2014 | Politics

Officials Receive “Sobering” Report on County Finances

Budget officials are currently forecasting a decline in tax revenues, creating a difficult budget situation for next year

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As the Montgomery County Council prepared for its winter holiday break, President George Leventhal evaluated the presentation members had received from the budget department. “Well that’s a very sobering presentation, clearly 2015 is going to be challenging,” he said.

In the next budget cycle the council is looking at a predicted shortfall of $132.9 million in income tax revenue and $39.2 million in property sales tax revenue, despite a national economy that appears to be recovering, in terms of jobs numbers and stock indices.

A decision by the U.S. Supreme Court also could impact the county’s budget—the court is currently considering a case that could affect $110 million in next year’s budget, which the county plans to set aside in case it loses the case. The “Wynne Case,” as it’s known by county officials, is a challenge to the state’s system of providing counties with revenues generated by income taxes collected from Maryland residents’ out-of-state earnings.

Jennifer Hughes, director of the county’s office of management and budget, called the situation “the new normal” and said the county may need to recognize that it can’t expect income tax revenue to continue to grow at the same levels it has in the past.

“If we do win the Wynne case,” Hughes said, “we won’t be in as bad of shape.”

In documents provided to the council, the budget department noted that if the revenue forecasts are correct, then the county budget would need to be cut 6.1 percent. And because the council must maintain its level of funding for the school system under state law, then spending for county government and the planning department would likely need to decrease by 15.2 percent, according to the documents.

“It is sobering,” Councilmember Roger Berliner said after budget officials finished their presentation Tuesday.

Meanwhile, Montgomery County Public Schools Superintendent Joshua Starr announced Tuesday he plans to request a $2.403 billion operating budget next year, including a $103.6 million increase over this year’s budget to handle growth and ongoing costs as well as another $23.3 million to restore funding that was used by the County Council to pay for retiree health benefits in this year’s budget.

In his request, Starr noted that there’s significant uncertainty surrounding state funds that the school system may receive. He said MCPS is projecting an increase of $16 million in the state budget, but that new Gov.-Elect Larry Hogan is projecting a $600 million deficit.

He said his budget is a preliminary spending plan: “We have no idea what’s going to happen over the next few months… We know how we want to spend the money, but there’s no guarantee we’ll get the money.”

The Montgomery County Board of Education is scheduled to hold public hearings Jan. 8 and 15 on Starr’s budget proposal.