County Budgets

Frederick Adopts Balanced Budget, Delivers on Strategic Priorities

Barbara Zektick County Budgets, County News

The Frederick County Council approved the County’s budget on Tuesday, days before the County experienced severely compromising flooding. Frederick

County Executive Jan Gardner’s proposed budget aligns with the jurisdiction’s “Strategic Priorities,” focusing on “good government, exceptional public schools, a vibrant economy with a diversity of jobs,” and meeting “community needs through public safety, health, transportation and general well-being.” As proposed and as approved, the budget includes no tax rate increases. The General Fund budget increases by 4.58 percent.

With Frederick County Public Schools teaching nearly 800 additional students this past year, the County is providing $5 million in mandated maintenance of effort, as well as an additional $7.2 million above that for raises for teachers and staff. The capital budget reflects a nearly $225 million investment in school construction over four years.

County employees receive a step increase.

The budget also accommodates for a number of new initiatives. These include dedication of 1.5 percent of recordation tax revenue to the Housing Initiative Fund, which leverages federal tax credit programs to support workforce and affordable housing; start-up funds to implement a public private partnership to address the opioid epidemic through treatment and a new detox center; and the development of a new business innovation center, ROOT, which opened its doors about a month ago.

 

Investment Strategy Explained in Response to Recent Report on State Pension System

Robin Clark Eilenberg County Budgets, County News, Pensions & Public Funds

A statement from the State Retirement Agency’s Chief Investment Officer responds to the most recent critical report of the Maryland Public Policy Institute.

About half of Maryland’s counties participate in the State Pension System for pension coverage for their employees. Those counties pay employer contribution to the System. All counties provide funding for teacher pensions, also a part of the State Pension System, through contributions to local Boards of Education. Maryland counties and municipalities have two seats on the State Pension Board of Trustees.

The Maryland Public Policy Institute has regularly offered criticism of the State Pension System’s investment strategies, and specifically, to the fees paid to active investment managers on Wall Street.

The recent report by the Institute points to fees paid by the State Pension System to investment advisors might be better spent on reducing the System’s unfunded liability, stating,

In 2017, the total estimated fees for Maryland was $506 million. For all 33 states, the total fee load was $9.83 billion, despite the median state underperforming a passive
composite index. Capitalizing the fee load at 5 percent suggests a reduction in unfunded liability of $200 billion, assuming the indexes continue to outperform the states’ complex constructed portfolios.

In a statement in response to this report, entitled, “Think Tank’s” recent work of fiction, the State Retirement Agency’s Chief Investment Officer provides a pointed critique of that report, and offers information to explain the basis for the System’s investment strategy and past practices.

CIO Andrew Palmer states that the figures used in the MPPI report are inaccurate,

MPPI claims that the System paid $505.6 million in management fees in the fiscal year ending June 30, 2017, which includes an assumption for performance-based compensation (known as carried interest) earned by the System’s asset managers. This is an assumption not based on actual historical experience or quantitative modeling, but rather, it was simply made-up. This fabricated number overstates the amount of the System’s most recent performance-based fee calculation by an astonishing $84.6 million, or nearly 97%. Errors of this magnitude have a profound impact on the results of the report, rendering it completely unreliable.

Later in the report, Palmer shares how the Pension System’s careful mix of active and passive investment strategies has paid off, stating,

The System pays careful attention to ensure that it is compensated for the higher fees it pays to active managers. In efficient asset classes where the likelihood of successful active management is low, the System employs a predominantly passive strategy. As of March 31, 2018, the passive investments represented 18.3% of the total fund, or roughly $9.5 billion. In inefficient asset classes and asset classes that cannot be managed passively, active strategies are utilized. Table 2 below shows that the System has added value, net of all fees and expenses, over a fully passive alternative to its asset allocation. While not shown, the System achieved these superior returns while experiencing lower return volatility than the Passive Benchmark.

Screenshot 2018-05-17 11.45.05
From “Think Tank’s” recent work of fiction, by Andrew Palmer, CIO

For more information, read the letter from State Pension Chief Investment Officer Andrew Palmer.

For background, see the 2018 State Pension Fund Investment Performance Report from the Maryland Public Policy Institute.

