Montgomery County is a great place to live, learn, work, do business, and raise a family. This did not happen by accident. And we won’t keep the Montgomery County we all know and love by avoiding hard choices – or by thinking only about today – rather than about the future.
Today, I release my Recommended Operating Budget for Fiscal Year 2011, which begins this July 1.
Nobody needs to be told that we are experiencing one of the most challenging economic periods in our history.
Comparatively, Montgomery County is one of the best places in America to live. We have a relatively low unemployment rate. We have a world-class school system and, we have businesses and neighborhoods bursting with vitality.
I said three years ago, even before the current economic downturn, that County Government spending was not sustainable.
The year before I took office, County government spending increased by over 14 percent. In the three years before I assumed office, County government spending climbed by 36 percent.
Since taking office, I have made as a top priority getting our fiscal house in order.
In my very first budget, we faced a $200 million budget shortfall. We reduced the increase in spending by County Government from 14.1 percent to 6.9 percent.
In my second year, the shortfall increased to $401 million. We slowed the rate of growth to 1.6 percent.
In the current year, we closed a gap of $590 million without a tax increase by reducing costs, abolishing nearly 400 positions, and eliminating general wage adjustments for most employees.
In developing the FY11 budget, we faced a daunting and historic projected gap of nearly $780 million, which my proposed Budget released today fully closes.
The cumulative amount of budgetary shortfalls I have resolved in the four budgets recommended to the County Council is nearly $2 billion. That, simply put, is unprecedented.
How did this happen?
First, there was a structural deficit. County government was living beyond its means – even BEFORE the economic downturn.
Second, the downturn severely affected County revenues. In Fiscal Year 2007, County income tax revenue grew by 21 percent.
For this current fiscal year, income tax revenue is down by more than 15 percent.
Third, nearly all other revenues have dropped sharply – and the State of Maryland’s budget woes have severely impacted the County as never before. One example: Montgomery County usually receives about $46 million a year from the State’s Transportation Trust Fund. This year we received less than one million dollars.
At last -- knock on wood -- this terrible winter is finally over. But the bill for this year’s winter storms will exceed $60 million – far more than we budgeted.
To address the current year’s fiscal crisis, I developed a multi-pronged strategy including:
- Two different mid-year savings plans that totaled nearly $100 million; 20 focus groups involving all directors, key Council staff, and selected outside agencies collaboratively, developing ideas for structurally improving the County’s budget. We also continued the hiring freeze instituted over two years ago, and reduced current revenue funded expenditures in our capital budget.
- We negotiated and renegotiated bargaining agreements with our employee unions; and
- In order to address our long-term budget challenges, I have reached out to our partners in Montgomery County Public Schools, the Park and Planning Commission, Montgomery College, and Washington Suburban Sanitary Commission to establish a cross-agency committee to develop resource-sharing ideas.
I believe the record is quite clear that during my first three years, I have worked to bring our fiscal spending under control while continuing to protect education, public safety, and help for the most vulnerable in our County.
I do not, and would not ever, take lightly any budget decisions that impair our essential county services. None of these decisions have been easy… and none have been made lightly.
The choices ahead, however, are much, much more difficult, because of the extensive budget reductions we have already had to make over the past three years. The low-hanging fruit is long gone.
In addressing this budget, I have worked to carefully weigh the significance of our decisions – evaluating them both on how they will impact the current budget… and how they will affect our county, in the long run.
It is necessary for us to make deep reductions in existing County programs, services, and staffing levels.
I have sought to minimize the impact of these reductions wherever possible and have carefully scrutinized viable alternatives. But let there be no mistake, there is pain in this budget – for our community and for County employees.
- My recommended tax-supported budget for Montgomery County government reduces spending by 6.1%.
- The total tax-supported budget for all County agencies is reduced by 4.3 percent over FY10.
- Tax-supported funding for the Montgomery County Public Schools is reduced by 3.9%.
- This amounts to a reduction of $137 million from the Board of Education’s proposed budget and funds about 96 percent of their request.
- Funding for Montgomery College’s tax-supported programs is reduced by 3.8%.
- Tax-supported funding for the Maryland-National Capital Park and Planning Commission decreases by a whopping 13.5% over FY10.
- The total budget for all County agencies is $4.3 billion, 3.8% less than the FY10 budget.
My FY11 Budget recommendation represents the only time that the total annual CountyBudget has been reduced since the adoption of the current Charter in 1968.
Now, I want to talk a little about the hard choices behind these numbers.
I am proud of the exemplary performance of our County employees. In putting the County’s fiscal house in order over my first three years, I have sought, wherever possible, to protect and preserve jobs.
For example, the State of Maryland and other neighboring jurisdictions have furloughed their employees last year and again this year. Until now, I have avoided furloughs because of the sacrifices our County employees were already making.
The problem is that 80 percent of our County budget goes to compensation in the form of wages and benefits for County employees. Closing a $779 million gap without some significant changes to compensation costs would be impossible.
To achieve much needed savings, I am recommending the abolishment of over 450 positions in County Government in FY11; 230 of these positions are actually filled. We will make every effort to appropriately place the affected individuals in available vacant positions. To alleviate the impact of these position reductions, I am recommending that the County Council adopt a Retirement Incentive Program (RIP). All positions vacated through the RIP will be permanently abolished to ensure that the savings are ongoing.
