The Montgomery County Council signaled its unanimous approval of a $7.6 billion county spending plan for fiscal year 2026 – with no tax increase required — with a straw vote Thursday morning that will be followed by a May 22 binding vote.
The county operating budget, which includes funding for Montgomery County Public Schools (MCPS), represents an increase of more than 7% from the county’s current $7.1 billion spending plan. It does not require a tax increase, despite efforts by County Executive Marc Elrich (D), who initially proposed a property tax rate hike before switching to a call for an income tax increase to help fund the $3.65 billion budget requested by MCPS.
“This was a difficult budget. Simply put, the multiplicity of needs in our community are growing, and the decisions we had to make were tough,” council President Kate Stewart (D-Dist. 4) said following Thursday’s vote. “This has been exacerbated by chaos at the federal level.”
This year’s budget process was more tumultuous than in some previous years due to state and federal challenges outside of the control of county officials. When Elrich introduced his proposed budget in March, the Maryland General Assembly had yet to finalize the state budget, creating funding uncertainties for localities. After the state budget was passed on April 7 — the last day of the legislative session — Elrich had to amend his plan after state funding totals for the county were finalized.
Elrich initially proposed a 3.4% property tax rate increase to help fully fund the MCPS budget request for fiscal year 2026, which begins July 1. That proposal proved controversial with councilmembers. Elrich withdrew that request and replaced it April 22 with a proposal to increase the county’s income tax rate from 3.2% to 3.3%. This initiative was enabled by legislation passed by the General Assembly in April that allows counties to increase the formerly mandated income tax rate of 3.2% to a maximum of 3.3%.
However, the proposed income tax hike did not prove to be popular with most councilmembers either. Several shared concerns about increased financial pressures on county residents as 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.
One of the aspects of Elrich’s income tax proposal that was most controversial among councilmembers is a clause that included retroactive tax collection. This means the proposal would have applied to all wages earned in tax year 2025, which corresponds with the calendar year, according to council budget staff. The retroactive nature of the tax proposal meant most residents would have had to pay taxes to the county that most likely would not have been withheld from their paychecks.
The council unanimously voted Wednesday to reject Elrich’s income tax proposal. Instead, the council approved a plan in partnership with MCPS that will fund 99.8% of the school system’s budget request without requiring an income tax increase. That plan, introduced Tuesday by Stewart, would allow MCPS to use retiree health benefit trust funding that is typically reserved for the future to fulfill current employee health benefit needs, alleviating budgetary pressures, according to officials.
“We fought back against both a property tax and a retroactive income tax, which would have made Montgomery County less affordable and less competitive,” councilmember Andrew Friedson (D-Dist. 1) said following Thursday’s vote. “[We approved] a path forward to fund our schools without adding unnecessary financial burdens on a community already struggling, faced with unprecedented challenges for our county.”
The 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.
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.
Stewart’s plan will allow the school system to receive an additional $50 million – $25 million in fiscal years 2025 and 2026 — by increasing the school system’s annual drawdown from the retiree health benefit trust.
“This is truly remarkable to be able to fill most of the obligations and address so many of the needs,” councilmember Gabe Albornoz (D-At-large) said following Thursday’s vote. “Doing it without having to raise taxes and further making investments to ensure that we have a strong budget going into next year by strengthening our reserves, was nothing short of remarkable.”
A challenging budget process
Stewart said Thursday that the pressures on the federal level underscored the county’s challenging budget process.
“Not even five months into the Trump presidency, [we’re] facing the most uncertainty we’ve seen in decades,” she said. “Federal cuts are and will touch all our lives and impact every public service that our residents rely on.”
There were also several disagreements between councilmembers and Elrich throughout the process that went beyond the county executive’s tax proposals. Montgomery Parks Director Miti Figueredo asked the council in March to increase funding for the parks department for the coming fiscal year, saying that Elrich underfunded the department’s proposed spending plan. Figueredo said at the time that Elrich’s proposal for parks was $1 million short of covering staff compensation and $3.1 million below what’s needed to maintain the existing level of services. Elrich said Figueredo was “overblowing” the situation.
Weeks later, Elrich submitted an amendment to the council, saying he “inadvertently underfunded the amount necessary to fully fund the parks department’s employee contract obligations” by $1 million and requesting the council make the necessary changes. However, the $1 million was still not enough to fund the department’s needs, according to Figueredo. Through amendments and reductions, the council was able to restore funding for the parks department.
Some other budget highlights include:
- More than $200 million in services to support children, youth, families, older adults and people with disabilities;
- $66 million for Behavioral Health and Crisis Services;
- $62 million for Services to End and Prevent Homelessness;
- $14 million for the Office of Food Systems Resilience;
- $1.2 million for the Nonprofit Security Grant Program;
- Spending increases for public safety departments, county affordable housing assistance programs and the Office of Emergency Management and Homeland Security;
- Expansion of the Drone as First Responder program to Germantown;
- Fare-free RideOn Bus service; and
- Budget reserves of 11.2%.
“I am proud to say we did not turn anyone away from any public hearing,” Stewart said. “We listened to the views of over 300 residents during our budget hearings, reviewed thousands of emails and met with numerous groups.”
A spokesperson for Elrich did not immediately respond Thursday morning to Bethesda Today’s request for comment.
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 funding solution for MCPS and looked likely to approve most aspects of his operating budget proposal, but that he 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 the county operating budget is moving forward for the next fiscal year, some councilmembers said Thursday they know the challenges are only beginning.
“We need to focus on the future sustainability of our budget, and we need to begin that work right now. We need to really assess our economic competitiveness,” councilmember Marilyn Balcombe (D-Dist. 2) said. “We need to take a good, hard look at why, given all the assets that we have in Montgomery County, why we’re not creating more jobs. We need to continue to address our housing affordability crisis and take bold steps to move the needle on housing.”
