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Old 03-28-2008, 02:26 PM
Howard Hartman Howard Hartman is offline
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Default Isiah Leggett Reports - Budget Edition March, 2008



When I took office in 2006 I pledged to put the County's financial house in order. My recommended FY09 operating budget continues the effort to do so by bringing current and expected expenditures into better alignment with our revenues.

If we formulate our budget appropriately, we can set the County on the right path of fiscal responsibility well into the future. On the other hand, if we fail to fully address many of these challenges now, I truly believe we would severely undermine our ability to protect the services and programs the County needs to better enhance our overall quality of life for years to come.

This budget reflects the concerns and policy issues that I heard County residents express during the many Town Hall Meetings, Budget Forums, On-Line Chats, and other community meetings we have held over the past year.

The good news is that Montgomery County will continue to be a place where the investments we make year in and year out will light the lamp of learning in our schools, help folks move around the County more efficiently, protect County families and their properties, allow us to be responsible stewards of our environment, ensure a vital community where men and women can earn a living or grow a business, and help the most needy and most vulnerable in our midst.

But, the bad news is that County government has been living beyond its means. Given the weakness in the housing market and in the national economy, we have a very difficult year ahead in matching our resources and our needs. But our problems do not stop with a single year. We have a structural deficit that will only grow worse - unless we change course - and do it now.

The County didn't get into this financial problem overnight - and it cannot be solved in a single year. This is why I am taking a multi-year approach to resolve this unprecedented challenge.

In my first budget, the County faced a $200 million budget shortfall. We reduced the rate of increase in spending by County government from 14.1 percent to 6.9 percent. Although we were able to fund critical services and held the line on taxes, I warned at that time that more difficult days lay ahead. Last November, the County's income, recordation, and transfer taxes fell far short of projections due to a significant downturn in the housing market. As a result, our projected shortfall increased to $401 million.

To help us resolve this unusually high shortfall, I recommended spending reductions in this current fiscal year of two percent from County government departments and agencies, including the school system. This initiative provided $33.2 million in savings. I also imposed a hiring freeze on all but essential personnel. These measures, plus other actions, helped to reduce our $401 million challenge to $296 million.

In addition to changes to the FY08 operating budget, I submitted to the County Council in January a Capital Improvements Program for the next six years that increased by only one percent over the previous CIP budget. The two previous CIP budgets had averaged increases of 25 percent each.

In the past we could look to the State of Maryland for assistance to help with our financial challenges. Presently, however, the state has its own problems. The increase in state aid for the County this year is likely to be only about $11 million, a 1.7 percent increase - the smallest in over 10 years. Indeed, if you take out state funding for teachers' pensions from that amount, we would actually receive less in absolute dollars from the state.

County residents are paying more in state income taxes and sales taxes that resulted from last fall's Special Session. While we experienced a slight reduction to local aid in the Special Session, the State budget situation is uncertain and additional reductions to local aid may occur.

The decline in interest rates also means less investment income for Montgomery County. This source of income is projected to decline in the current year from an expected $32.8 million to $14.7 million - a 55 percent decrease.

Many of the limited number of options available to the County to address prior budget shortfalls are no longer available. For example, the County income tax is at the legal limit of 3.2 percent. County taxes on energy and telephone services have been increased substantially over the past half dozen years. County residents' energy costs are at an all-time high.

Because of the urgency of addressing these challenges, we sought additional reductions from our departments in developing the FY09 operating budget. Our process for identifying and deciding which expenditure reductions to make gave an early preference to protecting public safety and health and human services. All decisions on reductions were focused on preserving essential services, protecting the vulnerable, and achieving significant productivity improvements.

