Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland

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“More misguided spending will not fix Maryland schools”

Something to think about when you vote.   From the Baltimore Sun of June 24, 2018:

Maryland ranks 6th in the nation in teacher salaries and 10th in the nation in per-pupil spending, according to EdBuild. From 1998 to 2014, our research reveals Maryland increased education operating expenses by $3.8 billion in inflation adjusted dollars — a 45 percent increase. Yet the Kirwan Commission laments how poorly Maryland schools have performed over that time.

 

Why Progressives Need Economic Growth

From The Seventh State June 11, 2018:

Some on the County Council would like to expand pre-k education, a huge progressive priority and a great idea.  The problem is that it would cost – at minimum – tens of millions of dollars to be meaningful.  And when the county is already relying on tens of millions of dollars in employee and retiree health insurance money just to fund its current budget, there is no way that’s going to happen.

Irresponsible budgeting?

Posted  May 23, 2018, on Seventh State:

And next year is already projected to see a $76.8 million shortfall after this year’s shortfall, which was over $100 million.

Suppose you were an elected official reading that information.  What would you do?  Perhaps you might say, “Wow, things are kind of tight.  We need to cut back a little because if there is a downturn, we are going to have a problem.”

That’s not what happened.  Instead, the council tapped a total of $77.7 million in one-time fund transfers to finance ongoing spending both this year and next year.

The County Council continues to increase the budget in the face of falling revenues.  How long will this behavior go on?.

 

 

 

Questions for meeting of May 16, 2018

Topic:  “WSSC and its Financial Future”

Speaker:  Joe Beach, Chief Financial Officer, WSSC

                         Free and open to the public

The following questions have been sent to the speaker in advance of the meeting:

1.  What criteria does WSSC use in its decision-making process given the need for new pipes, old pipe repair and replacement, processing facilities, IT investments, etc. especially as WSSC is reaching its debt limit and thus must carefully set priorities for capital spending while maintaining quality and service levels?

2.  We understand the approved capital budget for WSSC includes a $250 million project to build a new anaerobic sewage treatment plant at Piscataway for bio energy.  While WSSC policy does not require that a return on investment justification be provided for projects, do the economics of this project justify this large expenditure of $250 million?  Or could the sewage be more economically transported to Blue Plains for processing.  The documented business case dt. 6/21/12 does not address this option.  Alternatively, are there other projects with a higher return on investment that have not been approved?

3.  Debt service is the largest driver of WSSC’s budget and is projected to hit 40% of its total expenditures in 2023.  We also note that the “new debt” projections for FY 2019, 2020, and 2021 jumped from:
In fall of 2014 (FY 16 budget): $327 million, $278 million, and $219 million for a total of $824million
In fall of 2016 (FY 18 budget): $505 million, $510 million, and $429 million for a total of $1.44 billion
In fall of 2017 (FY 19 budget): $558 million, $562 million, and $545 million for a total of $1.67 billion
New debt projections for the next three years have doubled. Could you address this?
4.  Debt shows big drops in FY 22 and 23 for new water and sewer debt issues.  Is this realistic?  Are the projections based on current known costs with no contingencies for unknowns.  Does this assume that there will be no change to the water loss rate which was 17.9% in 2016 and for sewer line infiltration of 40%?

5.  With the new rate structure, will the highest tier (the rate paid for practically all of the water used by the largest accounts – hotels, NIH, UMd students), meet the Public Service Service Commission’s (PSC) criteria for non-discrimination? Also would let’s say anything over $17.00 per kgal be unjustifiably high and thus not meet the PSC criteria?

6.  We also note a rate increase jump to 6% from 2020 to 2023.  Since presumably this will be determined by the size of the CIP, the operating budget, weather events, interest rate for debt issued and change in the number of customers, it is also obvious that the first two are well within the control of the WSSC.  Will the PSC weigh in as to whether such an increase is reasonable?  How often has the PSC done so in the past?

7.  The negative expenditure adjustments that begin in 2020 appear to be an artifice to make the debt service coverage ratio work. Is there a more rational explanation for this?

8.  The expenditure increases in the fiscal plan assume no new hires (except for attrition).  Are the collective bargaining agreements negotiated by the union affordable?  By how much will these increase the budget?  Also are the health and retirement benefits of WSSC employees similar to those of Montgomery County Government employees?

