After the Montgomery County Council cut the budget last year by around $53 million after revenues fell short of projections, members of the County Council are facing another tough fiscal decision.
Last week, members of the County Office of Legislative Oversight briefed the County Council on how spending on growing wages, among other things, is putting a greater fiscal strain on the County’s budget.
Craig Howard and Aron Trombka, analysts from the OLO, informed the County Council that compensation for County employees is making up a larger portion of the County budget, which could potentially put a great fiscal strain on the County.
“Yes, it has been frustrating every year I think for us here on the Council to try to, you know, understand clearly what is the true state of our fiscal situation,” said Council Vice President Nancy Navarro (D-4).
According to a report from Howard and Trombka, it will be hard for the County Council to raise revenues to meet growing spending in the budget, if needed, because the County is close to the state limit on income tax for residents. In addition, they wrote in their report that another property tax increase above the rate of inflation would require unanimous approval from the County Council, something that is not politically viable at the moment.
The limits to a shift in increasing revenue could lead to a cumulative budget shortfall of $200 million in five years, according to Howard and Trombka. Before, in FY14 to FY19, the County’s revenue outgrew the cost for compensation, something that County analysts project will not be a reality in the coming years. From FY14 to FY19 County revenue grew an average of 3.5 percent, enough to accommodate the average 2.7-percent increase in County compensation for employees.
“The way we have been doing things just isn’t sustainable any longer,” said Council member Craig Rice (D-2). “And it really requires us to really start looking at new and innovative ways in which we can address the needs that continue to grow here in Montgomery County.”
As of now, the County’s revenue is projected to grow at 2.7 percent through fiscal year 2024, which would not be able to cover the growing cost for County wages, Social Security, and insurance growth at the same rates, while retirement costs remain the same.
For Council member and County Executive-elect Marc Elrich (D-at large), the budget issues extend beyond compensation for County employees, saying the County can find savings by looking elsewhere.
“County government has the ability to find savings not just in labor but say, for example, in procurement,” Elrich said.
For the new County Council and County Executive, the projections are a difficult task.
While labor costs are high, the ability to pay for them is shrinking. At the moment, members of the County Council have said they won’t raise property taxes beyond the charter limit, and County Executive-elect Elrch has promised to find savings by restricting the County government.
The projected $200-million revenue shortfall comes almost a year after the County Council had to cut $53 million from its FY18 budget when County revenue fell short of projections. But the $53 million in cuts only accounted for a portion of the $120-million revenue shortfall the County faced last fiscal year.