Updated – 5 p.m. – Montgomery County Executive Ike Leggett has proposed $60 million in cuts as part of the first effort to address the county’s $120 million operating budget shortfall.
The cuts to Montgomery County Public Schools, county departments and agencies were detailed in a memo Leggett sent to County Council President Hans Riemer on Tuesday.
Leggett’s proposed cuts include:
$25 million from the school system’s budget
$5 million from Montgomery College
$4.3 million from the Department of Health and Human Services
$3.8 million from the police department
$2.6 million from the fire department.
Other agencies’ budgets also are expected to be cut as Leggett seeks to reduce funding for each department by about 2 percent to address the shortfall.
The county’s fiscal 2018 operating budget totals about $5.4 billion.
Jennifer Hughes, director of the county’s Office of Management and Budget, said Wednesday morning that additional cuts could be proposed since the first round satisfies roughly half of the shortfall.
“We have more work to do,” Hughes said. “We’re looking at every option.”
If more cuts aren’t made, the shortfall will have to be addressed in an already constrained fiscal 2019 operating budget. County revenue forecasts project a shortfall of $86 million in next year’s budget, which covers county spending from July 1, 2018, to June 30, 2019.
The shortfall is the result of lagging tax revenues that came in below projections, particularly lower income tax receipts.
In November, the county received an income tax disbursement from the state that was about $80 million lower than projected. The county also received lower-than-projected revenue from the energy, transfer and recordation taxes, according to Leggett’s memo. The transfer and recordation taxes are applied to property transactions.
Leggett noted in his memo that the federal tax-cut bill could further reduce county revenues, but its anticipated impact is not yet known.
“The legislation’s full impact on our revenues and our economy, requires complex analysis that the Department of Finance will be conducting,” the memo says. “There are other significant pressures that are likely to impact county finances, including continued student enrollment increases, possible cutbacks in both federal and state funding, and collective bargaining negotiations.”
The cuts Leggett proposed are intended to be long-term, rather than one-time fixes.
“This requires some difficult decisions,” Leggett wrote.
Leggett is asking the county’s Board of Education to come up with a plan to slash $25 million from its $2.4 billion budget.
Those proposed cuts come about two weeks after MCPS Superintendent Jack Smith proposed increasing the school system’s budget by 2.7 percent next fiscal year. School board President Michael Durso said Wednesday the board is awaiting a recommendation from Smith on how to manage the proposed cuts in the savings plan.
“I don’t know if anybody’s enthused about it,” Durso said, “but if we have to make that cut we will.”
Ultimately, the County Council would have to approve the proposed cuts in the savings plan. Council members return from winter recess in mid-January. Council President Hans Riemer said Wednesday that the council plans to approve a savings plan by the end of the month.
“Inevitably, the council will have some variances,” Riemer said. “If past is prologue, we’ll take a look through [Leggett’s proposal] and largely accept it. We’ll make changes. We might do a little more or do a little less.”
Riemer described the savings plan as a “down payment on next year’s budget.”
He said the county might receive better news in February, when additional income tax disbursements arrive. If those come in greater than the county’s projections, the budget process might become easier. If the disbursements are less than the projections, the process becomes more difficult.
Riemer said that by addressing about half of the shortfall now, creating next year’s budget will be more manageable.
“I think the prudent thing to do here is to find the savings we have for what we know isn’t coming in,” he said. Riemer noted this will be his third savings plan he’ll work through with the council since he took office in 2010.
The proposed cuts to county government departments were detailed in the 32-page memo.
Much of the savings will come from “lapsing” positions—not filling job openings at departments and agencies.
Leggett proposed cutting the Department of Health and Human Services’ $313 million budget by $4.3 million. That includes savings of $1.4 million in lapsed positions and $966,000 from information technology contracts.
The proposal also calls for $220,000 in cuts to a service that funds psychiatrists for outpatient mental health clinics in the county and $190,000 from the county’s mental health court. Mary Anderson, a spokeswoman for the health department, said Wednesday the department will delay hiring a psychiatrist it planned to employ to reduce treatment delays at the clinics.
There also are proposed cuts to the Montgomery Cares community health program, local YMCA funding and a CentroNia pre-kindergarten program.
Riemer said reducing funding for health-related services “will cause concern.”
He said council committees will begin reviewing all of the cuts later this month and will examine ways to reduce department budgets “without causing undue harm for people.”
To cut the police department’s budget by $3.8 million, the executive branch is proposing lapsing about $2.2 million in positions and reducing the January recruit class to save $525,000, among other items. Hughes said the lapsed position savings also reflect the police department accounting for turnover savings, which is the difference between the salary of an experienced officer who retires and the lower salary of a new recruit who replaces the officer. The cuts represent a little more than 1 percent of the department’s $276 million operating budget.
“Police was definitely spared more than others,” Hughes said. She added that none of the reductions to public safety departments will require any reduction in officers or firefighters.
The savings plan calls for reducing the fire department’s $215 million annual budget by taking two engines and a tower truck out of service and reducing staffing on a third engine to save $2.6 million.
Proposed cuts at the transportation department include $2 million from a program to replace the county’s bus fleet and $732,000 by delaying the startup of a limited stop Ride On service on U.S. 29.
The Department of Liquor Control’s efforts to remodel county liquor stores would be significantly scaled back, with a nearly $800,000 cut proposed to that program. The savings plan also calls for reducing supply costs by $250,000 by moving to a “paperless process.” Robert Dorfman, the DLC’s director, said Wednesday afternoon the department is negotiating with landlords to have them pay for renovations to county stores, rather than use county funds for the updates. He said the department is in the process of either relocating or renegotiating leases for about five of the county’s 27 liquor stores to renovate them.
“It’s a better route for us to deploy rather than investing hundreds of thousands of dollars in stores that could be relocated,” Dorfman said. “Our objective is to improve the ambience and look of our stores.”
The DLC also revised its profit estimate up by $1.5 million. The department, which controls the wholesale distribution of alcohol and retail sale of alcohol, generates about $30 million in profit for the county each year. Dorfman added that he wants the department to be able to pay for its own investments with profits rather than receive money from the county.
“The day ought to come when we can in fact earn over and above what we transfer to the county,” Dorfman said. “That’s at least the philosophy going forward.”
Leggett also proposed cuts at smaller agencies, departments and services such as the court system, Board of Elections, corrections, libraries, and public information, as well as County Council and county executive staff.
The savings plan includes $13.5 million in cuts from the capital budget, as well. Those cuts include $3 million from the school system and $3.1 million from Montgomery College. The capital budget funds infrastructure improvements such as new schools, government buildings and roads.
Leggett asked in his memo that if the council doesn’t approve any of his proposed budget reductions, that it identify alternative long-term savings of equal value.