Montgomery Officials Consider Budget Cuts Following Revenue Hit

Montgomery County officials have been instructed to prepare spending reduction plans for their agencies following lower than expected revenues and a Supreme Court decision that will result in significant tax refunds. A reported by the Washington Post,

In a memo released late Friday afternoon, the chief administrative officer, Timothy L. Firestine, ordered department heads to prepare 2 percent reductions in spending for the fiscal year that begins Wednesday. The “savings plan,” as Firestine called it, would shave about $25 million from the $5 billion operating budget, county officials estimated.

Firestine said the reductions would be submitted to the County Council for action before the summer recess that begins after its July 28 session.

The cuts are necessary, Firestine said, in part because the county’s most recent distribution of income tax revenue from the state fell $21.4 million short of projections. In addition, costs associated with last month’s Supreme Court decision in Comptroller of the Treasury of Maryland v. Wynne may run higher than estimated.

As previously reported on Conduit Street, the US Supreme Court ruled in a 5-4 decision that Maryland’s income tax system, specifically the application of the local income tax, is unconstitutional and must be altered to grant more credits for Maryland residents’ out-of-state income. At issue in the case, Maryland State Comptroller of the Treasury v. Brian Wynne, was whether the failure to allow a credit against the county income tax violates the commerce clause because it discriminates against interstate commerce.

Montgomery officials said early estimates showed the county losing $10 million in fiscal 2016. But new projections put the cost of refunds at closer to $15 million. Losses for fiscal 2017, originally estimated at $55 million, might be closer to $76 million, Firestine said.

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