Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland

Labor Contracts

Notes from the meeting of March 22, 2017

Topic: “The FY 2018 Montgomery County Budget and what it means for County Residents”

Speaker:   Jennifer Hughes, Director
Office of Management and Budget, Montgomery County

Wed., March 22, 2017  –  7:00 – 9:00 pm
Council Office Bldg. (3rd Fl. Conf. Rm.), 100 Maryland Ave., Rockville, MD 20850

Free and open to the public

Here are the 9 questions sent to the speaker in advance of the meeting and the answers supplied by the speaker at the meeting:

Q1.  Moody Analytics predicts that reductions outlined so far by the Trump administration would reduce employment in our region by 1.8%, personal income by 3.5% and lower home prices by 1.9%.  These reductions might affect Montgomery County even harder given the presence of several federal agencies and tens of thousands of employees in the county.  The budget has been touted as a “cautious” budget.  Is there room in this budget to handle what could be deep cuts later in the year?

A1. The proposed Federal budget suggests major cuts in Federal programs and employment, which will affect the county significantly. The county is home to many Federal agencies (Nuclear Regulatory Commission, National Institutes of Health, etc.). There are approximately 50,000 federal employees in Montgomery County. The county has not made any serious efforts to analyze the effects of the Federal budget so far and will wait until the federal budget picture becomes clearer.

Q2.  Can you discuss the major sources of revenue for the County, and comment on the percentage contribution of each and their volatility (unpredictability) for the last 5 years?  Are the revenue projections that underlie this budget realistic?  How so?

A2. The major source of revenue is property tax which accounts for $1.8 B (28.7%) of total revenue followed by income tax of $1.6 B ( 25.3%) and Intergovernmental which is State and Federal funds of $1.1 B almost all of which goes to the Montgomery County Public Schools (MCPS). The rest of the revenue pie consists of transfer and recordation taxes, charges for services, fines and miscellaneous and other taxes.

As to revenue projections, so far these projections have been valid.

The county’s bond rating has remained at AAA, the highest possible, allowing the county to borrow at a rate less than 1 percent. Much of the bond revenue goes to finance capital projects such as school buildings and police and fire stations.

The County Executive’s highest priorities are education and public safety. For FY 2018, 49.6% of the budget is for MCPS 12.2% for public safety and 8.4% for debt service.

Q3.   What did the property tax increase of last year actually accomplish?  Could you list the programs towards which this increase was applied and did these programs achieve the ends for which they were intended?  Given that the tax increase raised the base for these programs, how are these funds being spent in the FY 2018 budget or are these funds being used elsewhere?  

A3. Most of the tax increase went to MCPS where the Maintenance of Effort funding has remained static for at least 5 years. The increased funding was able to decrease class size by 1, though the results of reducing class size will take some time to show up.

For FY 2018, the County Executive has recommended that the property tax rate be decreased but because property values are going up, there will be a small increase in property tax revenue.

Q4.   When will we see a sunset of the energy tax which we were promised was temporary with a 2-year life ending in 2012? It is now 2017 and the energy tax lives on.  It is true that the County Council has reduced it somewhat by nibbling at the edges but the promise has not been kept.  What gives?

A4. The energy tax increase, enacted in 2010 brings in over $200 million in revenue. One advantage of this tax is that it is very broad and includes entities that pay very little or no tax such as the Federal Government and non-profit groups. There will be a problem if this tax is reduced or eliminated as it currently funds many programs. While the speaker did not address this, it is clear that a tax, once levied never goes away as this “temporary” tax increase now funds permanent programs.

Q5.  What is the rationale for increasing the MCPS budget above the maintenance of effort level, after the huge increase provided last year?  In the absence of a strategic plan to close the achievement gap, how is the Executive assured that continuing the extra spending will make a difference in academic performance?  How much of the increase for MCPS is directly related to employee salaries and benefits?

A5. About half the county budget goes to MCPS which has grown by 2,000 new students annually over the last several years. Of the entire State student population, Montgomery County accounts for 30% of the increase every year; which is the equivalent of one high school per year. This increase in student population is more than that of any of the other 23 school districts in the State. A question was raised that it appears that 25,000 of our total student population are undocumented. The number was said to be highly suspect as there are only 23,000 students in the system who qualify as English for Speakers of Other languages (ESOL)and this includes those who are here legally.

The MCPS budget is supplemented by over $250 million in additional county funds that are used for police officers in schools, nurses, health aides, debt service for school construction, IT modernization, etc. This funding does not appear in the MCPS budget.