McCarthy’s Budget Seeks “Solid Footing” For Sewer System

Barbara Zektick County Budgets, County News, Transportation and Public Works

Cecil County’s proposed fiscal 2019 budget holds the line on taxes and does not draw from the County’s fund balance, in large part due to last year’s tax increases. It does, however, propose significantly increasing sewer fees (but not water, which the County has turned over to Artesian Water via franchise agreement).

The Cecil Whig reports on County Executive Alan McCarthy’s announcement of his proposed budget:

The biggest surprise for many in attendance was McCarthy’s plan to increase sewer fees from the current $11.87 per thousand gallons. In three year’s time, the user fee will be $15.70 per thousand gallons.

“The wastewater fund is facing serious financial challenges that are decades in the making,” McCarthy said. “The county undertook a much-needed upgrade at the Northeast River Advanced Wastewater Treatment Plant, and the user base has been slow in paying for these upgrades. We must address this now in order to put us on solid financial footing.”

The overall budget of $306 million includes revenue from property and income taxes, as well as fees from three enterprise funds: wastewater, landfill, and property management. Property taxes remain at $1.0414 per $100 of assessed value while the  county income tax stays at 3 percent.

County Executive Alan McCarthy’s general fund proposal includes $195.3 million, which is $5.6 million more than last year. Property taxes fund 60 percent.

Slightly more than half of the budget funds Cecil College, Cecil County Public Schools and the Cecil County Public Library (together $99.4 million). The budget provides $250,000 for school security improvements, significantly less than the $1.25 million the schools system requested.

The budget includes $37.3 million for public safety, including $3.7 million for radio system upgrades for first responders.

It accommodates for increases in employee salaries in a number of ways. Emergency responders receive a 2.5 percent cost of living adjustment, dispatchers employed by the County more than five years receive a 6 percent increase and new titles, and both police and non-public safety employees receive new pay scales altogether.

The County Council will hold a public budget hearing on May 22 and vote on the budget in June.

 

 

Calvert’s Proposed Budget Increases, Taxes May Still Decrease

Barbara Zektick County Budgets, County News

Calvert’s proposed operating budget of $297 million focuses on “education, public safety, capital investments, and maintaining a high level of service to our community,” according to County Administrator Terry Shannon’s cover letter to the Commissioners.

With an increase of $13.8 million over fiscal 2018, the budget also allows room for a property tax decrease of 25 cents, from $0.952 to $0.937 – largely due to initiation of operations at the expanded Dominion Cove Point Liquefied Natural Gas plant, and the accompanying Payment in Lieu of Taxes (PILOT) agreement.

The budget allows for a Cost of Living Adjustment (COLA) for County employees of 1.22 percent, as well as step increases. The County provides $144 million, or 49 percent of its General Fund, to the Board of Education – above Maintenance of Effort. Other highlights include:

  • A $1.5 million increase to Calvert County’s Highway Maintenance Division to fund the road paving program bringing the total amount provided for paving to $5.5 million, finally at a level the Director of Public Works is satisfied with.
  • The first year’s funding of about $1.8m for the operations of the new Linda L. Kelley Animal shelter.

Properties in the southern end of the County are projected see tax assessments increase by 4 percent over three years, helping to bolster the budget.

The County will hold a public hearing on the budget and proposed tax decrease on May 15.

 

Open Space Incentives, Increased Assessments Bolster Allegany’s Budget

Barbara Zektick County Budgets, County News

Allegany’s proposed fiscal 2019 operating budget provides an increase to its general fund of 4 percent – and also proposes reducing the property tax rate by 1/10 of $0.01. The general fund budget of $90,346,419 increases over fiscal 2018 by $3.5 million.

The increase in revenues comes in part from a 0.6 percent increase in assessments, which provides an additional $1.7 million in property taxes. It also includes, for the first time, $1.3 million through the new Open Space Incentive Program, which compensates certain counties with large amounts of state-owned land for lost property taxes. This program came into effect through Senate Bill 273 of 2017 – a bill MACo avidly supported.

Allegany projects that income tax revenues continue to decrease for a second consecutive year, this time by $500,000.

