The County Costs of Kirwan: Running the Numbers

A report on the capacity of county governments to afford the mandated local funding under the recently passed Kirwan Blueprint school funding plan was released – its 12-year forecast includes mixed messages for counties and their fiscal planning. We break it down here.

When the General Assembly passed legislation during the 2021 session amending and refining various provisions of the ambitious “Blueprint for Maryland’s Future” education legislation, it included a section requiring a study to evaluate the fiscal effects on Maryland’s counties:

Recently, the final report conducted by legislative staff, pursuant to this requirement, was published on the Department of Legislative Services (DLS) website.

The Bottom Line: A Mixed Bag, Worth Re-evaluating in a Few Years

If you’re the type to flip to the back of the mystery novel to see “whodunit,” here’s the report’s “Conclusions and Recommendation” section, one page in its entirety:

The report effectively finds that a birds-eye-view of county affordability, with some statewide assumptions of tax bases and cost mandates, suggests the plan is:

A number of jurisdictions will face fiscal stress at some point in the next 12 years to meet the Blueprint funding requirements. The ability of local governments to manage the additional spending demands will vary based on several factors.

A few main takeaways from the lengthy report, to guide you through the essentials:

Long Term Forecasting Is Always Imprecise

Veteran fiscal staff and stakeholders are familiar with Maryland’s standard one-year “fiscal note,” often followed by a five-year projection. Annapolis resists the familiar D.C. temptation to “score” legislation as a simple sum of an arbitrary duration that sometimes promotes unlikely phase-outs and-the-like to reach an oversimplified tally.

However… as shaky as a five-year projection can be, the Kirwan plan is slated for 12 years, and the staff wisely notes this as a major element of variability:

It is important to note that this study relies on projections of both Blueprint expenditures and local revenues over a 12year period. The State’s revenues and expenditures are typically estimated over a 5year period due to the myriad of assumptions that underpin such a forecast and the sensitivity of those assumptions to modest changes in economic conditions. Projections within, and especially beyond, this timeframe become less reliable with each additional year. Thus, these projected impacts are not etched in stone and future actual results will likely diverge, potentially considerably, by jurisdiction over the next 12 years.

The Report Continues to Use a “Forecast” Rather Than Current Law as the County Baseline

Fiscal estimates of legislation typically take the same format: show current law, show the effect of the bill, and the difference is the bottom line highlighted as its “fiscal note.”

Given the complexities of county funding, and recognizing the reality that most counties have directed funding to education above and beyond the state-mandated per-pupil amounts, during the Kirwan/Blueprint study and debates, DLS opted to show costs relative to a “trend,” instead. Thus, a county that had made specific education investments in recent years would be forecasted to maintain that recent growth trend — and the “cost” of the new funding law would be compared to that trend line, rather than the requirements of current law.

A practical, if unconventional (and sometimes confusing) presentation – and one that continues in this report. These “Pre-Blueprint Projections” represent county funding not as it is mandated by the State, but as it might be expected to continue based on the assumption that each county’s trajectory continues into future years.

Regardless of the magnitude of the incremental cost, this basis does not alter the overall affordability conclusions reached by the report. While some of the summaries embed this forecast of local spending trends, this is generally noted in the discussion, like here on report page 26:

By fiscal 2028, six jurisdictions will require local appropriations that are at least 5% greater than pre-Blueprint amounts ... Caroline, Cecil, Kent, Prince George’s, and Talbot counties also require significant increases above the expected pre-Blueprint levels.

However… this requires that context to be applied throughout the multiple comparable sections. When the report later on the same page indicates a segment labeled “No Impact Jurisdictions” that should be understood to be read as “no more funding than the county’s pre-Blueprint forecasted funding increases” rather than “no more funding than prior law required.”

Putting Together Revenues and Required Funding Levels

This report makes the clearest and most comprehensive effort yet to put, side-by-side, the best available estimates of revenue growth and funding obligations, by county. Among several pages of narrative and explanatory tables, we include Exhibit 3.8 below — an attempt to normalize the added funding for each county, above its prior trendline, obligated by the Blueprint plan. Here, rather than show these figures in raw dollars (sometimes obscuring the relative effect upon different-sized jurisdictions) the effect is shown as a percent of that county’s expected property and income tax revenues (the lion’s share of the county revenue picture):

So, here is perhaps the most useful representation of the overall effect – relative to the direction each county had already been “pointing.” Several jurisdictions, including both large and small, high- and low-wealth, will be obligated to ramp up their education funding substantially during the phase-in years of this multi-stage funding plan.

The body of the report details, in multiple ways, the components of the formula changes that affect local jurisdictions, and the outcomes from those multiple parts of the legislation.

The “Wealth Formula” Is Not Addressed Here

While this report is the most exhaustive available in covering these issues of county-level affordability, it did not go beyond its direct charge and make any additional evaluation of the propriety or effectiveness of the “wealth per pupil” and related “county education effort” calculations that undergird many of the formula components. Some jurisdictions have argued that these formulae collectively depress funding for counties with unusual combination of property and income tax bases.

While the studies leading to the eventual Kirwan Commission report included a series of policy options to alter the wealth calculation, the Commission eventually made no recommendations to do so, nor did the legislation do so at any of its various stages.

A Valuable and Informative Report

It can be tempting to receive a report that falls short of making bold, actionable recommendations as a missed opportunity. We suggest this report serves an important purpose, by updating and elaborating on matters that had been previously scattered among multiple sources.

Here, stakeholders (including county government officials, most especially) now have the most authoritative and easily understandable compilation of the fiscal roadmap ahead for counties supporting these educational programs.

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Helpful Resources:

DLS Full Report (January 2022): Local Fiscal Impact of Implementing the Blueprint for Maryland’s Future

Conduit Street (September 2021): “Huge Cache of Kirwan Blueprint Data Now Available

Conduit Street (May 2021): “Kirwan Blueprint Fix-Up Bill – A Final Fiscal Note

Conduit Street (April 2021): “Kirwan “Blueprint 2.0” Follow-up Bill Passed, Sent on to Governor

Michael Sanderson

Executive Director Maryland Association of Counties
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