By Neal Earley @neal_earley
Proposed cuts to the County budget are likely to come, as Montgomery County Executive Marc Elrich is preparing a savings plan for the County Council to consider.
On Tuesday, County staff updated the Council on the latest revenue projections for the County. While projected tax revenues are on track, meeting the predictions County staff anticipated when they made their assessments months ago, the County is still in a tight fiscal situation as Elrich prepares cuts to the Fiscal Year 2019 budget.
The fiscal update the staff gave to the Council was an early assessment, meant to give the Council a rough picture of the fiscal state of the County, as it heads into its winter recess. The Council will return in January, when it will have to consider a savings plan from the County Executive as well as begin the budgeting process of the next fiscal year.
“This year, our revenue update is probably the closest projection that we are aware of in recent memory,” said Marlene Michaelson, executive director of the County Council. “It is almost identical to the projections you saw in June.”
Elrich will ask each County agency to suggest one-percent cuts, a plan that will need approval from the County Council totaling $41 million. However, in a memo to Michaelson, from Mary C. Beck, acting director for the Office of Management and Budget, the County is limited in its cuts, given it cannot make cuts to Montgomery County Public Schools according to state law, meaning the greatest cuts will come to the Maryland-National Park and Planning Commission and Montgomery College, which could see a 2.2-percent cut for both agencies.
For Elrich, his first term will likely begin with a slew of cuts. During his campaign, Elrich spoke about needing to restructure the County government in order to find new ways to save costs, as the demand for services in the County grows. The cuts will come without tax increases, at least for the first fiscal year, as Elrich repeatedly said County government needs to find a solution to its fiscal situation without raising taxes on residents again — something which, at the moment, is not politically viable.
“As you will discover at your later briefing on what’s happening with revenues in the County, we have challenges, we’ve had challenges,” said the County’s new Director of the Office of Management and Budget Rich Madaleno.
Last year, the Council had to work quickly to make $53 million in cuts to the County budget after revenue projections fell short. County officials blamed changes to the federal tax code, which prompted some of the County’s wealthiest residents to file their income tax returns early, in order to take advantage of the new law.
Now again, the Council will have to make cuts to County government, something that will be hard to do as the County’s needs grow and members of the County Council, along with the County Executive, have promised to implement or expand programs such as early childhood education.
For County staff, the fiscal projections are still early, as there several factors that could lead changes in their predictions — namely, revenues from state government.
While the change in federal tax code hurt County revenues, it increased those at the state because of a reduction in the State and Local Tax deduction. The reduction of the SALT deduction by Congress means many pay more in state income taxes, resulting in the state having more revenue.
However, it is unclear what the General Assembly will do with the additional revenue, as the Maryland State Senate rejected a plan from Gov. Larry Hogan (R) that would have given some tax relief to residents.
“Obviously, I’m not a big supporter of that federal tax change, but there should be a revenue increase, at least at the state level, and we piggyback off of the state,” said Council member Andrew Friedson (D-1).