Montgomery County’s proposed $5.73 billion budget released Friday morning includes more funding for schools, pay raises for county workers and holds the property tax rate. But the budget defers money for the county’s health benefits trust fund for retirees for one year.
In his first budget since taking office, County Executive Marc Elrich is recommending a $51 million increase for schools, which is slightly below the school board’s request from the county, which funds most of the 163,000-student system.
Elrich is also recommending $310.4 million for Montgomery College, which represents an overall decrease from last year’s $316 million budget. Elrich said enrollment at the college has decreased, and per pupil spending has increased as a result.
The county executive has also set recommended $155.5 million for the regional planning and parks agency, the Maryland-National Capital Park and Planning Commission. The amount represents at 1.2 percent increase from last year’s budget.
The county executive, who pledged not to increase taxes during his campaign, plans to keep the property tax rate of 98 cents per $100 of assessed value.
Budget Director Rich Madaleno said the rate would drop slightly by two-tenths of a percent but some property owners could still see higher tax bills if the value of their houses increases.
Elrich touted his no-taxes pledge at a news conference Friday.
“Anybody who’s waiting for me to drop the tax increase bomb will be sorely disappointed,” he said.
Elrich’s budget also includes pay raises of at least 2 percent for employees – and paychecks for some could be greater when so-called step increases in pay tables are factored in.
Workers covered by the county’s main union, Local 1994 MCGEO, as well as the local firefighters union will receive a 2.4 percent salary increase recently reached in contract negotiations. Non-union employees will receive a 2 percent increase.
“We had to go to arbitration with firefighters, and this was the decision,” Madaleno said.
Elrich said his administration has been dealing with a host of financial challenges since he took office Dec. 3, which included the discovery of a $44 million mid-year budget deficit due to lower-than-expected revenues, which forced the county to pass a savings plan in January. He received more bad financial news from the state two weeks ago.
They decided they had to write down $80 million in revenues. We thought we had a difficult gap that we had made progress on …. $80 million doesn’t just fall out of the air, and so our staff has worked really hard to work with multiple, ongoing, changing environments and at the same time has tried to sit down and put together a budget. So I think this is an extraordinary effort to get this right,” Elrich said.
The budget increases the county’s reserve fund levels to 9.9 percent, which nearly meets Elrich’s goal of 10 percent by 2020. Reserves function as an emergency fund that also demonstrate financial stability to credit rating agencies in New York, and helps the county maintain a high bond rating.
Elrich said he is sending funds for the trust fund, known as OPEB – Other Post-Employment Benefits, into the reserve fund because the state’s tax revenue shortfall would have forced him to create another $40 million savings plan for the final three months of fiscal 2019, and cut $40 million in services from the fiscal 2020 budget.
“That would have required a savings plan over the last three months of this year of over $40 million. Can you imagine what it would have taken to raise $40 million over the last three months of this budget? It would not have been pretty. No one would’ve been happy,” he said.
Elrich said ultimately no retirees will lose healthcare coverage because of the OPEB deferment. Additionally, Madaleno said the pension trust fund was 97 percent funded.
But during a Friday morning meeting between Elrich and members of the County Council, council member Andrew Friedson, who represents Bethesda, said he was concerned about the lack of funding for the trust fund.
“I would be interested if you can send over where the OPEB money went to,” he said.
Elrich responded by telling him that it went into reserves, and that there simply “weren’t a lot of good plays” given the fiscal outlook for the coming year.
“I hear what you’re saying… if I had the money, trust me, I wouldn’t have done that,” the county executive said.
At-large council member Hans Riemer said he believes the budget has “a lot of great things” overall but that the lack of county revenues demands a more fiscally conservative approach going forward.
“My concern is that this could be as good as it’s going to get in terms of our revenues, and I worry that we’re not taking action and are sufficiently cautious about the near term fiscal environment. And if this is as good as it gets in terms of revenue, where are we gonna be in two or three years. The last thing we wanna to is make promises we can’t keep,” Riemer said.
Elrich replied by saying he didn’t think this was “as good as it gets” but that revenues were not likely to accelerate any time soon.
Council President Nancy Navarro, whose district includes Wheaton, said she was overall pleased with the budget, particularly because Elrich kept his promise of not raising taxes and of shoring up the county’s reserves. She said the council would be having “some in-depth conversations” in the coming weeks.
Madaleno said there were difficulties in crafting the budget, in part due to the uncertainty in how the national economy would react to the federal government shutdown in January, as well as the fact that it is unclear what will be in the state budget, which will be approved at the end of the legislative session. He added that having a transition to a new county executive also presented its own challenges.
“It’s part of a very interest back and forth between the county and the state,” he said of the budget process.
The $2.65 billion dedicated to public schools is $2.5 million more than required by the state to keep local funding consistent from year-to-year.
Other departmental funding changes include:
-$1.2 million for the Office of the Inspector General, an 8.6 percent increase from last year’s budget.
-$1.9 million for the Office of Legislative Oversight, an 8.2 percent increase
–$15.3 million for County Circuit Court, a 5 percent increase
-$18.9 million for the State’s Attorney’s office, a 4.6 percent increase
-$6 million for the County Executive’s office, a 3.9 percent increase
-$89.6 million for the Department of Finance, a 6.8 percent increase
-$281.8 million for the Department of Human Resources, a 5.4 percent increase
-$5.2 million for the Office of Management and Budget, a 6.4 percent increase
-$70.8 million for the Department of Correction and Rehabilitation, a 6.8 percent increase
-$223.3 million for the Montgomery County Fire and Rescue Service, an increase of 2.4 percent
-$295.2 million for the Montgomery County Police Department, an increase of 5.4 percent
-$25 million for the Sheriff’s Office, an increase of 5 percent
-$323 million for the Department of Health and Human Services, a 1.4 percent increase
-$58.6 million for the Department of Housing and Community Affairs, an increase of 13.6 percent
-$43 million for the Department of Recreation, a 12.6 percent increase
-$5.5 million for the economic development fund, or an increase of 20.7 percent
-$32 million for the Department of Environmental Protection, an increase of 4.2 percent
The county executive has also budgeted more than $12 million for the County Council and said during Friday’s press conference that it is ultimately “their budget,” since that money is at their discretion.
The council is scheduled to hold a series of public hearings on the budget to receive feedback during the next two months. The council will approve a final amended budget in late May. The budget year begins July 1.
Dan Schere can be reached at Daniel.firstname.lastname@example.org