Next meeting:  TBA

County Council gives preliminary approval to 4.5 % WSSC rate increase

From the Bethesda Beat article posted May 7, 2018:

“On Monday, the Montgomery County Council gave preliminary approval to a 4.5 percent rate increase requested by the Washington Suburban Sanitary Commission in its proposed fiscal 2019 budget.  If the budget is formally approved Thursday during a joint meeting of the councils of Montgomery and Prince George’s counties, it will mark the 15th straight year of rate increases for the utility.”

Md. Pension Fund Lost Out on $8.8 Billion in Retiree Income

From a new report by the Maryland Public Policy Institute:

“Maryland state pension managers lost out on nearly $9 billion in income over the past decade by paying higher-than-average investment fees to Wall Street managers in exchange for lower-than-average investment returns,…Compared to its peer group states, Maryland lost out on an estimated $5 billion in income, an amount sufficient to replace every public school in Baltimore City with a brand-new facility.”

 

Economic Underperformance in Montgomery County

From a new report on the health of Montgomery County’s economy:

“Between January 2001 (the beginning of the data series) to September 2017 (the most recent month for which data are available), Montgomery County added 26,459 jobs. That translates into 6.0 percent growth in  the number of jobs supported by the county’s economy.  Over that same period, Maryland’s total employment expanded 12.2 percent and the nation added 10.7 percent to its job totals. In other words, despite representing approximately one-sixth of Maryland’s population and a quarter of its household income, Montgomery County created fewer than 1 in 10 net new Maryland jobs between early-2001 and the fall 2017.”

The report—“The Coming Storm: How Years of Economic Underperformance are
Catching up with Montgomery County”—was done by the
Sage Policy Group for Empower Montgomery and is available here.

 

Testimony before the County Council on the Proposed FY 2019 Budget

Testimony before the County Council on the Proposed FY 2019 Budget

April 11, 2018

Thank you for the opportunity to testify on the proposed FY 2019 budget. I am Joan Fidler, president of the Montgomery County Taxpayers League.

I’d like to note that this is very definitely a $5.56 billion election year budget – no property tax increases and a decrease in the property tax rate. And kudos to the County Executive for increasing the county’s reserve fund to $492 million.

And now a cautionary note: income taxes continue to be volatile. We ask that despite pleas from many for “more money, more money, more money” that the only exceptions be for the most vulnerable in the county – the working poor, the homeless, veterans and the developmentally disabled.

Next, we believe it is extremely short-sighted and somewhat reckless to reduce the county’s contribution to the employee retirement fund by $21 million – let us not mortgage our future.

Regarding our public schools where funding has been proposed at $19 million over the mandated what we call the Maintenance of Emolument level, we ask that you require the school system to provide you with the specific goals that they plan to achieve along with performance measures and timelines. If they are unable to do so, then taxpayers are funding a budget of $2.59 billion with results of which we are unaware. The school system does have a strategic plan that I would describe as more poetry than prose.

And here are two ideas: (1) that MCPS establish at least one charter school, perhaps in easy county, focused entirely on innovation – perhaps one that attempts new ways to narrow the achievement gap, and (2) that MCPS establish an Inspector General position reporting directly to the Board of Education – MCPS is too large a system to be run by bureaucrats with no “lean, mean junkyard dog” overseeing its operations, and more important, its performance. The Board alone cannot do it.

And now to job creation. Our increase in job growth has been, let me understate this, abysmal. According to BLS, the growth of establishments in Montgomery County between 2011 and 2016 was SIX! We were dead last in the Washington region. Is the Montgomery County Economic Development Corporation really succeeding?

I end on a somewhat nostalgic note as this is the last time I will be testifying on the budget before this particular County Council. Four of you will not have to sit through such hearings again. And so we at the Taxpayers League wish council members Berliner, Elrich, Floreen and Leventhal the very best as you move on to other pursuits.

Thank you.

Questions prospective voters could ask candidates for county and state office.

Many voters have asked us to come up with thoughtful questions that they could ask of candidates for local and state offices.  Too often we hear the same promises of greater support for schools, better transportation and lower taxes.  But very little is said about how a candidate intends to achieve these goals.  Our questions below are designed for voters to ask candidates directly so they can get a specific answer as to how the candidates intend to fulfill their promises.

 

County Level:

1.  Now that debt service accounts for 10% percent of the county budget and is for all intents and purposes at its ceiling, how would you address school construction needs?

