Revenue Collection Tools Ensure Fairness To All Ratepayers

MACo Associate Director, Barbara Zektick, provided testimony in opposition to House Bill 453, “Tax Sales – Water Liens,” to the House Ways and Means Committee on February 23, 2017.  James DiPietro, Deputy Director, Bureau of Utility Operations, Department of Public Works, Anne Arundel County; and Janice Simmons, Bureau Chief, Revenue Collections, Department of Finance, Baltimore City, joined in opposition to this bill.

MACo ensured the bill sponsor and committee that the Association was happy to help work on addressing any issues which might allow some to profit, perhaps unduly, from the hardship of others. However, this bill deprives counties of the opportunity to use an effective tool for enforcement – tax sale – to enforce liens for unpaid water, sewer, or sanitary system charges. The tax sale process, or more specifically the potential for a property to go to tax sale, presents a much needed tool of last resort to ensure that property owners remit payment for their fair share of taxes and charges connected to public services. Most counties in Maryland go to tax sale solely to enforce utility liens. This bill removes this leverage for all counties, and undoubtedly would create many more deficient accounts for water and sewer bills from lack of enforcement – leading to increased rates on citizens who properly pay.

From MACo testimony:

All property owners deserve full and adequate notice of any collection efforts to collect taxes or charges assessed on the property – and as such, every county has procedures to ensure notice is provided prior to tax sale. Additionally, property owners have the right to redeem property within six months from the date of any tax sale by paying the amount owed. The tax sale process includes multiple checks and balances to ensure that local governments can collect overdue fees without unjustly depriving taxpayers of due process, water, or their homes.

Follow MACo’s advocacy efforts during the 2017 legislative session here.

MACo Opposes Costly Changes to State Retirement System

MACo Policy Associate, Kevin Kinnally, provided testimony in opposition to House Bill 344, “State Retirement and Pension System – Disability Retirement and Workers’ Compensation Benefits – Offsets,” before the House Economic Matters Committee on February 21, 2017. Kinnally was joined by Wendy Karpel, Associate County Attorney, Montgomery County in opposition to the bill.

The bill appears to shift costs from the pension/retirement sector to the workers’ compensation sector, which may not affect State costs but would increase costs on local governments. One of the key provisions of HB 344 is the repeal of the ability to offset a workers’ compensation benefit if a person is receiving an ordinary disability payment for the same injury from the State Retirement and Pension System (SRPS). Another appears to result in the shifting of costs between SRPS and the workers’ compensation system.

Currently, the ability to collect both a workers’ compensation payment and a disability retirement payment is a special benefit enjoyed by fire and public safety personnel. The “stacking” of these benefits is costly to local governments. HB 344 would broaden the pool of potential candidates that could stack such benefits.

From MACo testimony:

While such shifting may ultimately be neutral at the State level, as the State pays for both retirement benefits and workers’ compensation for its members, such shifts have a different effect for local governments, which pay for workers’ compensation directly.

Follow MACo’s advocacy efforts during the 2017 legislative session here.

MACo Supports Grant Funding to Offset Declining Enrollment

MACo Policy Associate, Kevin Kinnally testified in support of House Bill 684, “Education – Grant for Declining Education Aid,” to the House Appropriations Committee on February 21, 2017.

HB 684 would help to offset the sudden drop-off in education funding to jurisdictions with declining enrollment, ensuring school systems can offer equivalent courses and programs, even with fewer students.

Five Jurisdictions–Baltimore City, Calvert County, Carroll County, Garrett County, and Talbot County–are slated to lose a combined $45M in state education funding in 2018. Baltimore City is the most deeply affected, with a $38m loss in year-to-year total state education funds.

From the MACo testimony,

Counties value public education as a high priority, and an essential service and benefit to the citizens and the economy. State Budgeting formulas and requirements complicate this commitment, especially because nearly all state education funding is distributed on a per-pupil basis, meaning that the more students a school system serves, the more funding it receives.

By contrast, when the number of students declines, schools can experience a sudden drop in funding. This dynamic can strain local budgets – reflecting the reality that not every dollar spent in a school system is truly a “variable cost.” A sudden drop in students across a county school system may mean some cost savings in bus transportation and meals service – but may not have any effect on “fixed costs,” which account for most system-wide expenditures on education and administration.