Therefore, I forwarded to the County Council a recommended operating budget that includes the lowest spending increase in 12 years. Here are some brief facts:

  • The tax-supported budget for Fiscal Year 2009 is $3,770,119,839, up $117,364,790 over FY08 - a 3.2 percent increase. The total County budget (which includes debt service, grants and enterprise funds) for FY09 is $4,324,296,898, up $161,750,964 over the FY08 Approved Budget - only a 3.9 percent increase.
  • For the tax-supported budget, funding for Montgomery County government increases by $20.8 million - a 1.6 percent increase over FY08.
  • Funding for the Montgomery County Public Schools increases by $74.8 million - a 4 percent increase over FY08 and nearly 98 percent of the Board of Education request.
  • Nearly two-thirds of the total increase in County spending will go to MCPS.
  • Funding for the Montgomery College increases by $8.8 million, a 4.5 percent increase.
  • The Maryland-National Capital Park & Planning Commission receives $4.4 million more, a 4.5 percent increase.

As a start toward addressing the structural challenges we face, I recommended the abolishment of approximately 225 positions in County government itself - an estimated 50 of them through an early retirement incentive program.

Only after considering the very serious magnitude of the expenditure shortfall and related service reductions necessary to close the County's budget gap did I conclude that our options were so very limited that it was necessary to increase the property tax. This was a last resort - as it should be.

I have always believed that County government must keep faith with those who pay the bills - our residents. We have an obligation to be honest with them about our challenges and be diligent about reducing spending where possible without critically affecting needed County services. Only then should there be consideration of tax increases. So, while I found it necessary to recommend an increase in property taxes, I have structured the increase in a progressive manner to limit the burden on lower- and fixed-income residents.

This means that for the median house in the County, assessed at $343,200, the homeowner will see a $138 hike - a 6.2 percent increase. A homeowner whose home is assessed at $220,000 (21 percent of County homes) would pay $56 less in property taxes (a 4.7 percent decrease), while a home assessed at $500,000 would pay $383 more - an 11 percent increase. We will promote existing mechanisms for senior citizens and those on fixed incomes to assist them as needed with property tax increases.

Despite the current challenges we are facing, I am very optimistic about the prospects for our community. The quality and nature of services we offer our residents in the areas of education, affordable housing, public safety, and health and human services are among the very best in the nation. The underlying economy, including property values, is strong, employment is high, and we are growing in our diversity and capacity to work together to find innovative solutions to our challenges.

Children Prepared to Live and Learn

For Montgomery County Public Schools, I recommend a total of $2.060 billion - nearly 98 percent of the Board of Education request. This is an increase of over $75 million or 3.8 percent over the FY08 Approved Budget to support an anticipated student body of 137,763 down from a high of 139,387 in FY06. Per pupil spending increases to $14,954.

I recommend an investment of $250.8 million in Montgomery College. This is an increase of $12.6 million or 5.3 percent over the FY08 Approved Budget, with a local contribution of $99.1 million. This level of support requires an increase in tuition and fees of $3 per credit hour for County residents, $6 per credit hour for Maryland residents, and $9 per credit hour for students from outside the State.

Our Positive Youth Development initiative is intended to provide a system for identification, prevention, early intervention and treatment that addresses the particular needs of our most vulnerable children. This budget not only sustains prior investments of nearly $5 million but adds over $600,000 in new funding to address the growing need for out-of-school activities.

Affordable Housing in an Inclusive Community

Despite recent fiscal and economic challenges, we must continue to work to make housing affordable in Montgomery County for all our residents by creating affordable housing and preserving our current affordable housing stock.

To do this I recommend an investment of over $54 million in the Montgomery Housing Initiative fund (MHI) for acquisition and rehabilitation of the County's affordable housing stock. My recommended budget for MHI will leverage the existing resources of that fund with the transfer from the General Fund to create a property acquisition revolving fund which will significantly increase our capacity to acquire affordable housing. Thanks to a new approach to leveraging County dollars, this provides a significant increase to the MHI budget without impacting other County operating budget funding priorities.

Safe Streets and Secure Neighborhoods

This budget sustains the most important investments we have made in our public safety departments including patrol and investigative staffing in the Police Department and field staffing in our Fire and Rescue Services. The past several years have seen significant increases in public safety staffing. Due to current fiscal challenges, we have been forced to make reductions in certain public safety programs. However, those reductions were carefully selected to minimize impacts on response time or first response services.