Q6.   Given that 70+% of the county budget funds county salaries and benefits, what is the pay raise this year and how much will this pay raise alone increase pension costs over the next 10 years?  Given the collective bargaining process where the unions are much more successful in bargaining than the Administration and given the tilted playing field of arbitration, is there a likelihood that the County Executive will push to change the arbitration process that failed in the Council last year? 

A6. The pay raise for fire, police and Montgomery County Government staff is 2% for COLA, 3.5% for within-grade increases and 3.5 % for longevity. This was questioned by audience members as excessive compared to the private sector in the county.

As to the collective bargaining process and the need for public participation at least at the stage of “opening offers” and later before the “final” decision, the response was that the public might not find the process too interesting.

Q7.  Would the county consider including civics/citizens groups in the budget formulation process so that ordinary citizens and taxpayers have greater input into how their money is spent?  Also, has the County considered asking for representation in the budget formulation process for MCPS, given that it is close to half of the entire County budget.

A7. The County Executive has been very transparent and has held many meetings open to the public where he has listened to the public’s ideas on the budget. The question was raised as to why there could not be civic representation in the budget formulation process at the agency level before decisions were made by OMB and the County Executive. It was suggested to the speaker that public input could be useful in setting performance measures for the budget year linked to strategies and spending. Most performance measures are “outputs” and not “outcomes”. A discussion ensued as to whether county programs are developed and funded without performance measures established at the outset.

Q8.  The County Executive supported a 4.5% salary increase last year for the WSSC, a $1 billion bi-county enterprise with little oversight and no Inspector General.   In light of a benchmarking study last summer that showed higher than necessary staffing, and weak controls over high fixed cost reliability of service activities, and water rates that are much higher than Fairfax County for residences and businesses, how does the Executive justify a 3.5% spending increase this year.   Why is there not a freeze on spending until new cost controls are implemented?

A8. The WSSC is a bi-county organization which means that both counties have to agree on the budget proposed by the WSSC. If there is no agreement, the budget as proposed by the WSSC goes into effect automatically. Also there is quite a bit of oversight in existence at present by 4 entities – each of the county executives for Montgomery County and Prince George’s County as well as the county councils of both counties.

Q9.   Does every major department in the County Government have a strategic plan in place?  For those that have such plans, why can’t the published budget for the department include a cross-walk of the budget request to the strategic plan so that the public can see how much planned spending is related to strategies, how cost-effective those strategies are, and how much spending is for non-strategic programs and overhead activities?

A9. Will think about it.

Questions for the of meeting of November 16, 2016

Free and open to the public

Topic: “What Factors will Shape the FY 2018 County Budget?”

Speaker: Steve Farber, Council Administrator, Montgomery County Council

Questions sent to the speakers in advance of the MCTL meeting of November 16, 2016

1.  Will the results of the national elections affect the projections for FY 2018 revenue and spending for Montgomery County?

2.  What do you project to be the revenue source mix for FY 2018 among property taxes, income taxes, grants and contract, fees and other?  Are there policy options in place for increasing the less volatile property tax share?  Is it likely that there will be another Charter busting property tax increase?   How could other revenue sources be boosted to match Fairfax County’s approach?

3.  Given that the Wayne case decision has been incorporated into the projections for FY 2018, will ITOC credit refunds, faster reassessments for property improvements, and collections of overpayments made to municipalities affect the revenue picture positively?  By how much?

4.  Other than spending increases that are likely to exceed the CPI such as negotiated salaries and benefits for MCPS and county employees, and debt service, what other spending increases are likely?

5.  With the FY 2017 funding of MCPS of $90 million over the Maintenance of Effort requirement, by how much will this increase the baseline of per pupil costs for FY 2018?  Given MCPS cost projections for FY 2018, is it likely that funding for MCPS will exceed the MoE limit once again?

6.  What are some of the bills passed at the last legislative session in Annapolis that will affect the Montgomery County budget in FY 2018 –  both positively and adversely?

 

“A County’s Self-Inflicted Compensation Crisis”

From Governing.com:

“One reason why even a large tax increase can’t cover the county’s expenses is that over the last six years deals negotiated by County Executive Isiah Leggett raised the wages of police, firefighters and other county employees by between 25.4 and 31.5 percent. Leggett says one reason for the hefty raises was his desire to avoid arbitration; the county has lost 16 of 20 arbitration decisions since 1988.”

Your comments are welcomed.

“Unions kill a smart arbitration proposal in Montgomery County”

From the Washington Post of July 29, 2016:

“OVER THE past six years, wages for Montgomery County’s about 9,000 public employees — police, firefighters, budget analysts, clerks, librarians, bus drivers, jail guards and others — have grown between 25 and 31 percent. That increase, nearly three times the inflation rate over the same period, is much greater than that enjoyed by most public- and private-sector workers, including federal workers. Montgomery taxpayers are on the hook for those raises, mainly through their property taxes, which will spike 9 percent this year.”

