County Executive Marc Elrich sent his second savings plan for the fiscal year — proposing a cut of $25 million — to the County Council late Friday afternoon.
The budget cut recommendation follows the first savings plan, in which $72 million was cut from the budget in July .
The $25 million that is currently on the table to be cut includes $16.4 million from the operating budget and $8.6 million from the capital budget.
The savings plan follows bleak tax-supported revenue projections in December of $101.5 million less than initial projections. Tax revenues for the upcoming fiscal year 2022, which begins on July 1, are estimated to be $163.8 million lower.
Because of the county’s response to the pandemic, spending for the current fiscal year is expected to be $194 million higher than the approved budget.
Elrich wrote in a memo attached to the new proposed savings plan that without action, the county’s reserves will be 7.6% of adjusted governmental revenues at the end of FY21 compared to 10.2% estimated in the FY21 budget.
“Most if this increased spending is directly related to the county’s response to the pandemic, and we anticipate that much of it will be covered through reimbursements from either the Federal Emergency Management Agency (FEMA) or the federal Coronavirus Relief Fund (CRF),” he wrote.
In addition to the initial $72 million savings plan in July, the county had also asked its departments to identify 6% of potential cuts to their budgets in June.
As far as the proposed operating budget savings, departments were asked to find additional savings that totaled $16.4 million . The departments that reached a 6% cut in the initial June savings were not asked to identify additional savings for the second savings plan.
The following departments were asked to identify an additional 2% in savings because of pandemic response efforts and public safety concerns:
● Department of Health and Human Services
● Department of Correction and Rehabilitation
● Fire and Rescue
● Police Department
Montgomery County Public Schools will also be participating in the savings plan by holding off on $25 million in spending until the following fiscal year. That reduces the amount that the county will pay the school system in FY22.
Elrich noted that the state’s maintenance-of-effort law precludes the county from recognizing this savings in FY21. Maintenance of effort refers to the requirement that a county must have per-pupil funding at the same level as — or higher than — the previous year. That level cannot drop.
As for the $8.6 million from the capital budget, the remainder of PAYGO funding would be eliminated. PAYGO refers to the principle of not adding debt when there is an expenditure.
One cost that some members of the County Council have raised concerns about is the high figure of paying COVID-19 hazard pay for employees who have had to work with the public.
The county has spent $77.7 million in hazard pay since Elrich negotiated with the unions for the agreements in early April.
But the agreements did not have a deadline, and council members have said there is not an adequate plan to cover the cost.
The county’s administration has submitted reimbursement requests from FEMA for hazard pay costs. But if the pay is not mostly covered by FEMA, the county will have to dip into the CRF money, which council members have noted is already committed to relief programs and other needs to respond to the health crisis.
At a meeting on Tuesday, some council members said the administration indicated that hazard pay would not continue past the end of 2020 without council approval.
But Rich Madaleno, the county’s chief administrative officer, said the hazard pay was continuing for the current pay period. In addition, Elrich noted that a fiscal update provided to the council in December included an “assumption” that the payments would continue through the remainder of the fiscal year.
On Tuesday, Madaleno did not explain why the pay is continuing, but said he was “hopeful” that the council would “see something different” in the savings plan.
But the savings plan submitted on Friday did not include the expected change in hazard pay.
Elrich wrote in a message accompanying his savings plan that the county is in “active negotiations” on the hazard pay differential with the three labor unions.
“I am unable to share details of this negotiation at this time; however, a finalized agreement between my administration and the county’s labor representatives will be completed on this subject imminently,” he wrote.
Council President Tom Hucker said in a phone interview Friday evening that he had not had the chance to read the savings plan yet, but he was planning on reviewing it soon.
Referring to the $25 million proposed cut, Hucker said it is difficult to know the right number.
But regarding hazard pay, Hucker said he expects the compensation to reduce significantly before the end of the next pay period.
He said he received “possible scenarios” from Elrich’s office regarding hazard pay options under negotiation.
“The bottom line is we want to compensate our employees fairly. They’re on the front lines,” he said, adding that many have contracted COVID-19 or died from it. “They deserve some compensation for the risk they’re bearing. The question is how long that can continue.”
The three unions representing county employees are entitled to more hazard pay through their contracts than they are receiving through the current agreements, Hucker noted. They would usually be entitled to double their pay, he said.
Hucker said the contracts were probably written regarding hazard pay with the idea that an emergency would last shorter than 11 months.
“They agreed to a much lower number,” he said.
Elrich acknowledged that the structure of the hazard pay is “not currently fiscally sustainable.”
“Moving forward, with the availability of vaccines and plentiful personal protective equipment, the need for the differential could be mitigated,” he wrote.
In addition to the budget cuts, a hiring and procurement freeze will continue until the health crisis ends. The freeze was put into place on March 18.
County staff members have also been working on identifying at least 100 vacant positions that can be eliminated over the next one to two years. Elrich expects to include the impacts of the initial implementation of the cost efficiency study in his budget proposal for FY22.
Briana Adhikusuma can be reached at firstname.lastname@example.org.