Fire, Rescue, Emergency Medical Services and Emergency Preparedness are paramount to providing residents and visitors safe and secure streets and neighborhoods. Toward this end I recommended adding 36 new firefighter positions to staff the West Germantown Fire Station when it opens during the next fiscal year. We are also including funds to sustain the second phase of four-person staffing on fire apparatus and the uniformed staff added last year to enhance our capacity to make inspections for compliance with the Fire Safety Code.

In this budget I also recommended that we institute an Emergency Medical Services (EMS) transport fee to provide additional resources to sustain and grow our Fire and Rescue Services in the coming years. The projected level of tax-supported resources for the Fire Tax District Fund simply cannot meet the demands for apparatus management; volunteer enhancement, recruitment and retention; performance based initiatives for the volunteer fire rescue departments; additional staffing for new stations opening in West Germantown, East Germantown, Travilah, Clarksburg, and other locations around the County; additional staffing to implement four-person staffing of apparatus; and competitive compensation and benefits for our firefighters and emergency medical technicians.

This EMS Fee will be billed directly to an individual's health insurance. No County resident who is unable to pay will have any out-of-pocket expense for transport to the hospital. All of our surrounding jurisdictions have implemented similar programs with no impact on the willingness of individuals to call for emergency services.

To address the high incidence of pedestrian injuries and fatalities in our County, I formed the Pedestrian Safety Initiative. This initiative was staffed by an interagency work group from the Maryland-National Park and Planning Commission, the Maryland State Highway Administration, the Montgomery County Department of Public Works and Transportation, Police Department, the CountyStat Office, the County Council, and others, and developed seven strategies designed to enhance pedestrian safety throughout Montgomery County. Based on the recommendations of the work group, I am recommending an additional $800,000 to conduct safety audits in areas with a high incidence of pedestrian collisions, make physical improvements to those areas, and enhance outreach and education. This additional investment will complement our existing pedestrian safety program, which includes sidewalk repair and construction, signal optimization, crosswalk installation, and outreach and education.

Investing in Our Workforce

As required by law, I recommended funding the contracts with the County Government's employee representative organizations. I also recommended continued funding to support the provision of promised health insurance benefits to County retirees. However, due to fiscal constraints we called for revising our previous plan for phasing in the funding for this benefit from five years to eight years. This will free up tax-supported resources that can be invested in preserving existing services. In the past, too much focus was put on the accounting requirements related to this benefit. The truth is that if funding does not exist for this benefit, the benefit itself is not secured.

To approve health benefits for future retirees without funding those benefits is not responsible - it breaks faith with retirees who will need to know the money is there when it is needed. We have long accepted the concept of pre-funding of pension benefits because it is a responsible and cost effective approach to fulfilling our promises to retirees. We need to embrace the need to realistically fund this commitment as well.

To ensure that the County sets aside the funds needed for promised health benefits, I recommended that the appropriation for each agency, including Montgomery County Government, condition the spending authority of that Agency on its contributing the scheduled amount of funds for Retiree Health Benefits into a trust created to manage the funding for and payment of these benefits.

Because we are projecting a long-term imbalance between expenditures and revenues we need to focus on solutions that are continuing in nature. For this reason I recommended creation of an early retirement incentive program. While all of the details surrounding this plan need to be further defined, we are estimating savings of approximately $5 million in FY09 through this program.

This budget proposes to abolish approximately 225 positions in Montgomery County Government. These reductions include an estimated 50 positions that would be permanently abolished as part of the early retirement incentive program. While it was a difficult decision, the elimination of these positions will create substantial long term savings that will contribute to realigning expenditures with revenue growth.

The full budget can be viewed on the County's website.

County Government Rate of Growth (Tax Supported)

Total Rate of Growth (All Agencies, Tax-Supported)

County Government Rate of Growth (All funds, including debt service, grants, and enterprise funds)

Total Rate of Growth (All agencies, including debt service, grantsand enterprise funds)

Capital Budget Growth (Every Two Years)

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Last edited by Howard Hartman; 03-28-2008 at 03:42 PM.
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