2.  The Department of Liquor Control is run by the county government and handles the purchase, warehousing and sale of liquor bringing in $28 million in revenue in a $5.5 billion county budget.  Do you believe that the county government should employ 442 county staff and cover their salaries and benefits or does this function belong in the private sector?

3.  The County Executive’s budget proposal for FY 2019 gives the school system $2.59 billion of which $19 million is over and above the mandated Maintenance of Effort level.

–  Do you believe that the school system, while it describes how it will spend the increase, should also show how the increase will produce results?  How would we know that such results have been achieved?

  • 45% of the MCPS budget is overhead (non-instruction), Should MCPS cut overhead costs before it gets an increase in county funding? By how much?
  • Public school budgets are created by non-elected public employees without formal input from the taxpaying public.  What would you do to make the taxpayers feel more confident that the schools are spending their tax dollars wisely? Is it time for an Inspector General for MCPS that would look not only at waste, fraud and abuse but also at program performance?

4.  According to Maryland’s State Department of Assessments and Taxation, there were just 19 new filing for new businesses in Montgomery County in FY16. In the year before there were 57 new business filings in the county. What specifically would you do, at the county level, to encourage business growth in Montgomery County?

5. In addition to reduced income tax forecasts, recordation/transfer and energy taxes are forecast to be lower than expected over the next 5 years.  What are some of the programs or services where you would reduce spending to balance the budget?

6.  County employees will get a 2% cost-of-living increase along with a 3.5% “step” increase in FY 2019.  Do you believe this comports with wages in the private sector in Montgomery County?

7. It has been said that collective bargaining gives unions an unfair advantage in arbitration, leading to pay raises way above market and the highest paid employees in the region.  Would you support changing the arbitration rules? Also would you support more transparency in collective bargaining negotiations so that the public is aware of the “going in” positions of labor and management and is allowed to express their opinions at a public hearing before the agreement is finalized?

8. County income taxes have varied significantly from forecast for the last 2 years.  Property taxes are less volatile, but stagnant, and subject to Charter limits.  Would you support increasing property taxes on home improvements by treating them as “new construction” and thus gaining more for the county in property taxes – without Charter limit restrictions? In other words, do you support the inequity of property owners of unimproved properties supporting those who have made major improvements to theirs?

9.  WSSC, the largest monopoly in the state of Maryland, has prepared a six-year fiscal plan that requires 6% rate increases to maintain the debt service it has accrued to meet its net revenues.  WSSC also has ad valorem taxing authority to raise county property taxes. What oversight would you propose to make WSSC an efficient and effective monopoly to avoid these annual rate increases or even an increase in property taxes? 

10. What specific experience do you bring to the office to which you wish to be elected which demonstrates your development or implementation of a program in the public sector.

State Level

1.  The Maryland State Retirement and Pension System has $20 billion in unfunded liabilities.  The last time the State fully funded the system was in 2000.  Further, the State pays $500 million a year to financial management firms to manage pension investments at no higher a return than low-cost index funds.  Should we continue to pay out $500 million a year to these firms?

2.  For every $1 that Montgomery County taxpayers send to Annapolis, we get 20 cents in return in direct aid.  Howard County, a wealthier county than ours gets 24 cents on every dollar.  How would you get us, at least, to Howard County levels?

3.  Our delegates to Annapolis inform us, every year, that they have passed a “balanced” budget.  True, in one sense.  However it excludes long-term liabilities which in pensions alone exceed 10s of billions.  How would you provide transparency in budgeting?

4. According to the State Department of Assessments and Taxation there were just nineteen new business filings in Montgomery County in FY16.  In the year before, there were 57 new business filings in the county.  What specifically would you do, at the state level, to encourage more business growth in the county?

5. Would you support Maryland Public Service Commission oversight of the WSSC, the largest monopoly in Maryland? Would you support privatizing the WSSC?

6. Do you favor the modernization of the state’s laws governing breweries? Breweries—most of which are small businesses—are limited to 2,000 barrels of beer they can sell to visitors in their tasting rooms. They can sell an additional 1000 barrels but only by adhering to a “buy back” provision requiring that they sell the extra beer to a distributor and then buy back their very own beer. This puts our breweries at a competitive disadvantage regarding surrounding states and hinders job growth and the concomitant increased tax revenue.