Montgomery Cuts Budget by $54 Million Following Revenue Shortfall

The Montgomery County Council approved cutting the fiscal 2016 budget by $54 million this week to offset lower than expected revenues and significant income tax refunds that will need to be paid as a result of a recent Supreme Court ruling. This reduction is slightly higher than the $50.8 million proposed by County Executive Ike Leggett.

As reported by the Washington Post,

The council accepted about $36 million of Leggett’s cuts, including $10 million from Montgomery County Public Schools and $2.5 million from Montgomery College. But it also restored about $2.5 million in executive reductions to salary supplements for aides to the developmentally disabled, and housing assistance for homeless veterans and families with children. The council also walked back cuts in library materials and in deep cleaning of libraries and recreation centers.

To get to the $54 million mark in cuts, the council voted to pull from the capital improvements plan more than $18 million in tax funds earmarked for certain projects. The projects have encountered delays, so the money will not be needed this year, officials said. A contract for renovations to the council’s Maryland Avenue office building ($14.3 million) is being rebid. Delays in approval of the proposed Purple Line have freed up money ($3.8 million) that would have gone to a new entrance connecting the street-level stop on the light-rail line in Bethesda with Metro ($3.8 million).

County Executive Leggett has indicated that a property tax increase may be necessary next year. However, Council President George Leventhal stated that he would like to have “a serious conversation about the cost of government.”

Congress Set to Pass Another Short-Term Transportation Funding Measure

With the August recess fast approaching, Congress will again pass a short-term transportation bill extending federal dollars until the end of October.

As reported by The Hill,

The House voted Wednesday to approve an $8 billion bill that would extend federal transportation funding until the end of October, sending it to the Senate with just two days to go before the nation’s road and transit spending expires.

The bill passed in a 385-34 vote, with Rep. Betty McCollum (D-Minn.) voting present. Senators are expected to accept the patch to prevent an interruption in the nation’s infrastructure spending during the busy summer construction season.

The House is adjourning for the traditional August recess after the vote, forcing the Senate’s hand.

But senators are planning to stay in Washington next week, and Majority Leader Mitch McConnell (R-Ky.) has vowed to finish a six-year transportation bill to jumpstart conference negotiations on a final bill.

A long-term transportation measure will be taken up when Congress reconvenes in September.

Congress is grappling with a funding shortfall for transportation that is estimated to be around $16 billion per year. Since 2005, lawmakers have not passed a transportation bill that lasted longer than two years.

Augustine Commission Faces Difficult Task in Examining Tax Structure

An article in the Daily Record (subscription required) indicates that the Maryland Economic Development and Business Climate Commission has a difficult task ahead as it begins its work to examine the State’s tax structure. The Commission, otherwise known as the Augustine Commission after its chair, former Lockheed Martin Chief Executive Officer Norm Augustine, has been charged this interim with examining the State’s business tax and incentive structure to improve Maryland’s competitiveness.

As described by the article, some members, including Mr. Augustine, hope to identify “low hanging fruit” that can be changed to improve the state’s tax structure. One member, former St. Mary’s Delegate John Bohanan, commented that local governments are part of the problem because the state provides aid to local governments in ways that other states do not. However, the bulk of this aid is provided for K-12 education.

Senator Edward Kasemeyer, Chair of the Senate Budget and Taxation Committee and a Commission member, commented that the group needs to determine where it can provide the biggest impact and place the emphasis there. He further indicated that there would not be broad sweeping changes to tax categories.

As previously reported on Conduit Street, the Commission convened last week to examine the state’s tax structure, revenue estimating practices, and budget process. The Commission will continue to hold meetings over the next several months looking more closely at business taxes and incentives and best practices. A final report is due in December.

Meeting Schedule

Congressman Delaney Calls for Smarter Government on TEDx

Congressman John Delaney of Maryland gave a TED talk on TEDx Pennsylvania Avenue that shares his idea for a new approach to government, nonprofit and business sector collaboration. U.S. Representative Delaney was a business entrepreneur before entering Congress.

In his talk, he describes the need a new sense of collaboration between government, nonprofits, and the business sector to make a difference on issues and to help Americans who are struggling.

The Congressman describes three main challenges to government’s ability to address the problems of the day.  These include: funding; innovation; and transparency.

The Congressman suggestions collaboration through pay-for-success contracting as one approach to overcoming these challenges. The general process would be:

  • The government contracts with a nonprofit to create a program that addresses a problem.
  • The nonprofit issues social impact bonds to fund the program.
  • The government pays for the program only when and if the program’s metrics show success.

For more information, watch Congressman Delaney’s TED talk.

Report Summarizes Fiscal Effects of 2015 Session on State and Local Government

The Department of Legislative Services (DLS) recently released a report titled Effect of the 2015 Legislative Program on the Financial Condition of the State. This annual report summarizes the fiscal effects of the immediate prior legislative session on state and local governments.

The report is divided into five sections.

The full document can be found here.

NACo Session on Medical Cannabis Offers Insight into Effects of Legalization

The National Association of Counties Annual Conference in Charlotte North Carolina featured a educational workshop, Medical and Recreational Marijuana Legalization: Impacts on Counties.