To learn more about Maryland’s school budgeting formula, read “Why do Five Jurisdictions Lose $45M in Education Funds?” on MACo’s Conduit Street Blog.

For more on MACo’s advocacy efforts during the 2017 legislative session, visit our Legislative Tracking Database.

Anne Arundel Board of Education Passes $1.17B Operating Budget

Anne Arundel County Board of Education voted Wednesday to send a $1.17 billion operating budget to County Executive Steve Schuh. The request is $7.8 million more than Superintendent George Arlotto’s proposal because of a decision to increase employee salaries to make up for years of frozen salaries and offset potential increases in school staff’s health care payments.

As reported in the Capital Gazette,

In December, Arlotto asked for $1.16 billion to pay for a salary increase for school employees to close a gap in the school system’s health care fund and to hire more teachers and support staff.

The school board and county officials allocate money for compensation, and the Teachers Association of Anne Arundel County and the school board negotiate salaries and benefits.

In the last few months, Arlotto has said the health care deficit is a priority. The budget earmarks $20.5 million to close the gap. Hammond is working on a long-term plan to balance the schools’ health care budget and will request that the state allow Schuh to provide a one-time money for the fund.

School staff said they’re short about $7 million to pay medical bills through the end of this fiscal year. Arlotto warned if the deficit doesn’t get fixed, school officials may have to resort to furloughs or layoffs.

School employee unions negotiate health care plans with the school board.

The president of the teachers union, Richard Benfer, said the board’s additional salary request will make negotiations over health care easier.

“It’s inevitable that we’ll have to pay more,” he said, citing the rising costs of health care.

Teachers union leaders have said they want to see more money for salaries if their medical payments goes up.

The budget also sets aside money to hire more psychologists, special education teachers, social workers and counselors.

The school board backed Arlotto’s proposal to hire five assistant principals for elementary schools — part of a plan to hire assistant principals for more than 30 elementary schools with vacancies.

The spending plan includes money to expand an elementary school program that gives teachers more planning time as well as $6.8 million to open an elementary school in Annapolis this fall.

They also kept the money for 93 more teachers to staff a school population that has 763 more students this year than the previous year.

There are approximately 81,000 students this year, compared to about 73,000 in 2006. The school system is expected to continue to grow. Students eligible for food assistance have about doubled in the last decade. The number of students receiving English language help has about tripled.

The board also passed the $240.6 million construction budget toward upgrades for Tyler Heights, Edgewater, Richard Henry Lee, Manor View, High Point, George Cromwell, Jessup and Arnold elementary schools, and Crofton High School.

County Executive Schuh will present his version of the operating and capital budgets in May.

Read the full article for more information.

MACo Urges Repeal of County Mandate to Repay Comptroller

MACo Associate Director, Barbara Zektick, testified in support of Senate Bill 397, “Local Income Tax Overpayments – Local Reserve Account Repayment – Forgiveness,” before the Senate Budget and Taxation Committee on February 15, 2017.

Over this past year, due to an issue concerning misclassified addresses, the Comptroller’s Office has identified $21 million in local income tax revenues which were distributed to counties and municipalities incorrectly for tax years 2010-2014 – resulting in overpayments to some local governments and underpayments to others.  This bill repeals the requirement that local governments must reimburse the Local Income Tax Reserve Account for overpayments of local income tax revenue distributions made by the Comptroller. This bill allows for funds to be drawn from the Account, rather than local government budgets, to rectify errors for which they are not responsible.

From MACo testimony:

MACo supports this bill because it alleviates local governments from bearing the burden for unpredicted liabilities due to no fault of their own. Such liabilities could potentially compromise a local government’s ability to provide funds for needed programs and services.

Follow MACo’s advocacy efforts during the 2017 legislative session here.

MACo Wary of Same Day Voter Registration

MACo Policy Associate, Kevin Kinnally, provided testimony in opposition to Senate Bill 423, “Elective Franchise – Registration and Voting at Polling Place,” before the Senate Education, Health, and Environmental Affairs Committee on February 9, 2017.

This bill would empower the General Assembly to pass a law authorizing an individual to register and vote at a polling place on Election Day. Counties are concerned this legislation places a substantial administrative and cost burden onto local Boards of Elections, whose operations are supported by county funding. Without state resources to offset these potentially large costs, the bill represents an unfunded mandate on local governments.

