Budget, First Look: Counties To Fund Most Of SDAT; Most Formulas Capped

Today Governor Hogan released his fiscal 2018 budget and accompanying Budget Reconciliation and Financing Act of 2017, boasting that it “responsibly holds the line on spending without raising taxes, cutting services, or raiding special funds.” FY 2018 operating budget expenditures total $17.1 billion; the total budget is $43.6 billion, a 2 percent increase over fiscal 2017. Thus far, MACo has gleaned the following information from the provided materials, but will continue to provide updated coverage as we gather more information and analyze the impacts more fully.

Most notably, the budget makes counties responsible for nearly all operating costs for the assessment and directorial functions of the State Department of Assessments and Taxation (SDAT) – 70 percent in fiscal 2018, and 90 percent for every year thereafter.

Additionally, all county (and other) aid requirements, except those for education, are capped at one percent less than projected General Fund growth. 

Among county effects — some areas are fully funded:

  • The budget fully funds K-12 education according to law, at $6.4 billion. Community colleges are also fully funded at $256 million.
  • $53 million is included in capital grants to counties and municipalities for transportation aid, above the formulaic appropriation of highway user revenues. This includes $5.5 million to Baltimore City and $27.4 million to counties, distributed according to the same formula used to distribute highway user revenues, based on road mileage and vehicle registrations. This in effect increases the highway user split by 0.3 percent for Baltimore City and 1.5 percent for all other counties.

…some areas are “flat funded” at the same level, reduced from formula-driven increases:

  • Local health departments and police aid to counties from the Police Protection Fund are flat-funded from fiscal 2017.
  • Disparity grants are flat-funded as of the November 2, 2016 Department of Public Works meeting, when the State passed midyear cuts to the program ( a reduction of about $8.4 million to affected counties).

…and in one area, major new costs are being shifted to counties– specifically, SDAT’s operating costs:

  • For fiscal 2018, counties pay for 70 percent, rather than the existing share of 50 percent, for certain SDAT functions, including the costs of real property valuation, business personal property valuation, and information technology costs.
  • For fiscal 2018, counties also pay 70 percent of costs for the SDAT Office of the Director (an function where there had not been any county share previously).
  • Beginning in fiscal 2019 and thereafter, counties pay 90 percent of the above-mentioned costs to operate SDAT.
  • Nothing in the legislation provides county governments any say in the management or oversight of these state functions – counties merely are invoiced for the costs.

Finally, as part of what the Governor has termed the “Common Sense Spending Act of 2017,”  funding increases for all programs (other than specific K-12 education programs, Rainy Day Fund deposits and debt service payments) are capped as follows beginning in fiscal 2019 and forever after:

…any appropriation that is mandated by law shall have its mandated level of spending increased by the lesser of:

(1) the amount of the existing formula calculation; or

(2) an amount equal to 1% less than the reported amount of General Fund revenue growth in the report submitted by the Board of Revenue Estimates to the Governor under § 6–106(b) of the State Finance and Procurement Article for December.

In other words, no statutorily-required state funding — including many programs supporting counties (other than for education) — would ever increase beyond projected General Fund growth minus 1 percent, regardless of what the formula in law currently dictates.