The workshop included a big picture discussion of the issues of transitioning to medical marijuana and recreational marijuana usage, and specifics including projected revenues from marijuana sales. County policy directors for the Washington and Colorado state county associations presented on the state/local roles in licensing, drug-free workplace policies, taxation and financing the regulatory structure and the difficulty in reconciling state legalization with the federal Controlled Substances Act. Some aspects that I thought were the most interesting included the level of fraud with medical marijuana, the need for zoning changes in agricultural zones, and the difficulties and limitations of local control.  Here are some bullets from the slides:

Medical vs. “Medical”

  • How do you create a system that is resistant to fraud?
  • What are the roles/responsibilities of the doctors?
  • What does patient access look like?
  • Who regulates the “bad” actors? State or local?
  • What happens when a well-child visit by social services reveals the presence of marijuana plants in the home?

What We Learned

  • Medical vs. recreational
  • Problems vs. process of setting up new markets
  • Difficult to monetize impacts to local government
  • Take the money
  • Local control is a two-edged sword
  • Message effectively

For more information:

Here is a link to a video of the workshop.

Here is a link to the power point from the workshop.

An article from NACo, Legal pot issues ‘slant’ westward, have implications for broader U.S.

JUST ADDED — This year’s MACo Summer Conference will also feature a Thursday session on medical cannabis — see more details on Conduit Street.

Learn more about MACo’s Summer Conference:

For a schedule of educational sessions at MACo’s Summer Conference, please view the Registration Brochure.

Questions? Contact Meetings & Events Director Virginia White.

Prince George’s Will Earmark Half of Casino Revenue to Schools

The Prince George’s County Council unanimously approved a measure this week to earmark half of all county casino revenue generated from the MGM casino to public schools, libraries, and community colleges. As reported by the Washington Post,

Lawmakers introduced the measure in response to a proposal by County Executive Rushern L. Baker III (D) to raise property taxes by double-digits to generate new funding for schools. The council rejected the plan after a public outcry, raising taxes by a third of his original request.

The bill passed Tuesday would redirect 50 percent of the $42 million in revenue the casino is expected to generate once it opens in 2016 from the county’s general fund to its schools, library and community college budgets.

“This money should not supplant money that is already funding the schools, but supplement,” said council Chairman Mel Franklin (D-Upper Marlboro).

The legislation caps the amount of supplemental funding at $25 million.

The county executive’s office did not take an official position on the measure.

The State Budget, and its County Effects – Where Do We Stand

The State and its fiscal policies and position tend to have a direct effect on local government revenue. This relationship is evident in a recent article in the Daily Record (subscription required) announcing a Tax Amnesty program that is set to take effect from September 1 through October 30. The program will give taxpayers, who may be behind on paying their taxes, the opportunity to pay their liabilities at reduced interest with no criminal penalties. The program is expected to generate $18 million in State revenue and $4.5 million in local revenue.

To learn more about the State and local funding and revenue relationship, attend the following session held during the MACo Summer Conference titled “The State Budget, and its County Effects – Where Do We Stand?”

Description: The State and its fiscal position has a major ripple effect on county budgets and our many shared policy priorities. Even as the economy shows signs of recovery, Maryland still faces challenges with revenues, competing desires for spending, and tax reductions. The State carries on its books substantial liabilities for pension and health care liabilities, and still faces growing costs for debt service and environmental goals. Seasoned fiscal experts will discuss – from the state and county perspectives – where the State stands, what critical decisions lie ahead for the Governor and legislature, and how much of this flows down to county governments and local priorities.

Speakers:

  • Warren G. Deschenaux, Jr., Director of Policy Analysis, Department of Legislative Services
  • Michael Sanderson, Executive Director, MACo

Moderator: The Honorable Rikki Spector, Baltimore City Council Member

Date/Time: Friday, August 14, 2015; 2:15 pm – 3:15 pm

The MACo Summer Conference will be held August 12-15 at the Roland Powell Convention Center in Ocean City, Maryland. This year’s conference theme is “Energize. Mobilize. Capitalize.”

Learn more about MACo’s Summer Conference:

For a schedule of educational sessions at MACo’s Summer Conference, please view the Registration Brochure.

Questions? Contact Meetings & Events Director Virginia White.

Anne Arundel Cuts Water and Sewer Rates

The Anne Arundel County Council voted last evening to reduce water and sewer rates by 2.25%. The water rate per 1,000 gallons of water will drop from $2.76 to $2.70 and the wastewater rate will drop from $4.85 to $4.74.

As reported by The Annapolis Capital,

The bill was introduced by Council Chairman Jerry Walker, R-Crofton, who said he believed the county’s growing utility fund should be redistributed back to the taxpayers. County code suggests a minimum utility fund balance equal to at least two months of expenditures. The legislation passed 6-1, with Councilman John Grasso, R-Glen Burnie, registering the “no” vote.

The utility fund is currently sitting at about a six-month surplus.

NY Times Analyzes Property Taxes

The New York Times‘ “The Upshot” section ran an interesting analysis of property taxes this weekend. Maryland local governments, like most states, rely on property taxes more than any other revenue source (though our dependence is lower than many places). Their discussion looks at their unpopularity, but also their relative efficiency, as a tax levy.

A 2008 study by researchers at the Organization for Economic Cooperation and Development looked at a number of countries and found that taxes on real property caused the least drag on gross domestic product per dollar of revenue raised. Next came sales taxes, personal income taxes and corporate income taxes. In other words, property taxes were the best way to collect revenue without hurting the economy too much.

So from an economist’s perspective, it’s a bit of a problem that Americans have fought so strongly against property taxes for the last 40 years. Since the 1970s, most states have significantly restricted how high local property taxes can go. The main effect has been not to restrict the growth of government but to push government to rely on less economically efficient taxes.

Read the full article on “The Upshot” section of the New York Times.