The Montgomery County Council voted unanimously Wednesday to reject County Executive Marc Elrich’s controversial proposal to increase the county’s income tax rate from 3.2% to 3.3%, underscoring members’ concerns about the county’s financial stability in uncertain times.
“The economy and the future fiscal challenges that we’re going to face are extraordinarily unknown,” councilmember Andrew Friedson (D-Dist. 1) said Tuesday after introducing a motion to reject Elrich’s proposal.
Elrich (D) had introduced the proposal to help fully fund Montgomery County Public Schools’ (MCPS) $3.65 billion budget request for fiscal year 2026. It is part of Elrich’s recommended $7.65 billion county operating budget plan for the coming fiscal year, which begins July 1. The spending plan represents a substantial increase of 7.4% from the county’s current $7.1 billion operating budget.
The council is expected to take a straw vote on the proposed fiscal year 2026 county operating budget Thursday and a binding vote on May 22.
After rejecting Elrich’s proposal, the council also voted unanimously – 11-0 — to instead approve a plan that would fund 99.8% of the school system’s budget request without requiring an income tax increase. The plan, which was introduced by council President Kate Stewart (D-Dist. 4) on Tuesday, will reallocate money from the school system’s retiree health benefit trust to help fill spending gaps in the MCPS budget proposal.
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 county and district officials.
The school board’s tentatively approved MCPS budget represents a $300 million – or nearly 9% increase — over current spending. The additional $300 would help pay for spending that includes an expected 3.25% base salary increase for staff. It also includes funding for 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.
Stewart’s plan, created in partnership with MCPS, will 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 will allow MCPS to receive an additional $50 million – $25 million in both fiscal years 2025 and 2026 — by increasing the school system’s annual drawdown from the retiree health benefit trust.
“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 the new agreement, the county’s contribution to MPCS for fiscal year 2026 would still be $210 million over the required state maintenance of effort level. State law mandates that counties must spend at least as much in per-pupil funding each fiscal year as in the previous fiscal year.
Elrich was absent from his weekly media briefing Wednesday due to illness. In his place, Rich Madaleno, the county’s chief administrative officer, said Elrich was glad the council found a budget solution for MCPS but would have preferred for the council to have passed his income tax increase.
“He was disappointed to see that they decided to use these one-time funds in order to provide more or less an ongoing increase to [MCPS],” Madaleno said. “We will start next year with a question mark. … It would have been better for the council to go along with the income tax increase.”
While all councilmembers voted in favor of Stewart’s proposal, not everyone agreed that it negated the need for a tax increase. Council Vice President Will Jawando (D-At-large), who chairs the council’s Education and Culture Committee, expressed concerns that the retirement drawdown plan is not sustainable on its own. He said he wants the council to eventually revisit the issue of a tax increase.
“We’re going to have to come back to this. Since I’ve joined this council, I’ve talked about our flat income tax. Everyone pays 3.2% – that’s regressive,” Jawando said prior to the vote. “We also need to make sure we have stable funding for our schools and other important priorities.”
At a public hearing Tuesday, several speakers, including members of the Montgomery County Education Association, the union representing MCPS teachers, shared Jawando’s sentiments that a tax increase is needed in addition to the retirement drawdown plan.
However, most councilmembers expressed concerns throughout the spring budget process that it would not be responsible to raise taxes on residents when thousands have been laid off from federal jobs and some economic experts predict a recession is on the horizon due to changes by President Donald Trump’s administration.
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 after a change was made in state taxation law during the Maryland General Assembly session, which ended April 7.
The quick turnaround between the April 22 introduction of Elrich’s resolution and Thursday’s mandated deadline for approving any tax changes for fiscal 2026 became a salient point among the proposal’s opponents, who said it’s not appropriate to rush such a major decision. County budget analysts also warned councilmembers that the amount of potential revenue from an income tax hike could be unpredictable.
“This year was not the year for an income tax increase. This issue never should have been on the table this year, especially the way it was placed,” councilmember Natali Fani-González (D-Dist. 6) said prior to the council’s vote. “Next year, I look forward to talking about it.”
