Editor’s note: This story was originally published at 11:42 a.m. on May 13, 2025. It was updated at 1:27 p.m. on May 13, 2025 to include a statement from Scott Peterson.
The Montgomery County Council announced Tuesday morning a proposal drafted in partnership with Montgomery County Public Schools (MCPS) that would fund 99.8% of the school system’s $3.65 billion budget request for fiscal year 2026 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.
Tuesday’s announcement follows Montgomery County Executive Marc Elrich (D)’s proposal last month for a controversial income tax rate increase from 3.2% to 3.3% in order to fund the MCPS budget request.
The proposed income tax increase 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.
“We have developed a path forward that will provide Montgomery County Public Schools with the resources it needs in the fiscal year ahead… these are very, very difficult times we are all facing,” council President Kate Stewart (D-Dist. 4), who is leading the proposal, said Tuesday morning at a press conference at the Rockville council office building.
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.
Stewart’s 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.
According to Stewart and council staff, this use of one-time funds will assist MCPS in meeting its payments for retiree benefits, address cash flow issues and make other funds available to MCPS to address needs.
Concurrently, MCPS is taking action on its three-year plan to address escalating health care costs.
“We recognize that this is one-time funding, but this gives us important time to continue to evaluate, to plan and to restructure for long-term sustainability,” MCPS Superintendent Thomas Taylor said at Tuesday’s press conference. “All of that work is what the school system needs to do. We do need to sit and evaluate and to plan ahead for the future.”
Under this agreement, the county’s contribution to MPCS for fiscal year 2026 would be $210 million over the required state maintenance of effort level, which is the required level of per-pupil funding that must be maintained by county governments in Maryland.
“I’m going to be honest, this is not a plan that during normal times I would have advocated for,” Stewart said. “But we are not facing normal times right now … . There are so many challenges we have, and we need to plan for the future as we are also budgeting for today.”
Before his income tax increase proposal, Elrich originally proposed a 3.4% property tax rate increase to fund the MCPS budget request. 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.
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.”
Taylor presented his proposed $3.61 billion spending plan for fiscal year 2026, which begins July 1, in December. He described it as an attempt to provide the district with “long-term stability.” The county school board tentatively approved the $3.65 billion operating budget — representing a slight increase over Taylor’s recommendation largely due to anticipated additional state funding that comes with mandated spending — for the upcoming fiscal year on Feb. 4.
Taylor’s recommendation represents a nearly 9% increase over current spending. The proposed $300 million total increase in MCPS spending from fiscal year 2025 comes in the wake of a difficult budget season in 2024 in which the county school board had to make significant spending cuts. The cuts were needed to close a spending gap after the council approved a fiscal year 2025 MCPS operating budget that was $30.5 million less in spending than the school board requested. The operating budget for fiscal year 2025, which ends June 30, is $3.32 billion.
The additional $300 million included in the proposed fiscal year 2026 budget would help pay for spending that includes an expected 3.25% base salary increase for staff. It also included the proposed addition of 688 special education positions — most of which are paraeducators — and 52 additional security staff members, among other expenses, according to MCPS officials.
Of the 688 special education positions, 188 would be new teachers and 500 would be hired as paraeducators, according to MCPS. Of the 500 paraeducator positions, 366 are existing part-time jobs that would be converted to full time and 134 of the positions would be new hires.
Fixed costs such as staff salaries and benefits make up a majority of the budget, according to MCPS officials.
On April 30, the County Council’s Education and Culture Committee recommended that the full council fund the entire budget request, although members expressed concern that doing so could require Elrich’s proposed tax increase.
The council will still formally consider the proposed income tax hike, and is set to vote on it Wednesday. However, Tuesday’s development means it is increasingly unlikely such an increase would pass.
“Moving forward as the Board of Education, we understand that we must make tough choices and have transparency, but let’s celebrate this moment,” MCPS Board of Education President Julie Yang said at Tuesday’s press conference. “This moment is the testimony that when we have collaboration and leadership, we can move forward together.”
Bethesda Today reporter Ashlyn Campbell contributed to this story.
