Lower State Tax Revenues Expected To Create Tight County Budget

County executive says Montgomery must account for $80 million less over two years

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Montgomery County Executive Marc Elrich, preparing to unveil his 2020 budget plan on Friday, is facing a sobering report from the state that projects the county will receive $80 million less in tax revenue for fiscal 2019 and 2020.

A revenue forecast released last week estimates the state will receive $268.5 million less during the two fiscal years due to changes to state and federal tax codes resulting from the 2017 Tax Cuts and Jobs Act.

Elrich said the state’s estimate had added another layer of difficulty to crafting his first operating budget as county executive.

“It’s not their [the state’s] fault. They were looking at the tax receipts for the state and told us we would receive less money,” he said.

For Montgomery County, the revenue forecast doesn’t mean the county is facing a budget deficit, said county spokesman Ohene Gyapong.

“It is a downward revision in our projected revenues, partially due to a lower than expected quarterly income tax disbursement from the state in February,” he wrote in an email. “This simply means that there will be a smaller increase than anticipated (and budgeted) in county revenue in FYs 19 and 20. The state also had to write-down their revenues after a disappointing fourth quarter of tax year 2018.”

The county has dealt with lower-than-expected revenues recently, having passed a mid-fiscal year savings plan in late January to cover a $44 million budget shortfall in the county’s $5.6 billion budget.

County officials have been tight-lipped about what parts of the budget for fiscal 2020 will be deemphasized, and where cuts will be made.

Council President Nancy Navarro said that things would likely “be tight” in the coming year.

Following a news conference on Monday, she said in her conversations with Elrich she had urged him to maintain a pathway to achieving a 10 percent reserve level —an emergency fund that is also used to help the county maintain a high bond rating with the credit-rating agencies in New York. Bond ratings affect the cost of borrowing for major projects.

“I’ve expressed some of my priorities. I’ve expressed my desire to ensure that we meet our goal of 10 percent reserves. He has assured me that we will stay the course,” Navarro said.

Navarro said in addition to the reserves, she also hoped that funding would not be cut from the Department of Health and Human Services.

At-large Council member Hans Riemer said he too hoped that Elrich would maintain fiscal discipline in the budget.

“I’m very concerned about reserves and the retirees and the health fund. Beyond that, I’m eager to see how he structures his priorities,” he said.

Following Elrich’s release of the budget on Friday, the County Council will hold public hearings and then submit an amended budget in late May.

Dan Schere can be reached at Daniel.schere@bethesdamagazine.com

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