Early projections show Montgomery County government facing a $71 million budget gap going into fiscal 2014, because of the faltering economy, other expenses, and $30 million needed to meet state funding regulations for Montgomery County Public Schools.
An updated summary for fiscal years 2013 to 2018 was adopted Tuesday by the County Council.
The summary painted a “very sobering picture” of the county’s future, particularly in 2014, Council Staff Director Stephen Farber told the council. Fiscal 2013 begins July 1.
The summary, which Farber called a “snapshot in time,” showed revenue growing 2.3 percent, or about $92 million, from 2013 to 2014, to about $4.14 billion. It also assumed state aid remaining flat, an unchanged energy tax rate and property taxes increasing annually to the charter limit.
Non-operating spending — which includes employee retirement health insurance pre-funding, current revenue for capital projects and debt service — is projected to grow 28.1 percent, or about $133 million, to $611.7 million from 2013 to 2014, effectively reducing the pool of money available to all county agencies by about $41 million.
Making matters worse is the state’s maintenance of effort law, which requires the county fund the school system at the same amount per pupil as the year before.
When the Maryland General Assembly passed changes to the maintenance of effort law this year, which authorized the state to divert county income tax to local schools if the county does not meet MOE, the county did not expect that change to affect its finances until later years, Farber said.
But the law likely is to have an effect sooner rather than later, as early as 2014, he said.
Meeting MOE and pension costs in 2014 will require $30 million more in county funding, increasing the projected budget gap for county agencies to $71 million, Farber said.
To meet its education funding obligation, the council is looking at reducing its government and park and planning spending, making it harder to continue the quality of services the community expects, said Council President Roger Berliner (D-Dist. 1) of Bethesda at his Monday press briefing. Similar sobering projections were made last year, but those were based on a sunset of the energy tax increase the council passed in 2010, which did not go away, he said.
“I do want to foreshadow, if you will, that we have difficult times ahead,” Berliner said.
Based on the projections, the county would need to reduce its county government spending by $66 million and its park and planning spending by $5 million in 2014 to break even.
County government and the Maryland-National Capital Park and Planning Commission are the only two agencies for which the county can reduce its spending under state law should revenues fall short, Farber said. State law requires county funding for Montgomery College to at least remain flat at $218.8 million in 2014.
Funding the school system at maintenance of effort will put enormous pressure on county government and park and planning, but those agencies would feel even more pressure if the council were to consider funding the school system above MOE, Farber said.
Despite concerted efforts by the county to fight the maintenance of effort change and a partial shift of teacher pensions — projected to cost the county $7 million more in 2014 — the General Assembly did not have any idea what it was doing when it passed the measures, Councilwoman Valerie Ervin (D-Dist. 5) of Silver Spring said Monday, echoed by Jennifer Hughes, director of the county’s Office of Management and Budget.
Council Vice President and GO Committee Chairwoman Nancy Navarro (D-Dist. 4) of Silver Spring said the county had just begun in its $4.6 billion 2013 operating budget to restore cuts to its basic services like police and libraries.
Restoring more services when facing a $71 million gap for 2014 will be difficult, Hughes said.
The Government Operations and Fiscal Policy committee recommended the council adopt the summary, with Navarro noting that it was “recommended with a lot of unhappiness.”
Council staff will update the summary again in December, but Farber cautioned that based on global markets the financial picture could get worse.