County Executive Marc Elrich spoke of a $160 million budget shortfall in the Fiscal Year 2020 Operating Budget and the potential for some serious belt-tightening by County agencies at last Thursday’s Operating Budget Forum held at the BlackRock Center for the Arts in Germantown.
“When I was campaigning,” Elrich told the audience in Germantown last week, “I kept telling people the problem isn’t going to be three years from now or down the road, the problem was going to be this year, and we would struggle to fully fund the budget. I wish I weren’t as right as I am. It is worse than I had anticipated it would be.”
It was Elrich’s first official appearance in Germantown, since taking office in December. The Operating Budget Forum event has become an annual tradition in the County started by former County Executive Ike Leggett. The Forum was officially sponsored by the UpCounty Advisory Committee and was one of five such events held at various locations throughout the County. Thursday’s event was originally scheduled to be the first stop of the tour on January 14 but needed to be rescheduled after a snowstorm made travel dangerous that evening.
The Budget Forum serves as a way for residents to speak directly to the County Executive to relay concerns and help County leadership set priorities for funding spending. It is one of the few events in which citizens can directly address elected county leadership without first submitting questions in writing in advance, and pre-registration to speak.
This year’s Budget Forum was well attended. However, the audience seemed a bit smaller than in years past. The Germantown Budget Forum, in years past, had always been the first stop on tour, and it was originally scheduled to be first, but the snow forced it to be rescheduled, so maybe the drop off in attendance was due to the timing. Perhaps, the larger groups which often populate these events attended previous forums held elsewhere in the County due to the rescheduling of this event.
The evening began with a presentation from the Office of Management and Budget which outlined the basic needs and legal restrictions of the FY20 Operating Budget and the anticipated revenues. The County Executive must submit a balanced budget, which means all spending must be covered by revenues. Montgomery County is legally not permitted to carry operating budget debt.
The FY19 Operating Budget contained $4.96 billion in expenditures, which was balanced by $4.96 billion in revenues. However, the County announced earlier this year that it experienced a $50 million shortfall due to unexpected expenses. At a meeting with media in January, Elrich pointed to the repairs to a failed culvert on Father Hurley Boulevard in Germantown as an example of one such expense. That repair has cost the County an additional $4 million.
It was announced at the Budget Forum that the Preliminary FY20 Operating Budget was $5.19 billion, while the FY20 Preliminary Resources (revenues) were $5.05 billion which creates a budget gap of $104.5 million as of January 2019 when the presentation was developed.
However once Elrich began his presentation, he explained that the budget gap was closer to $160 million.
“We have a gap in resources of $160 million between what we would like to fund — a same services budget — and what the resources are that appear to be available. We are waiting for the late February dispersement of income taxes from the State to see whether that will be a little high, or a little low, or just right. However, just right isn’t going to be enough. We will have to wait until the end of February to see what our true picture is going to be,” said Elrich.
The increase in the total budget is due to increases in State mandated Maintenance of Effort Law, which is a state law established in 1984 that requires every local government to spend at least as much per student as it did the previous year to receive additional state aid for education. Based on the Office of Management and Budget presentation, the increase in funding required to keep the County compliant with the Maintenance of Effort Law is $60.4 million. The combination of increases in the cost of the County’s debt service, the CIP Current Revenue/ PAYGO, legally mandated reserves and funds set aside for supplemental appropriates, such as snow removal costs total $165.8 million. The County’s debt service, which increased by $19.2 million over FY19’s total of $420.0 million, for a total of $439.2 million in FY20. Last year, debt service accounted for 8.6 percent of the total tax-supported expenditures.
The increase in fixed costs for FY20 when paired with the expected increase in revenues, which totals $121.6 — leads to a $44.1 million deficit. The combination of $44.1 million and $60.4 million lead to the originally expected $104.5 million budget shortfall. Which is has now grown to $160 million budget gap.
“This is going to be a really difficult budget period,” said the County Executive. “We didn’t put a lot of exciting new things in the budget. We started this process, back in September, by saying we had to make a $50 million cut to the current year’s budget in order to wind up where we were supposed to be at the end of the year, in order to carry money into the next year’s budget.”
Elrich said that his office was working on the Fiscal Year 2020 Operating Budget, which will be submitted to the County Council on March 15, with public hearings to follow in April before the budget is finalized and adopted in June.
Top: County Executive Marc Elrich addresses the crowd at the Budget Forum meeting at BlackRock Center for the Arts in Germantown on Thursday, Jan. 31.
Photos by Germantown Pulse. Graphics courtesy Montgomery County Office of Management and Budget.