3rd Floor Conference Room, Council Office Building
100 Maryland Avenue, Rockville, MD 20850
Questions sent to the speakers in advance of the meeting of September 16, 2015.
Topic: “Smash the Charter Limit on Property Taxes? Or Decelerate Spending?”
Speakers: Steve Farber, Council Administrator, Montgomery County Council
Joseph Beach, Director of Finance, Montgomery County Government
1. There is a widely held belief that Montgomery County has been an ardent follower of Parkinson’s Law: “expenditure rises to meet income”. Now that the income situation is bleak, what are the approaches being used by the County Executive and the County Council to cut expenditures. Are there any analyses of programs that have outlived their original intent but continue to linger on? Are most budget reductions just a nibbling around the edges? What are some of the criteria used to analyzing existing programs? How many programs have actually been cut by more than 50%? How many exist despite those cuts?
2(a). Personnel costs are growing faster than inflation. The savings plan proposed by the Executive and the plan adopted by the County Council provide little relief from ever climbing personnel costs and have focused instead on non-recurring costs like the Capital Improvement Plan projects funded with current revenues, new programs and special project costs. How should the 2016 budget process and contract negotiations address out of control personnel costs to avoid the need for bigger cuts to services or possible furloughs?
2(b). Most retiree taxpayers will likely not receive any increase in 2016 retirement annuities due to a negative or flat Consumer Price Index (CPI). Most working taxpayers will not receive generous salary increases. The current system of contract negotiations with unions is tilted heavily in favor of the unions as there is no representation by the taxpaying public. Collective bargaining has an enormous impact on the County’s fiscal situation. How open is the County Executive and the County Council to making these negotiations more transparent and to including a few taxpayers in the negotiations process?
3. Income tax revenue increases are driven largely by capital gains, which have been in a slump since the 30% run up in the S&P index in 2013. Recent stock market indications point to even lower results for 2016, creating a need for further spending cuts or property tax increases above the charter limit. How much in further spending cuts are needed in FY 2016 to avoid busting the charter limit, assuming Wynne case projections are correct and income tax shortfalls are the same as last year? Regarding the Wynne decision, where Maryland was found to be double-taxing business owners, does the political leadership find it ironic that this ill-conceived decision to double tax might lead to even greater taxation of all taxpayers to fill the gap?
4. Taxpayers have suffered from slow economic growth and reductions in their investments and are aging, which reduces their ability to pay higher property taxes. We have seen our county grow dependent on income tax revenues, bloated by non-recurring capital gains not economic development, to annually increase operating budget and CIP expansion driven debt service costs. Now that the income tax revenue strategy has collapsed, the County Executive is talking about a 10% property tax increase, and even creating a new Transit Authority that would circumvent the charter limit. Taxpayers are losing confidence in the budget process and spending controls. How can the budget process for FY 2016 be changed to cut inefficient and ineffective spending and to make these allocation decisions more transparent?
5. County taxpayers are providing funding for migrant support services for education, affordable housing, food stamps and medical services. While these are seen as legitimate needs and the County has stepped up to this responsibility, how much of the county budget goes towards funding these needs? How much does the County get reimbursed by the Federal Government? By the State?
Next meeting: TBA