• Good afternoon. I am here today to present my Recommended Budget for the coming fiscal year – the fifth budget I’ve presented since assuming office as your County Executive.
• What all five budgets have had in common are the following: To continue my efforts to put our County’s fiscal house in order, to change the way the County has done business, to protect critical County services, and to make government more efficient and effective.
• With this year’s budget, I will have closed budget shortfalls of $2.5 billion – this is unprecendented.
• We have reduced County workforce by 1,260 positions – more than ten percent of our entire workforce.
• We retained our AAA bond rating and won approval for a new reserve policy that will require the County to set aside more resources to see us through fiscal challenges.
• These challenges have meant hard choices.
• I would like to be able to say that our challenges have eased and the need for hard choices is no longer necessary.
• Unfortunately, this is not the case. We still have a relative weak economy, there are uncertainties with our State’s fiscal deficit, and federal employment and procurement changes will have a negative economic impact on our County.
• The Recommended Operating Budget I forwarded to the Council today continues my work to put our fiscal house in order, it protects critical services, and position us to come out of this downturn an even stronger County.
• To address the fiscal challenges in the FY12 budget, I developed a multi-pronged strategy including:
* Recommended a mid-year savings plan for all agencies and departments for a total of $35 million;
* Required all County Government departments to identify and implement long term savings of up to $80 million in the FY12 operating budgets;
* We participated actively in multi-agency efforts to identify long term savings in restructuring government organization and in making County services more efficient and effective.
* We negotiated with our employee representative organizations to reduce ongoing costs related to employee compensation; and
* We continued the hiring and procurement freezes;
• This budget includes a number of sacrifices for County residents and for County employees
• For residents, this budget includes numerous reductions in County services across nearly all programs including Health and Human Services, Public Safety, Transportation, Libraries, Recreation, Parks, Planning, Technology Services, and other programs and functions. Only the Police budget increases.
• We are keeping faith with our fiscal standards by maintaining reserves at their required levels. We allocated funding for PAYGO at 10 percent of planned general obligation bond issue, and we budgeted over $26.1 million in the County Government for pre-funding retiree health insurance.
• We also allocated a more realistic $10 million for snow removal and storm response rather than funding these expenses by drawing down reserves after the fact.
• I recommended to the County Council that tax-supported funding for Montgomery County Government programs decline by $24 million – a reduction of 2.1 percent. Once the funds allocated for Retiree Health Insurance ($26.1 million) and snow removal ($10 million) are factored into the County Government there is a net increase of only $12 million – a 1 percent increase from the FY11 approved budget.
• As a grandfather with kids in our public schools, I know how important education is. But we can’t close $300 million budget shortfall by putting over half of our budget off-limits.
• I have publicly stated before that the County would not meet the State-required Maintenance of Effort level for schools funding.
• I have reduced the budget request of the Montgomery County Public Schools by $82 million. This means that our schools will receive no more County revenue this year than they received last year. Because of increased state and federal support, the MCPS budget will actually increase $67 million – or 3.5 percent.
• Montgomery College’s budget will increase by less than 1 percent and Park & Planning’s budget would decrease by 1.8 percent.
• Eighty percent of the County budget goes to wages and benefits for County employees. I recommended the abolishment of an additional 216 positions in County Government in FY12, 139 of these positions are currently filled.
• In the last three years, I have reduced the size of the County workforce by over ten percent, abolishing over 1,260 positions.
• Initially, on reviewing the FY12, I contemplated the potential elimination of over 500 positions and even more drastically reducing critical County programs.
• To save jobs and protect critical services, other tradeoffs were necessary.
• For FY 12, I recommend changes in the cost sharing arrangements for County Government employees for group insurance and retirement plans.
• Currently, the County pays up to 80% for most employees’ group insurance. Effective July 1, 2011, I recommend that we change the ratio to 70% for all health plans.
• I also recommend that we adjust the premium schedule into three tiers for its group insurance plans so that higher compensated employees pay a greater share of the costs of group insurance than lower paid workers.
• In addition, I recommend that employees in the defined benefit retirement plans pay 2% more in covered compensation for their retirement benefits and that we reduce the County contribution for employees in the defined contribution retirement plans by 2% of covered compensation.
• These changes will reduce the ongoing cost of compensation for the County and produce real, sustainable savings in the operating budget in the short and long term.
• To promote equity among locally funded public employees and produce sustainable savings across the entire government, I recommend that the governing board of the other County funded agencies – including MCPS -- support a similar approach to compensation in FY12.
• While my recommended budget does not contain any pay increases for County Government employees, I also do not recommend furloughs.
• I realize that reductions in current compensation levels will result in additional financial sacrifice for County employees and their families.
• I am quite aware of the substantial contributions that our employees have made over the last three years to help address the County’s financial challenges including forgoing negotiated pay increases, furloughs, and position abolishments.
• The alternative to these reductions, however, would be further layoffs and erosion of services including reductions in public safety staffing, education, and our safety net programs, or substantially higher taxes for our residents and businesses.
• Restructuring employee compensation is a more viable option to develop a budget that is fair to County taxpayers and workers. This approach also moves us toward achieving our long-term objective of fiscal sustainability.
• Whatever I ask of County employees, I and my entire management team and all senior managers will do the same, just as we have over the last several years.
• I am not recommending any increase in property taxes over the Charter limit in this budget.
• And, during these difficult times, I should mention some critical programs I have spared.
• No reductions in County transit routes and no reductions to senior transportation and nutrition programs. Library operating hours and materials costs were maintained. All County recreation centers remain open and ambulance service levels were maintained. There are no reductions in Police Department specialty units and County after-school Sports Academies and Rec Extra programs continue at their current level.
• I want to thank the community for the hundreds and hundreds of emails, and feedback in making these hard choices. I also want to thank our employees for their feedback as well.
• Thank all County agencies for working together with us on this and Councilmembers for their feedback and help.
• Special thanks to my Office of Management & Budget Director Joe Beach and his entire staff who have worked tirelessly to help shape this budget proposal. Stand up and take a bow, Joe.
• A few words in closing.
• Plainly put, Montgomery County has to change the way it does business. We needed to even before the downturn, as I have said many times.
• We need to restructure, not just talk about it, in order to save money and deliver services more effectively.
• We need to keep faith with fiscal responsibility – strong and larger reserves, employees benefits that are fair and affordable for the taxpayers.
• We need to invest now to prepare us to take advantage once this downturn eases.
• And we need to use these hard times to define a new “normal” for Montgomery County, which is – and will remain one of the best places in America to live, work, and raise a family.