Inclusion | Opportunity | Innovation

My budget priorities

Dear Resident:

The County’s budget for the next year is done. There is good news to share, as well as unfinished business.

Our budget process has two stages. The Executive prepares a draft and submits it by March 15. The Council then makes changes and finalizes the budget by the end of May.

Here are some of my highlights from this year, reflecting my own priorities.

Starting with education, we fully funded the MCPS budget request, thanks particularly to an increase in state funding. We also fully funded Montgomery College. Neither were fully funded in the Executive’s budget. MCPS will now reduce class size guidelines further.

On child care and pre-k, this is the third year in a row that we will expand pre-k for low income kids. Including this year’s expansion, the number of poor children benefiting from full-day pre-k will reach 1500, from 750 three years ago. This has been my highest priority in early education policy.

I want to salute Council President Nancy Navarro and Council Education Committee Chair Craig Rice and for their work on early education, and the County Executive for including the funds in his budget. We are making progress, though we have more to do.

I’m particularly thrilled by our expansion of after school programs. I have worked hard to add programs every year to our budget. This year I was joined by Councilmembers Albornoz and Jawando as we added four new high poverty elementary schools to our comprehensive Excel Beyond the Bell program, bringing the total to 8 that we have added in 3 years.

Each of these programs serves 120 children, five days a week. With 8 schools, we will now reach nearly 1,000 elementary age children served every school day!

We also added 3 middle school programs and we created a new initiative called Skills for the Future to support youth STEM programs.

On transit, we were able to restore four of the seven routes proposed for reduced service in the Executive’s budget. I am disappointed that we could not restore all seven. Cutting bus service is sure to increase driving and works against our social equity and environmental goals.

I am however happy that RideOn and WMATA bus service will now be free to students, all the time. This should create a whole new generation of transit riders. Thanks Councilmember Evan Glass for your advocacy!

I am particularly grateful that my colleagues agreed to reject the Executive’s proposed cuts of $5 million to the bicycle and pedestrian “Priority Areas” program (BiPPA). This is a construction program that builds new safety infrastructure in areas of the County with older infrastructure. It has projects planned in Wheaton, Silver Spring, and along the Purple Line corridor. Thank you Transportation Chair Tom Hucker!

We also restored funding for new Metro station entrances in White Flint and Forest Glen, both badly needed to make these station areas more accessible. The Executive had proposed cutting them from the budget.

On the climate emergency, I want to thank my colleagues for supporting my proposal for $400,000 to begin a comprehensive climate change planning initiative.

And finally, we were able to restore crucial funding to our Parks system, which was slated for significant cuts in the executive’s budget. I want to thank Councilmember Friedson, our Council’s Lead for Parks, who pushed until we got it done.

You may wonder how the Council was able to fund these programs. The answer lies in changing certain priorities within the budget. We did not raise taxes. We did, however, make changes in other ways, including scaling back some compensation that was excessive.

The County Executive’s proposed 9% raises were not affordable. Scaling them back enabled the Council to add funding to many of these key priorities mentioned above. (Though my view is that the 7% raise the Council agreed to for many employees was still more than we can afford, and I opposed that proposal too).

So as for unfinished business: while we crafted a better budget, the County still has an underlying problem — we have a structural deficit. A structural deficit is when our revenues continually come in below our expenditures. It happened again this year. The budget that we passed is substantially funded by using reserves intended for retiree health expenses. That practice needs to end.

We need to fix our structural deficit by bringing our expenses in line with our revenues. The County Executive has talked about “right-sizing” County government, and Councilmembers have indicated support. That would help ensure that compensation does not grow faster than revenues, leaving room to fund critical priorities.

Going forward, we need to work together to make changes that will put us on a more sustainable path.

Thank you for reading!

Hans Riemer Signature

Hans Riemer
Councilmember, At-large

Pay raises we can afford

Dear Resident:

Today the Council took an initial vote on next year’s compensation for County employees, as proposed in the County Executive’s budget.