The proposal had its genesis in the Organizational Reform Commission report submitted to the County Council in 2011.  MCTL President Fidler was a member of the Commission.

As always we invite your comments.

 

 

 

 

Testimony by Pres. Fidler on Transparency in Labor Negotiations

Testimony Before the County Council on Expedited Bill 24-16, Collective Bargaining – Impasse Procedures – Amendments

by  Joan Fidler, President of the Montgomery County Taxpayers League, July 12, 2016:

President Floreen and members of the Council, I am Joan Fidler, president of the Montgomery County Taxpayers League and I am here to testify in support of Expedited Bill 24-16 on Collective Bargaining – Impasse Procedures.

First, we would like to thank President Floreen for proposing the bill as it reflects a degree of courage that we admire. It begins to restore the balance for the taxpayers of the county.

Bill 24-15 is a new beginning. Let us count the ways:

The bill provides transparency – it requires public disclosure at the outset of bargaining and at evidentiary hearings.

The bill introduces objectivity – it separates the roles of mediator and arbitrator

The bill recognizes the need for a level playing field – it replaces the single arbitrator with a 3-member panel.

There will be opposition to this bill from the labor unions. We believe that labor unions are important and so are employee rights. But taxpayers are important too and they too have rights.

So to the argument that requiring public disclosure would impede efficiency and effectiveness, we would respond that opening proposals are not exactly state secrets to be hidden from the taxpaying public and that evidentiary hearings in all trials are open to the public. Why not here?

To the argument that the transparency provisions of this bill are harmful, we would argue that the only two transparency provisions in this bill are opening positions and evidentiary hearings. Should the taxpayer be barred from those? The bill does not require any open bargaining sessions.

To the argument that using the same individual as mediator and arbitrator streamlines the process, we would argue that separating the two roles is a standard method of mediation used in our court system and in other local collective bargaining laws. Why not here?

To the argument that labor relations professionals will be replaced by retired judges, we would argue that retired judges have vast experience in assessing facts fairly. Why would we reject an experienced judge?

Most important, the current system of interest arbitration has a direct and tremendous impact on the cost of County wages and benefits. In the last 3 years most county employees have had pay raises of 21% with another 4.5% this year. The bulk of property tax increases fund the salaries and benefits of our county employees. It is said that he who pays the piper calls the tune. Could taxpayers see the arbitration sheet music before the score is settled?

We invite you to post your comments.

 

Booing and heckling against transparency in collective bargaining

President Joan Fidler of the Taxpayers League testified on July 12, 2016, before the County Council in support of Bill 24-16, Collective Bargaining – Impasse Procedures – Amendments.  She was booed and heckled by union workers during her statement in the last paragraph of her testimony where she stated “In the last three years most county employees have had pay raises of 21% with another 4.5% this year”.

For those who do not follow the minutiae of pay raise percentages, here is the source on Page 9.

http://montgomerycountymd.granicus.com/MetaViewer.php?view_id=6&clip_id=10488&meta_id=92904

Specifically “…..For merit system County Government employees not at their maximum salary (nearly three-fourths of the total), the compound pay increases negotiated by the Executive and approved by the Council for these three years” (FY 2014 – 2016) “total 20.6 percent for general government employees and still more for public safety employees eligible for make-up service increments.”

In the video of the hearing, President Fidler’s testimony begins at minute 16 and lasts for 4 minutes.

“Montgomery County homeowners face biggest tax hike in seven years”

From the Washington Post of May 19, 2016:

“The Montgomery County Council, citing the unmet needs of a school system facing explosive enrollment growth and a widening academic achievement gap, voted Thursday to raise the average residential property tax bill by 8.7 percent — the largest increase in seven years.

The tax hike required a unanimous 9-0 vote because it exceeds the charter limit on tax revenue the county can collect each year. That revenue will help underwrite a $5.2 billion operating budget for the fiscal year that begins July 1, with about half of the money resulting from the tax increase going to Montgomery County Public Schools.

The council set the property tax rate at $1.02 per $100 of assessed value, 3.9 cents above last year’s rate. With rising assessments, it means that the average annual residential property tax bill will rise $326, to $4,075.”

Feel free to leave your comment below.

