associations for city and county governments, and another member would be the state treasurer.

No MES employees would be allowed to serve on the board.

McCray said the current makeup of the board means that the executive director can have too much sway, potentially leading the board to approve the executive director’s proposals without scrutinizing them. “That’s not the way a board is supposed to function,” he said.

Board members also would undergo training on ethics, diversity and harassment, and their meetings would be required to be streamed online.

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The board would be required to set policies on compensation for employees, including severance, bonuses, tuition, travel and other expenses. Those policies would be sent to the General Assembly for review when they are established and whenever they are updated.

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And when MES signs a contract worth more than $250,000, it would need to be approved by the state Board of Public Works, which oversees state spending.

The aim, bill sponsors say, would be to provide more oversight for contracts like one that McGrath entered into with a public relations firm. Contracts with other government agencies would be exempted from the Board of Public Works requirement.

The bill clarifies that MES employees, who are not currently unionized, may organize with a union and seek a labor contract.

The bill also would make clear that the top employee of the Maryland Environmental Service would hold the title of “executive director.”

McGrath styled himself as “CEO” or “chairman” of the environmental service during his tenure. When questioned about that during his testimony before lawmakers, McGrath initially would not answer questions about his title. He eventually said that he thought using the title “CEO” was necessary for “clarity.”

Korman said the tweak to that part of the law will prevent anyone in the future from claiming “grandiose titles” at MES.

Hogan, meanwhile, created a commission to review MES and other independent state agencies. That commission is charged with making recommendations for reforms by Dec. 1, 2021 — well after state lawmakers are likely to act.

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