Category Archives: State Aid

MoCo’s Mighty Seven Zip Codes

By Adam Pagnucco.

For a long time, Montgomery County has been thought of as a wealthy jurisdiction.  It has long appeared in lists of the nation’s richest counties (although it is about to drop out of the top twenty).  Politicians elsewhere in Maryland view it as a gold mine, with Senate President Mike Miller famously saying, “It’s like Never Neverland for other legislators of the state.”  The county is regularly shorted by state wealth formulas which disproportionately distribute state aid, especially for public schools, to other parts of Maryland.

But most of Montgomery County is not particularly rich.  Its wealth is concentrated in seven zip codes which skew its mean household income upward and make the county as a whole appear richer than it really is.

All residents of MoCo understand that there are huge differences between areas in the county even though many outsiders do not.  According to the U.S. Census Bureau, the county’s mean household income was $133,543 over the 2011-2015 period, just barely squeaking past Howard County ($132,751) for tops in the state.  But that conceals big variations.  MoCo has nine zip codes in which mean household incomes were under $100,000.  The combined mean household income of these areas ($92,668) is roughly equal to the mean household income of Prince George’s County ($90,268).

MoCo has seven zip codes in which mean household incomes were over $200,000 in the 2011-2015 period.  These zip codes, mostly located northwest of D.C., account for 14% of the county’s households and 25% of its household income.  If these zip codes were regarded as a separate jurisdiction, their combined mean household income would be $238,917.  The combined mean household income of the rest of Montgomery County is $116,618 – about half the income of the Mighty Seven.

How do the mean incomes of the Mighty Seven and the rest of the county compare to the rest of the region?  We show the mean household incomes of those two parts of the county along with the other large jurisdictions in the region below.  The Mighty Seven as a group are easily at the top although we suspect that extracts of the wealthiest parts of Loudoun, Fairfax, Howard and D.C. would also be in that range.  As for the rest of the county, its income is average compared to the rest of the region.

That’s right, folks – with the exception of its wealthiest zip codes, MoCo is a middle-income jurisdiction by the (admittedly high) standards of the Washington region.

This reality has interesting implications for policy makers and candidates.  The issue of equity between different parts of Montgomery County is getting traction as a political issue in the upcoming election.  But in terms of who pays the county government’s bills, there is no question that county revenues are hugely dependent on a limited number of wealthy neighborhoods, especially in the absence of robust economic growth.  If those residents decide that they can get a better deal by living somewhere else, that would be a huge threat to the county’s tax base.

As for the state level, there’s a tendency to look at differing incomes and wealth BETWEEN counties but not INSIDE counties.  That’s how state wealth formulas work – they compare counties to each other but not local areas to each other.  How many state policy makers have understood prior to reading this blog post that there is a large part of Montgomery County that is economically comparable to Prince George’s?  It’s time for a serious examination of how to direct state aid to local areas in need regardless of which county borders they happen to occupy.


Hell No!

By Adam Pagnucco.

A state commission charged with examining changes to Maryland’s public school funding formulas is sifting through recommendations for improvement.  And in the early deliberations, one big loser stands out:

Montgomery County.

The State of Maryland is a major player in public schools funding.  In FY17, the state will send $5.5 billion in operating aid to local school districts, about a third of its general fund budget.  MCPS gets 28% of its operating budget from the state.  Prince George’s County Public Schools gets 57% of its budget from the state.  In total, state aid accounts for 48% of Maryland public school budgets.

The state’s generous K-12 spending is driven by formulas dating back to 2002, when a state commission led by Howard University professor Alvin Thornton (commonly known as “the Thornton Commission”) proposed massive new investments in education.  These investments have helped rank Maryland’s public schools among the nation’s best.  Now another state commission chaired by former University of Maryland System Chancellor William E. Kirwan is reexamining the state’s funding formulas to see if they can be improved.  And here is where things are starting to go badly wrong for MoCo.

A consultant paid by the Maryland State Department of Education recently completed a two-year study on the state’s funding formulas.  In the interest of promoting “adequacy” in public school spending for students across the state, the consultant made several recommendations for changing the funding formulas which are now being examined by the Kirwan Commission.  One of them is that Montgomery County should get a 63% cut in state aid (a reduction of $354 million) while local taxpayers should pay 60% more (an increase of $842 million) towards MCPS.  Montgomery County Council Member Craig Rice, a member of the commission, said “that would be devastating” and termed the suggested local dollar increase for MCPS “impossible.”  Indeed, the County Council just levied a 9% increase in property taxes in part to increase funding for MCPS.  The consultant’s recommendations don’t just apply to MoCo: they would phase out all state aid for schools in Kent, Talbot and Worcester Counties while sending massive increases to St. Mary’s, Harford, Charles, Calvert and Prince George’s.

MoCo is already short-changed on state aid because of wealth formulas that disadvantage the county because of its high property values and high incomes but don’t recognize its high cost of living.  The result is that MoCo taxpayers get back just 24 cents for every dollar in taxes they pay to the state.  The state average for all residents is 42 cents.  Howard County, which has a higher average household income than MoCo, gets 30 cents.  Only Talbot and Worcester Counties get back proportionately less than MoCo.  If anything resembling the consultant’s report winds up being recommended by the Kirwan Commission and passed into state law, this imbalance will get a lot worse.

Your author has been told that the report is merely a “conversation starter” and thus is irrelevant.  But we are reminded of the last conversation the state had about public school funding.  For decades, the state covered the cost of teacher pensions as part of its commitment to K-12 education.  The program was particularly valuable to MoCo, which has higher teacher compensation costs than other jurisdictions because of its high cost of living.  A decade ago, state leaders began to have “conversations” about having the counties pay these costs despite the fact that Boards of Education, not county governments, set teacher compensation packages.  A spokesperson for the Speaker of the House said it was “a philosophical argument that we definitely need to have.”  In 2010, almost all MoCo state legislators promised to oppose a shift in their election campaigns.  But just two years later, Governor Martin O’Malley proposed a partial pension funding shift, backed by both the Speaker and the Senate President, and most MoCo lawmakers voted to support it.  The cost of the shift to the Montgomery County Government increased steadily from $27 million in FY 2013 to $59 million this year, with $6 million offset by the state.  This far exceeds the cost to any other local government and is more than a third of the amount collected by the county’s recent 9% property tax hike.  The county government now pays more for teacher pensions than it does for libraries, recreation, courts, IT, housing or environmental protection.  Its teacher pension payments easily swamp any money earned from the liquor monopoly, which will return $21 million to the general fund this year.

So goes these conversations.  Now that this new conversation has started, here is a suggested response from all of our state legislators and county leaders to this consultant’s report.