From MACo testimony:

Same-day voter registration, also known as Election Day registration, is meant to extend voting franchise as widely as possible to eligible voters. MACo does not raise policy objections with these goals – county concerns are merely practical and cost-driven.

Under state law, counties have no choice but to fund these costs – competing for limited local funds against education, public safety, roadway maintenance, and other essential public services.

Follow MACo’s advocacy efforts during the 2017 legislative session here.

Frederick Schools Expect Influx of New Students Next Year, Adding to Pressure on Budget

The numbers are in: Frederick County Public Schools officials expect the district to keep expanding — almost 500 more students in the next school year, more than some of the county’s elementary schools.

According to The Frederick News-Post,

With the influx of students — a much larger projected surge than in years past — come adjustments to short- and long-term budgets and construction planning. But funding is complicated by the way it’s calculated by the county and state, which rely on outdated enrollment numbers to determine their payouts to the district.

Already, the school system must contend with continued rapid growth in pockets of the county, such as around Urbana and western Frederick. Other schools are underused, largely in northern Frederick County.

School officials anticipate 498 more students next school year.

The county and state don’t use that number, though, when they give money to the district for the coming year’s operating budget. They base their contributions on the school district’s enrollment as of September 2016.

So even if the district accounts for many more students for the next school year, it’s lagging a year behind, said Leslie Pellegrino, the district’s chief financial officer.

The school board, without taxing authority, relies primarily on the county and state for money.

Another complication comes with paying for staffing.

The district figures how many staff members it needs based on its internal projections. Since funding is based on old enrollment figures, the money it receives doesn’t always cover additional positions.

The school system initially thought it would take in only 99 more students this school year. It added more than 650. District officials still can’t fully explain the swell. As of September 2016, the district enrolls more than 41,300 students.

At the same time, the 24 school districts compete for limited state dollars for school construction at a time when many regions of Maryland continue to blossom and want to build more schools.

Some schools, too, are aged and need repairs and modernization, which are covered by the same pot of state construction money. Pellegrino gave the example of Baltimore County and Baltimore City. State officials, such as Comptroller Peter Franchot (D), have blasted those districts for lacking air conditioning in some schools.

Frederick County Public Schools have struggled to pay for new schools, particularly in the case of Butterfly Ridge Elementary School, in west Frederick, and Sugarloaf Elementary School in Urbana. They are due to open concurrently in 2018. The county had to partner with a developer to help simultaneously fund both schools.

Frederick County’s school board has set its construction priorities for the next few years, and those likely won’t change, said Beth Pasierb, a facilities planning supervisor. After the new Frederick High School is finished and the two new elementary schools open, the district plans to replace Urbana Elementary School and construct a new Rock Creek School, as well as an addition to Waverley Elementary School.

Useful Links

Frederick News-Post Article

September 2017 Enrollment Projections

Why Do Five Jurisdictions Lose $45M In Education Funds?

DLS Releases Abundance Of Helpful Local Financial Data

The Department of Legislative Services has released several reports that detail information on local governments and local effects of the state budget. As always, these reports represent an extraordinarily valuable resource for county officials and financial managers.

Local Government Finances and Demographics

From the Introduction:

The Department of Legislative Services has prepared this overview document to provide legislators and the public with a better understanding of the fiscal and social issues confronting local governments in Maryland. Topics discussed in this report include the following:

• Structure of Local Governments
• County Salary Actions
• Demographic Indicators
• Public School Funding and Student Enrollment
• Local Government Finances
• Local General Fund Balances
• Tax Rates for Local Governments
• Local Debt Measures
• Local Revenue Growth
• Balance of State Payments

Overview of State Aid

This report includes detail on virtually every component of state aid to local governments in the proposed FY 18 budget. Most areas are shown county-by-county, with comparisons to the prior year, and with additional analysis reflecting trends or changes important to the programs.

County Revenue Outlook

This report looks at local revenue sources and tax bases, with a variety of comparisons across jurisdictions and over time. Once again, the detail in these analyses makes the report deeply valuable for local professionals and policy makers.

Two Year Charts

State Aid to Local Governments – Two Year Charts by Aid Program

State Aid to Local Governments – Two Year Charts by Governmental Entity

MACo To Ways & Means Committee: Prioritize Schools, Infrastructure

On Tuesday afternoon, January 31, MACo’s President Baltimore County Executive Kevin Kamenetz, Board Member Allegany County Commissioner William Valentine, Associate Director Barbara Zektick and Executive Director Michael Sanderson spoke to the House Ways & Means Committee on MACo’s 2017 legislative initiatives. The MACo panel followed Department of Legislative Services’ analysts, who presented a wealth of information contained in the report, Overview of State Aid to Local Governments: Fiscal 2018 Allowance.