As part of our annual budget process, the County Executive is responsible for negotiating labor contracts with the unions. The Council then has the final responsibility of making sure that compensation is affordable.

While I support a raise for our employees, the County Executive’s proposal includes a 9.4% increase for many County employees in the MCGEO bargaining unit. (Increases for Fire and Rescue and Police officers are about 5.9%; teachers and school support personnel are scheduled to get 4.5% increases, on average.)

MCGEO members are the workers you will see driving a bus for long hours, inspecting rental housing, or providing health services. Like other public employees, they keep this county humming, and they deserve a raise.

But after careful consideration, I voted no on the 9.4% raise, as did my colleagues.

I cast that vote because I take my obligation seriously to look to the future as a steward of our tax dollars.

Under the County Executive’s agreements, total compensation would grow at nearly double the rate of county revenue. When compensation grows faster than revenue, it consumes more of the budget over time, leaving less for new initiatives.

I think you will agree that we must be careful to preserve funds for goals such as reducing MCPS class sizes, expanding pre-k and afterschool programs, improving transportation and fighting climate change, to name a few.

By comparison, Federal employees, who make up a large share of our taxpayers, are receiving increases this year that are less than half of that amount.

While there is no doubt that the Recession was tough on our employees, with pay freezes for several years, since then, they have received steady raises.

The County Executive’s proposed 9.4% raise is all the more difficult because it is plain now that our budget has a structural deficit. The only way the budget achieves balance is through an extraordinary measure — using revenues from last year identified for the retiree health benefit fund.

Like a large ship, the County’s budget changes direction slowly. I think this is an important moment to begin to “turn the ship” and express the Council’s strong desire to start taking steps to resolve our structural deficit.

The County Executive talked about our fiscal challenges on the campaign trail, as did Council candidates. The County Executive’s mantra was that as a leader trusted by the County unions, he could work with them to right-size County government — recognizing that it is more affordable to provide raises to a smaller workforce.

He’s right about that, and I hope he follows through. I am prepared to work with him.

The budget we received, however, adds 90 new positions, exacerbating the impact of compensation increases.

I share the County Executive’s stated desire to make County government more efficient, and I also strongly believe that we can do more to promote economic growth in the County. If we achieve major savings and our revenue growth accelerates from a hotter economy, then I absolutely believe that County employees should share in those gains.

But let’s not count the chickens before they hatch: we have to make the necessary changes before claiming savings.

I look forward to supporting a raise that we can fund over time — one that is more in line with the wage increases that other bargaining units and our taxpayers are experiencing.

Sincerely,

Hans Riemer Signature

Hans Riemer
Councilmember, At-large

COMMISSION UPDATE
This past February, Councilmembers Jawando, Rice and I sponsored a resolution to establish the Remembrance and Reconciliation Commission to secure our County’s memorial from the Equal Justice Initiative (EJI) to commemorate the three known lynchings in the County. The Commission will include 10 voting members of the public. If you’re interested in being involved as a member of the commission, you can apply online up until May 13, 2019.

The Council Connection — the County’s overall fiscal picture

Council Connection Masthead

Council President’s Message

The Council has passed the budgets for the upcoming fiscal year (July 2018 to July 2019). In recent newsletters we have reviewed the MCPS and public safety budgets. This week, however, we step back to review the overall fiscal picture.

Revenue
This was a restrained budget year as the Council grappled with revenues that were lower than anticipated and only allowed for an increase in expenditures in a few highest priority areas.

Although the local economy continues to perform well with low unemployment, strong job growth, and rising incomes, tax revenues have remained below expectations. Tax revenues for this fiscal year are down $106.1 million from the budget we approved last summer. The revenue shortfall stems in large part from a significant decline in revenue from capital gains, but other revenues were softer than expected, too. Recognizing the need to get ahead of the problem, the Council approved over $125 million in reductions to the FY18 budget mid-year.

While revenues are below expectations, they did allow for a modest increase in FY19, which through the budget process was almost entirely devoted to MCPS.