The budget flat funds all outside agencies, including the local board of education, which still receives funding well in excess of maintenance of effort for the first time in years. County employees receive a 2 percent Cost of Living Adjustment (COLA), and flat health insurance costs as a result of a successful re-bid of the County’s health insurance plan.

Allegany taps into its balance for nearly $1.6 million to fund increased public safety efforts and capital transit. According to Director of Finance Jason Bennett, CPA’s cover letter, this still allows the County to maintain two months’ worth of operations in its fund balance, as recommended by GASB 54.

From that letter:

The hard decisions and tough cuts and sacrifices of the past several years are allowing us to present this budget with slight increases and allows us to continue to maintain a strong financial position that the taxpayers deserve of their government. We have reached or exceeded our goals for debt service and fund balance continues to be well positioned so that we may offer the services we promise to our citizens.

The Commissioners are scheduled to adopt the budget on June 7.

Washington Commissioners Review Budget Proposal, Focus on Safer Schools

Barbara Zektick County Budgets, County News

washington countyThe Washington County Board of Commissioners have reviewed the county administration’s proposed $229 million operating budget. The budget is an increase of 3.37 percent, or $7.5 million, over the fiscal 2018 budget.

The school system faces a $1 million gap, reports Herald-Mail Media:

[C]ounty schools would receive $98.3 million, an increase of about $1.3 million over the current year’s budget. The increase covers a slight increase in enrollment and the county’s “low-effort” designation for past maintenance-of-effort funding hikes.

However, the nearly $276 million spending plan that the Washington County Board of Education approved in February sought $99.3 million from the county, creating a $1 million deficit that could require cuts before the new budget year begins July 1.

The Commissioners have added $230,000 to staff’s proposed operating budget for the school system – the cost of two pre-kindergarten teachers and two assistants, reports Herald-Mail. In addition, they added $1 million in capital funds for security improvements to the schools, after hearing a report from the County’s new school safety task force:

The task force, formed in April, is made up of county, schools and law enforcement officials. It has met weekly to review current safety measures and estimate costs for further improvements. …

Other security improvements, such as hiring more school-resource officers, do not appear to be in the cards for the coming fiscal year in light of the commissioners’ latest budget discussion. … The first-year cost to hire and train a new school-resource officer is about $134,000, considering salary, benefits, training, a vehicle and equipment. The recurring operational cost is almost $70,000.

The County’s formal public budget hearing is scheduled for May 15 at 5:30pm at Hagerstown Community College’s Kepler Theater.

Major Issues & More–90 Day Report Reviews the Maryland Legislative Session

Robin Clark Eilenberg County Budgets, County News, Education, Elections, Health and Human Services, Human Resources, School Construction and Capital Budgets, State Budget and Fiscal Issues, Taxes and Revenues, Transportation and Public Works

The Department of Legislative Services annual synopsis of the General Assembly’s time in Annapolis provides an update on budget, education, transportation, and health issues addressed in laws that passed – and didn’t pass – in the 2018 Session. 

As described the the Maryland Department of Legislative Services, the 90 Day Report is divided into 12 parts, each discussing a major policy area.

Screenshot 2018-05-07 11.21.35
This chart from the 90 Day Report provides a summary of the State’s K-12 funding from fiscal years 2018-2019.

The areas include, among others (links will take the reader to the start of each sections, though there are other the references throughout the document):

Budget/Fiscal (includes resolving structural budget and addressing federal tax reform)

Business and Labor (includes paid sick leave legislation’s veto override)

Education (includes education funding, school construction, and school safety issues)

Health (includes opioids and cannabis topics)

State Government (covers elections security)

Transportation (includes highway user revenues legislation)

The Department of Legislative Services will release another report, the Effect of the 2018 Legislative Program on the Financial Condition of the State after the Governor has signed or vetoed all bills passed by the General Assembly.

 

 

Baltimore County Hears Budget, Two Post

Barbara Zektick County Budgets, Finance and Procurement, Taxes and Revenues

Two people weighed in at the Baltimore County budget hearing this week – and one was not even a Baltimore County resident. But, that is still two more than spoke last year, Pamela Wood reports for The Baltimore Sun.