 

“County Council Votes to Cut Pay Increases, Reduce Class Sizes”

From the Bethesda Beat May 16, 2016:

“The council then pledged unanimous support of a $2.45 billion schools operating budget that is nearly $90 million more than the minimum required by state law…Council members made clear the spending approved Monday is dependent on the council’s approval of a 6.4 percent property tax increase and an increase of the county’s tax on home sales,…“We are about to do three things that some of us said we would not do again,” council member Roger Berliner said, referring to the proposed property tax increase above the county’s charter limit and home sales recordation tax increase as well as funding the school system over the minimum required by the state’s maintenance of effort law.”

MCTL Vice-President Testifies in Opposition to FY2017 Budget

MCTL Vice-President Gordie Brenne testified April 6, 2016, before the County Council in opposition to the proposed FY2017 budget: 

Testimony on Proposed FY 2017 Budget for Montgomery County

April 6, 2016

In the years leading up to the 2008 economic collapse, bankers, Wall Street, and mortgage originators got too greedy and were subsequently found guilty of fraud after the banks were bailed out.  Where were the regulators when this was happening?  Today, our county government is playing fast and easy with the people’s money, and the Executive has asked for a 9% property tax increase to bailout excessive payroll increases.  You, the Council are the regulators and we’re looking to you to reverse compensation contract mistakes made by MCPS and Executive management which imperil our kid’s education and bloat our payrolls.

MCPS is a snake eating its tail with solutions that fail our kids.  Payroll costs have gone up 37% over the last ten years (OLO Report, 2/23/16), in spite of the recession.  This is largely because annual step increases that will cost $55M next year, drive teachers average salaries over 12% above their peers in Fairfax and Howard counties (WABE FY2016 Guide), and force planned hiring cuts to pay for them.  When we spend more on existing teachers and overhead, there’s less money to hire new teachers.  It’s that simple.

Incredibly, there’s another step increase in this budget request, accounting for over half the increase above Maintenance of Effort (MoE), and overhead takes another 45 cents of every dollar (MCTL Study).  The problem with one-size-fits-all solutions is that more expensive teachers in west county mean fewer new teachers in east county, larger class sizes, more reliance on para-educators to tackle the achievement gap and a widening gap. Ironically, teachers on the front line for closing the gap are paid on average 6% less than teachers in our wealthier west county schools (OLO Report, 9/22/15) .

Board members will tell you that in hindsight, last year’s step increase contributed to growing student teacher ratios, yet they seem powerless to do anything about it (OLO Report 2/23/16, pg 14).  But you’re not powerless.  Ask yourself if your arguments over the last 8 years against spending above the MoE level are still valid; and, if not why not?  Our parents aren’t stupid.  Explain the value proposition to east county parents who make less than teachers and have only 10% of their kids graduate college-ready (4/14 OLO report).  Say no to more across the board pay raises.  If you can’t do that, at least tie any spending increases to a requirement that MCPS sponsor an independent review of its gap-closing plans and costs.

General county government doesn’t look any better.  Over three years (FY14-16), public safety employees have seen a 30% boost in pay, and other county employees have received 20% increases (Farber, 11/13/15 memo to Council).  (After the third round of pay raises last year the Executive was forced to implement unprecedented spending cuts to the FY’16 budget just approved.  Unfortunately, the cuts were to non-recurring expense items, postponing cuts needed to balance the FY’17 budget.  He then promised to cut spending by 2% in the FY’17 budget request, but failed to deliver, even though the Budget Director and Chief Administrative Officer reiterated this approach in the 12/8/15 Council meeting).

Where are the productivity increases to justify labor costs growing faster than inflation?  Our county’s health, transportation, and public safety haven’t seen dramatic improvements to justify big pay raises, while our safety net struggles to keep up with immigrant population growth, and our tax base hasn’t grown significantly.)

Lastly, budget request revenue projections could again prove to be too high (projections assume increases in the rate of personal income growth, 4.5% vs. 3.5% last year, that drives income tax revenues, and property tax revenues are projected to increase 10%- table pg. 3-8).  Recently projected budget shortfalls (December 2015, Dept of Finance, $179M) were largely due to overly rosy revenue projections last June, not the Wynne Case (those shortfalls were already in the June 2015 projection).  This could happen again. Scale back overly generous salary increases that keep bloating our enormous budget base and risk new budget deficits.  Be regulators, not enablers.

Is the Montgomery County Government a More Lucrative Workplace than the Federal Government?

Are the salaries of some of the employees of the county government too high?  We took the most highly ranked person in 8 different county departments and compared their salaries to their equivalents in the Federal Government.  We found these county employees are handsomely rewarded.  For instance the Librarian of Congress makes $183,300 while the Director of the county’s Department of Public Libraries makes $210,142—a difference of almost $27 thousand..

The complete table is here.