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.