The Council did not raise taxes in this year’s budget. In fact, the weighted average real property tax rate fell by 1.98 cents this year, and by a combined 4.50 cents over the past two years.

The property tax will generate approximately $1.8 billion in revenue, about a third of total revenue. The next largest revenue source is the income tax at an estimated at $1.6 billion. The income tax rate remains unchanged. Read more about the Council’s decisions on the property tax here (pdf). More information on the other revenue sources can be found here (pdf).

What does this all mean for the average household? Adjusted for inflation, the County share of taxes relative to personal income has remained virtually unchanged for the last five years.

Expenditures
The operating budget for the upcoming year totals $5.6 billion, a 2% increase from the previous year. There are real differences though by agency. MCPS expenditures will rise by about 3%, Montgomery College will rise about 1%, and Montgomery County government (provider of public safety, libraries, HHS and other services) will rise at 0.2%.

I always find that the rate of increase overall is the most useful number to focus on when trying to understand the overall budget picture. This year’s increase, 2% overall, is very modest. Consider that in 2004, 2005, and 2006, the County budget increased by over 10% annually each year.

You can find a rough breakdown of how expenditures are programmed in the chart below.

County Expenditures Pie Chart

The chart above demonstrates our priorities: MCPS funding is about half of all County spending with the next largest program being public safety. Debt service, though, is not far behind, which is why we are reducing our borrowing levels in our capital budget.

Reserves
This Council strengthened its commitment to fiscal discipline in this budget, by setting aside additional funds for our reserve. By adding enough new funding in this budget to have a fund equal to 9.4% of our revenues, the County stays on track to meet its 10% goal by 2020. After making adjustments to our retiree health fund (OPEB) for the FY18 revenue shortfall, we also fully funded our FY19 commitment to OPEB.

Sufficient monies in reserves are critical for us to weather downturns in our revenues, which we have experienced regularly over the years — including this past year.

Healthy reserve funding helps the County maintain our coveted AAA Bond Rating, the highest possible. The AAA Bond Rating means we get the lowest interest rates, allowing us to build more schools and facilities with our capital funds.

Don’t just take my word for it, here is what the ratings agencies say:

“The County’s budget management demonstrates a strong commitment to bolstering its reserve cushion in preparation for the next downturn,” said Fitch. “Given the County’s conservative management practices and emphasis on increasing reserves, operations are expected to remain strong.” Moody’s noted that “the county’s financial flexibility remains sound,” while S & P indicated that the County’s “financial practices are strong, well embedded, and likely sustainable.”

Big picture
The Council produced a budget that is restrained and responsible and meets critical goals for fiscal discipline. It does not raise taxes, and ensures the County will continue to provide the superb services that so many of our residents appreciate so much.

Next week we will turn to budgets for transportation and parks. Stay tuned.

Cordially,

Hans Riemer Signature

Hans Riemer
Council President

Budget Challenges Continue

Our latest six-year fiscal planshows a sobering reality for Montgomery County: our resources will continue to be constrained, and that will necessitate very careful management of our spending.
Since 2010, the county government has issued six-year fiscal plans.  The plans project revenues, mandatory expenditures (such as debt service, retiree health pre-funding and reserves) and the amounts left over for services. 
This practice allows us to see rough estimates over time for how much we will have to spend on schools, parks, police and fire protection and other county services.
Due to the economy’s slow recovery from the Great Recession, the county’s revenues are projected to rise by just 2.3-3.6% per year through 2018.  That is not very different from what inflation will probably be over that period.  At the same time, the state has mandated local spending increases for MCPS matching its growth in enrollment.  Next year, we are projected to increase our local contribution to MCPS by 1.5% as a result of state law.  If we do, according to today’s estimates, we will have to cut most of the rest of the government by 5.2%.
Over the long run, the answer to our budget problems is to increase our rate of economic growth to expand our tax base.  I’m committed to doing that.  But in the short run, we have to continue to manage our spending carefully and show restraint with our resources.  You can count on me to do exactly that.