Montgomery County’s Budget and a Pepco Update
April 12, 2011
With County Executive Leggett’s budget in hand, the Council now has until the end of May to pass a final plan for spending and taxes. My commitment to you is to do the best that I can for all of our County priorities — schools, libraries, public safety, safety net services, parks, public transportation and more.
I will let my sense of fairness guide me and work hard not to burden any particular group with doing more than their share to get through this economic crisis. I will look for solutions that uphold our progressive values while putting the county on a stable long term financial path.
Now is the time for you to speak out. As a Councilmember, my job is to make the best decisions I can based on getting all of the information available. That’s why I read every email that comes to me. I strongly encourage you to email me and the entire County Council with your thoughts on what you want from your county government at this difficult time. What principles, values, and priorities do you think should guide the Council’s decisions?
As you follow the story in the news and your neighborhood email lists, I want to provide some background that I have found useful.
Many important services are facing their second straight year of tight budgets. The Executive’s recommendation for the public schools is higher than last year’s amount but is lower than what the schools received two years ago, despite higher enrollment. The fire and rescue service, libraries, transit and health and human services are facing their second straight year of cuts. Library staffing, for example, is down over 30% in the last two years. These reductions will cause real-world problems for county residents.
County employees, who make less than private sector workers with the same education, have gone two years without a salary increase, and did not ask for one this year. In his budget, the Executive recommended that employees bear a much larger share of their health and pension benefits. If the council approves a measure resembling the Executive’s recommendation, that could add up to thousands of dollars less in take-home pay for workers making as little as $50,000 per year.
The county’s fiscal solvency is improving, but we are not yet where we need to be. Last year, the county almost lost its AAA bond rating, which enables it to issue bonds carrying the lowest possible interest rates on our billions of dollars in debt for constructing schools, roads, parks and more. The county was able to preserve its rating by establishing a plan to steadily increase its reserves and meet its future obligations, especially for pensions and retiree health care.
Today, we have to make tough choices. I have not made up my mind on many of the key policy issues as I carefully consider the implications. But policy is not our only challenge.
This debate is also a test of progressive leadership. Can we get through our budget crisis without needlessly pitting residents against one another, without making victory for one concern a defeat for another, without dividing and conquering? As your Councilmember, that is what I am working to do.
When I ran for Council I said that we have to listen to everyone because our collective wisdom is our greatest asset. That’s why I’m asking for your input.
I also said that we should not turn every argument into a zero sum game, because we all have to live with the outcome of every decision, together.
Even in tough times, I believe that it can be done.
While I work through this crisis, I am keeping my eyes on the long term. Our budget is in dire straits because our tax revenue is dependent on two sources of income that have both suffered severe market “corrections”: property taxes and income taxes. Each of these revenue sources are down to a lower, corrected base. They are not going to rebound to their bubble highs.
That is why I strongly believe that we must expand our commercial tax base in this county in order to build a more resilient revenue stream.
I consider these times a true test of our progressive values and our ability to put them in practice. Through it all, I keep reminding myself, as others have said to me — if we can’t figure it out here in
The stakes are high.
Pepco’s power reliability is an issue of continuing concern for its customers. As of this writing, 1,093 people have signed our petition calling on regulators to establish performance standards and not approve a rate hike until the company’s service improves. Thank you to all the petition signatories and we hope even more residents will sign. Soon, we will be sending the petition to both Pepco and the Maryland Public Service Commission.
At the moment, the Maryland House of Delegates and the Maryland Senate have passed two different bills aimed at establishing reliability standards for Pepco. The Senate’s bill is far better. The Senate would begin levying penalties in 2012 whereas the House would levy them starting in 2014. The Senate would impose penalties totaling up to 2.5% of Pepco’s transmission and distribution revenues whereas the House would only allow a penalty of $10,000 per day per violation. The Senate and House must now agree on a compromise. If you would like the legislature to pass a bill more closely resembling the Senate’s version, you should email your state legislators as soon as you can.
Finally, Pepco continues to shower their executives with endless compensation and perks even as the company fails its customers. Pepco’s latest filing with the U.S. Securities and Exchange Commission shows that the company gave its top five executives a combined 20% increase in compensation in 2010. Its Chief Executive received a 14% increase and has an employment agreement that prohibits the company from cutting his salary or revoking any of his salary increases. Company executives also receive a long list of perks including car allowances, parking, tax preparation fees, financial planning fees, executive physical fees, club dues and spousal travel.
Clearly, Pepco has a long way to go before it makes itself truly accountable to its customers.