Fiscal Pressures, Court Decision Could Lead to Significant Shortfall in Montgomery County’s Fiscal 2015 Budget

Although the Montgomery County Council recently approved the county’s fiscal 2014 budget, it is looking ahead at the budget picture for fiscal 2015.  As reported by the Washington Post, the county could be looking at a $300 million shortfall in fiscal 2015.

The estimate is based on a number of fiscal pressures and policy assumptions. The county faces continued growth in education spending due to the state “maintenance of effort” law, which requires that schools receive, at a minimum, the same rate of per-pupil funding as in the previous year. Projected increases in enrollment and other costs could increase the county contribution to MCPS by $26.6 million. The continued shift of responsibility for teacher pension costs from the state to county government is estimated to rise by $3.3 million.

The county is lowering tax revenue estimates by about $150 million in anticipation of two potentially adverse events. Although to date the federal sequester “has not had the dire impact predicted for it,” Farber said, the county is taking a write down of $65 million in projected tax revenues for FY15.

The county could also be hit hard by a tax case pending in the courts. The state Court of Appeals ruled in January that Maryland must offer a credit to taxpayers who earn certain forms of income in other states to offset county income taxes. The court ruled that Maryland’s failure to offer the credit violates the Commerce Clause of the Constitution.

MACo has been following the county income tax case, Maryland State Comptroller of the Treasury v. Brian Wynne, et ux., very closely.  More information on the case can be found on Conduit Street.