I am recommending that Montgomery County government implement a ten day furlough -- 80 working hours -- of non-public safety County Government employees. I am recommending that the other County funded agencies also consider this cost reduction strategy as well.
I am recommending no pay increases for all County Government employees – no General Wage Adjustment and no step or increment increases.
To promote equity among public employees, I recommend that other County funded agencies support the same approach.
Not only is funding these pay improvements not affordable, I do not consider it to be appropriate, fair, or good public policy to award pay increases to some employees while we are substantially reducing direct services to the community and laying off other County employees.
In keeping with my earlier position on this matter, whatever sacrifice I ask of County employees, I will continue to match, and so will my entire management team and all senior managers.
I have focused on preserving direct services to the maximum extent possible over the past three years. Regrettably, given the numerous rounds of expenditure reductions we have experienced in the last three years, this is no longer possible.
This budget will include numerous reductions in County services across all programs.
These include Health and Human Services, Public Safety, Transit, Libraries, Recreation, Technology Services, and other County services and functions. I have not spared my own Office from these reductions: The Offices of the County Executive will be reduced by 26% in the FY11 Recommended Budget.
I am not going to stand here and tell you there will not be impacts. There will. There are some things we will do differently. There are some things we will not do at all.
Hard choices must be made, and not just talked about, in this difficult economic and fiscal environment.
Unfortunately, it is necessary to again recommend budgetary strategies that I have strongly resisted in the past.
I am reluctantly recommending that we temporarily reduce our tax supported reserves from 6 percent to 5 percent. This will free up nearly $37 million in resources.
Montgomery County will again seek a waiver of the State-required maintenance of effort in local funding of K-12 public education.
I am recommending that we defer an increase in pre-funding for Retiree Health Benefits, in FY11, this will allow us to redirect approximately $64 million in projected increases to help preserve existing services.
I am urging the County Council to finally institute an Emergency Medical Services (EMS) transport fee to provide $14.7 million in additional resources.
Three years ago, I recommended that the Council adopt an EMS transport fee. By delaying approval of the authorizing legislation for this fee, we have literally left tens of millions of dollars in insurance reimbursements uncollected.
Other jurisdictions have used these resources to improve service and save lives with no adverse effects. We should do the same, too.
Because of financial burdens on County households as a result of the economic downturn, I will recommend no increase in property taxes beyond the County charter limit.
Finally, and as a last resort to avoid even further reductions in County services or layoffs of County employees, I am recommending an increase in the County’s energy tax to raise an additional $50 million.
This is a broad-based tax; its impact on residents is reduced by the fact that it is paid by businesses and households, and all levels of government, including federal agencies located in the County (that currently do not pay any other major County tax).The average homeowner will see an increase of about $3 per month.
And we can’t stop here. I would like to tell you this is the last “bad” budget year and that recovery is well on the way. I cannot tell you that and – at any rate – we will see a considerable lag time in receiving increased revenues even if the recovery arrives sooner rather than later.
Assuming approval of my budget by the Council, we are projecting a more than $200 million budget gap for Fiscal Year 2012.
That’s why resorting to one-time solutions, quick fixes, and adding continuing costs back into the budget will only exacerbate the structural budget gaps well into the future rather than addressing them now through real, long-term solutions.
That’s why we cannot go back to “business as usual.”
We need to restructure the way County agencies do business to realize all possible efficiencies – including initiatives that some might find politically difficult to do, or those requiring changes in local or state law.
We have already achieved some efficiencies in County Government; such as creating the Department of General Services and the Department of Transportation to better focus efforts of County facilities management and transportation projects and services. Other departments have implemented significant internal reorganizations to efficiently consolidate functions, reduce costs, and preserve service levels.
But, I believe we have only scratched the surface. Much more must be accomplished to ensure an accountable, efficient and effective government.
In closing, I want to thank all of my department directors, and their staff for their outstanding work in helping me to craft this challenging budget. I want to thank an indispensable man – my Budget director Joe Beach -- and his magnificent staff for their terrific work.
I want to also thank Dr. Weast, President O’Neill, and the Board of Education and MCPS staff for their collaboration, as well as the leadership of Montgomery College, the Park & Planning Commission, and the Washington Suburban Sanitary Commission.
I especially want to thank all the County residents, including our employees, who have –- at Town Hall meetings, via email or phone or letter, or even in the line at the grocery store – given me their suggestions, ideas, and comments. They have been very helpful in crafting the choices I present to you today.
I strongly believe that we can and will ensure that all of the generations ahead will feel as blessed to live and raise their families in Montgomery County, as so many of us do today.
And making sure of that starts with the decisions we make right now. This is the time leaders need to make real choices – when we may not be able to afford to do everything that is wanted -- when you must very carefully select what things you are able to do and what things you are not able to do.
This is our test. This is our challenge.
Together, we will weather these difficult days. Together, we will move forward to make a good Montgomery County even better and lay the foundations for a strong recovery and a brighter future for our families.
Thank you and may God bless our great County.