Dozens of community members packed the Montgomery County Council chambers in Rockville on Tuesday afternoon to share their views on County Executive Marc Elrich’s (D) controversial proposed income tax rate increase — despite the diminishing possibility that the council will agree to hike taxes to help fund the county operating budget for the coming fiscal year.
Elrich has proposed raising the county’s income tax rate from 3.2% to 3.3% in order to fully fund the Montgomery County Public Schools (MCPS) operating budget request for fiscal year 2026 — a proposal that was unpopular with most of the 11 councilmembers. The MCPS budget is part of Elrich’s recommended $7.65 billion county operating budget plan for fiscal year 2026, which begins July 1. The spending plan represents a substantial increase of 7.4% from the county’s current $7.1 billion operating budget.
With most councilmembers appearing to be against raising taxes, Elrich’s initiative would seem to further lose steam after council President Kate Stewart’s (D-Dist. 4) introduction Tuesday morning of a proposal drafted in partnership with MCPS that would fund 99.8% of the school system’s $3.65 billion request without requiring an income tax increase.
The funding would be made possible by reallocating money from the school system’s retiree health benefit trust, according to officials. MCPS maintains a retiree health benefit trust to provide a funding reserve for health benefits for retirees in future years. However, the need to spend more now for current health benefit needs for employees and retirees is a major pressure on the proposed MCPS budget, according to the officials.
Tuesday’s funding proposal would allow the school system to use some of the money that is typically reserved for the future to fulfill current employee health benefit needs. Specifically, this plan would allow MCPS to receive an additional $50 million – $25 million in both fiscal years 2025 and 2026 — by increasing the school system’s annual draw down from the retiree health benefit trust.
Council Vice President Will Jawando (D-At-large) and councilmember Kristin Mink (D-Dist. 5) – both of whom previously expressed support for a tax increase to fund MCPS’ budget request – were the only councilmembers absent from Tuesday’s press conference. Stewart said they had prior engagements. The other nine stood in support of the proposal at the event.
Some officials, however, see a tax increase as a more sustainable funding option. Jawando issued a statement Tuesday afternoon saying he still supported Elrich’s proposed tax increase.
“I am concerned that this is not a sustainable solution. Redirecting retiree health benefit funds may help us close the gap this year, but it creates added pressure on future budgets and postpones critical decisions about long-term funding,” Jawando wrote. “This short-term fix may provide what we need right now, but our students, educators and families deserve more.”
While Tuesday’s announcement and its support from most councilmembers indicates a tax increase is unlikely to pass, the income tax proposal is still technically on the table for consideration by the council. In an email statement to Bethesda Today on Tuesday afternoon, Elrich’s spokesperson Scott Peterson said Elrich supports the proposal.
“[Elrich] had previously put forth utilizing the [Other Post-Employment Benefits] funding in the past to the County Council for MCPS and they were not receptive of this method,” Peterson said. “He is pleased that they came around on this idea.”
The two proposals are not mutually exclusive, county Chief Administrative Officer Rich Madaleno noted in his remarks on behalf of Elrich during Tuesday’s hearing.
“We’d like you to consider the rate increase … making sure that for the remainder of [fiscal year 2026] and moving into the future, we have the revenue to remain a stable county, in order to fulfill our outstanding obligations, including to the school system,” Madaleno said.
But others among the more than 40 speakers said the new funding proposal means the council has an opportunity to lessen the potential financial burden on taxpayers while still funding county budget needs.
“Montgomery County is becoming known as a less competitive county to attract and grow businesses and a more expensive county in which to live,” said Paula Ross, president of the Gaithersburg-Germantown Chamber of Commerce. “Our residents cannot afford [a tax increase].”
Before switching to his income tax increase proposal, Elrich originally proposed a 3.4% property tax rate increase to fund the MCPS budget request. That plan also proved controversial. Elrich ultimately withdrew his proposal and suggested the income tax hike instead.
Elrich’s new tax proposal didn’t seem any more popular among councilmembers than his initial idea. After a week of work sessions on the budget, most councilmembers voiced opposition or hesitancy over passing an increase. The council will still formally consider the proposed income tax hike, and is set to vote on it Wednesday. The council will take a straw vote on the proposed fiscal year 2026 county operating budget on Thursday and is expected to take a binding vote on May 22. State law requires a final budget to be adopted by June 1.
The quick turnaround between the introduction of Elrich’s resolution and the voting deadline has become a salient point among the proposal’s opponents, who say it’s not appropriate to rush such a major decision. County budget analysts have also warned councilmembers that the amount of potential revenue that can be raised from an income tax hike could be unpredictable.
Madaleno wasn’t alone in advocating for the council to move forward with a tax increase in addition to the new MCPS funding proposal.
“We remain convinced that a tiny increase in the income tax rate is a sacrifice that our residents are willing to make to fund the myriad of needs our county faces,” said David Stein, president of the Montgomery County Education Association (MCEA), the union representing MCPS teachers. “This solution [proposed by Stewart] is only for one year and will not address long-standing challenges that are facing this district. This fix cannot resolve staffing standards or reduce class sizes or ensure greater equitable access to programs.”
Dustin Jeter, an MCPS social studies teacher, expressed a similar sentiment.
“This decision does not let the council off the hook to come up with substantial funding for funding solutions for the future,” Jeter said. “The income tax rate increase would support funding critical programs needed to sustain MoCo’s exceptionalism, and our public schools are at the heart of that exceptionalism.”
But other community members strongly urged the council to refrain from raising taxes.
“This unexpected burden would hit small businesses and minority households particularly hard as many operate on tight margins and lack the resources to absorb certain tax liabilities,” said Mauricio Vasquez, executive director of the Montgomery County Hispanic Chamber of Commerce. “We recognize the need for a broader and stronger revenue source in Montgomery County. But small businesses, the backbone of our economy, are still recovering from economic disruptions.”
Samantha Damato, president of the Greater Capital Area Association of REALTORS (GCAAR) voiced concerns about how changes at the federal level, compounded with a tax increase, would impact county families. GCAAR recently embarked on an ad campaign opposing the income tax hike.
“Our county faces volatility in its revenue outlooks and economic uncertainty, as many of the industries and residents that rely on federal dollars are under threat by the [Trump] administration,” Damato said. “The ripple effect of this upheaval will inevitably hurt the county businesses who rely on foot traffic of those workers and the partnership of those industries facing hardship. Our county government cannot operate the way it has for the last 15 years, taxing our way into more revenue.”