County Executive Kamenetz started the briefing by calling the Committee’s attention to this year’s budgetary provision making 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. He remarked that making counties pay for an agency over which it lacked any managerial authority compromised the agency’s impartiality concerning assessments, and generally would lead to inefficiencies in governance.

About school construction, he said:

School construction costs have risen rapidly over the past ten years for a variety of reasons, including labor markets, regulatory changes, increases in enrollment, and programmatic shifts. Even though costs have increased, the State’s commitment has not. This has left counties primarily responsible for shouldering cost increases.

Commissioner Valentine asked for support for a Local Infrastructure Fast Track for Maryland, calling attention to counties’ many infrastructure needs:

Prior to FY 2010, local governments received 30% of highway user revenues – and now they receive less than 10%. And yet, local governments own and maintain 83% of our roads. County leaders from all across the State, from both parties, and from both rural and urban areas agree that these devastating cutbacks have gone much too far and lasted too long.

Committee Vice Chair Frank Turner asked about the rationale for the SDAT cost shift, suggesting that it seemed unfair to counties.

Baltimore City Schools CEO Warns of Massive Layoffs

Baltimore city schools CEO Sonja Santelises said Friday that she is prepared to lay off more than 1,000 people — from classroom teachers to custodians — to close a $130 million gap.

According to The Baltimore Sun,

Meeting with the city’s legislative delegation in Annapolis, she said the layoffs — as well as furloughs and cuts to art classes and other enrichment programs— are part of a far-reaching plan to close a budget shortfall that amounts to 10 percent of the school system’s $1.3 billion budget.

She said some schools would see class sizes increase by as many as 10 students.

The lawmakers made clear they found such sweeping cuts troubling, but they did not suggest that there might be state money to prevent them. Maryland is dealing with its own $544 million budget gap, and both state and city officials suggested that the school district will have to make tough decisions.

Santelises, in her first year on the job, revealed last month the shortfall for the budget year that begins July 1. It’s the largest budget gap the district has faced in recent history. Declining enrollment, rising teacher salaries and an ambitious school construction program have been cited as contributors to the problem.

“I’m not saying this is it, but I am saying that when push comes to shove, it’s my job as the head of the school system to have a plan,” Santelises said in outlining her cost-cutting proposals to The Baltimore Sun. “And this is the best plan I can give. Based on the trajectory we are on now, Baltimore city public schools will look drastically different on July 2.”

The Baltimore Teachers Union demanded that state and city leaders take action.

“Our children cannot get the education they deserve with 1,000 fewer people working in the schools,” union president Marietta English said in a statement Friday.

Baltimore City Councilwoman Mary Pat Clarke, a former teacher, suggested state officials look to casino revenue to shore up the schools budget. Maryland casinos have pumped $1.7 billion into the state’s Education Trust Fund, but state officials are allowed to redirect other money that once went to schools.

“The money is there to help us avoid this,” Clarke said. She also expressed concern that layoffs would cause the newest teachers to lose their jobs. “We can’t lay off the youngest new cadre of educators — the last in, first off — and deprive our children and those talented people of their future together,” Clarke said.

Outlining broadly her budget-cutting plan, Santelises said $80 million of the cuts would fall on individual schools. These schools will see a “dramatic increase in class size,” she said, while others will have to sacrifice programs like career technology courses.

“This is going to hit everything kids love about coming to school,” Santelises said. “We’re talking about severe impact to school programming, which then impacts all of our efforts to try to recruit new families.”

Most schools will have to lose staff, Santelises said, and some schools will have to target the highest earners for layoffs in order to recoup a significant amount of money.

In past years, when school officials announced a gap half this size, they avoided including teachers in staff cuts, which mostly affected non-classroom positions. Santelises said firmly that teachers will have to be included this time.

Baltimore City schools lost $38.7 million in state funding this year due to enrollment declines, increased wealth, and the loss of a one-time fiscal 2017 declining enrollment grant.

Useful Links

The Baltimore Sun Article

Letter From Dr. Santelises

Why Do Five Jurisdictions Lose $45M in Education Funds?