Mark Baskervill, a resident of Harford County but head of the Baltimore County Campaign for Liberty, spoke against cost-of-living increases to county employee salaries.

He also called attention to the fact that Moody’s, which rates the County triple A, had recently revised its outlook for county finances to “negative”:

“I would recommend spending cuts rather than increasing the debt to finance whatever programs you’re trying to do,” Baskervill said.

 

Moody’s still gives the county its highest rating of triple-A, but noted that the county faces “mounting challenges” and the need to borrow more money to pay for upcoming construction projects, including schools.

Wood also highlighted on Twitter that the County, in compliance with State law, had to advertise that it was increasing its property tax rate – even though it isn’t. That is because Md. TAX-PROPERTY Code Ann. § 6-308 requires this, right down to specifying the notice language and timeline. If a county will receive increased property tax revenues over the prior year, it must advertise that it is increasing the tax rate, although the rate will stay the same. This part of the law – much like Baltimore County’s existing and proposed tax rate – has been the same for decades.

Anne Arundel Budget Focuses on Education, Public Safety, & Reducing Traffic Congestion

Kevin Kinnally County Budgets, County News

Anne Arundel County Executive Steve Schuh on Tuesday unveiled his $1.59B budget proposal for FY 2019. The budget proposal invests in schools, strengthens public safety, and aims to reduce traffic congestion.

According to a press release:

“This budget keeps the promise to make our County the best place to live, work, and start a business,” said Schuh. “These investments in education, public safety, and our roads will ensure our County continues its ascent to become the best jurisdiction in Maryland.”

Highlights include:

  • Investing in Education: The County Executive’s budget will directly invest $684 million in our schools, including $21.2 million for two educator step pay increases. To reduce class sizes, the proposal would add 80 educators. The County will also fund expanding the “Triple E” initiative to the Annapolis Cluster. This program provides additional electives for our elementary school population and provides planning time for teachers. Additionally, the budget funds a third early education center, which will serve South County, to ensure residents access to high quality Pre-K opportunities and programs.
  • Protecting the Public: To ensure our Police Department can recruit and retain the best officers, the budget begins funding a 15% increase in compensation for police over the next two years. Under the County Executive’s plan, starting police salaries will also increase from $46,854 to $51,500. The budget adds 20 new police positions, including 10 new school resource officers.
  • Investing in Roads and Relieving Congestion: The budget proposal makes targeted investments in congestion relief. Three years ago, the County increased road maintenance funding by 53 percent to $26 million annually. This was the first time the County has ever committed the funds required to stabilize the system and to prevent further deterioration. This year’s budget proposal takes the historic next step of increasing the maintenance budget to $30 million, which will allow the County to actually improve the road system in the next few years. The proposal also funds crucial chokepoint improvements at Catherine Avenue in Pasadena, Brock Bridge at MD 198 near Fort Meade, MD 214 at Loch Haven Road in Mayo, and a road widening on Mountain Road in Pasadena.

The County Executive’s budget plan will undergo a series of hearings in May and face final consideration by the County Council by June 15th.

Read the full press release for more information.

Hard to Count the Amount of Data in this Local Government Report

Robin Clark Eilenberg County Budgets, County Government and Structure, County News, Education, Intergovernmental Relations, Taxes and Revenues

The annual Overview of Maryland Local Governments, prepared by the Department of Legislative Services for the General Assembly, also contains a wealth of information for Maryland counties.

The Overview of Maryland Local Governments, Finances and Demographic Information is released in January of each year, but the information can provide a helpful reference throughout the following year, too.

As Research Director of the Maryland Association of Counties, the Overview is the external source that I reference most frequently in response to research inquiries that come to the MACo office.

Sections of the report include:

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

While some of the information is from the previous fiscal year, the many charts in the report provide an at-a-glance for various demographic and financial factors.  Find one on economic indicators below.

For more information see the complete Overview of Maryland Local Governments, Finances and Demographic Information.

Screenshot 2018-04-30 12.06.41
One of the many charts of included in the Maryland Department of Legislative Service’s 2018 report shows a 1.9% increase in median home prices and a 0.2% decline in unemployment across counties from census and fiscal years 2016 to 2017.