Category Archives: MCPS

Placeholders, Indeed, Do Have a Place in the MCPS Capital Budget

By Glenn Orlin.

In a recent piece in Seventh State it was argued that so-called “placeholder” projects have no place in the Montgomery County Public Schools capital program. But there are very good reasons why the County Council has done exactly that for the past eight years.

First, some background.  The Subdivision Staging Policy (SSP) Public School Adequacy Test compares enrollment five years in advance—at each cluster and level (HS, MS, or ES), and at each school—against the budgeted capacity at each cluster/level and school five school years hence.  If the future enrollment exceeds the future capacity in a cluster by more than 20% at any level, then the cluster goes into a housing moratorium; that is, no more housing subdivisions can be approved until the capacity standard is met.  (Relocatable classrooms are not counted towards “capacity” under the School Adequacy Test.) If the future enrollment exceeds the future capacity in a MS service area by more than 20% and 180 students, then that MS service area goes into a housing moratorium.  If the future enrollment exceeds the future capacity in an ES service area by more than 20% and 110 students, then that ES service area goes into a housing moratorium.  The five-year rule was selected many years ago because, on average, that is how long it takes for a housing subdivision approval to morph into occupied housing units, many of them having kids of school age.

At the start of this decade the Council began the practice of budgeting generic “Solution” (i.e., placeholder) CIP projects in certain circumstances.  The rationale is that while a cluster or school service area might have enrollment that exceeds the moratorium threshold, in many cases MCPS is concurrently planning for a new school or addition that would provide sufficient capacity in time to avoid such a moratorium.  The Council has approved Solution projects only when all the following conditions are met:

  1. A cluster or school service area is projected to exceed the moratorium threshold;
  2. MCPS is concurrently—or about to start—planning for a capital project that would address the potential moratorium; and
  3. MCPS’s normal schedule for planning, design, and construction would have the project’s added capacity opening by the start of the school year five years hence.

The most recent application of the School Test was approved by the Planning Board on June 22, 2017.  The Board placed seven ES service areas into moratorium: Burnt Mills, Highland View, Kemp Mill, Lake Seneca, Rosemont, Strawberry Knoll, and Summit Hall.  At that time, while all of them met Condition #1, none of them met Conditions #2 and #3.  Eight other clusters or school service areas were not placed into moratorium because Solution projects were justifiable and programmed: they met all three conditions.  In the FY19-24 CIP several of these Solution projects will be replaced by specific projects that the Board of Education (BOE) is now officially ready to recommend.  This new CIP will include only four Solution projects.

It is important to note that the decision to budget a Solution project for a school has nothing to do with whether there are new housing applications in that area awaiting the Planning Board’s approval.  Condition #1 occurs either when projected enrollment growth due to turnover, already approved new housing, or both, will be over the capacity threshold.  Whether there are impending housing development applications simply doesn’t matter in the decision to budget a Solution project or not.  Now let’s turn to the examples raised in the earlier Seventh State piece.

Bethesda ES and Somerset ES.  The service areas for both schools in the B-CC Cluster are projected to be well over capacity (+25% and +27%, respectively) in five years, that is, by the start of the 2023-24 school year.  MCPS is initiating an elementary school capacity study for the B-CC Cluster, which would examine a range of options.  The study will be conducted during the 2018-2019 school year.  The Board of Education (BOE) will then be in position to propose a specific project in its FY21-26 CIP request; if that project’s funding were to begin in FY21, then, following the normal schedule for planning, design, and construction it could open at the start of the 2023-24 school year.  Because all three conditions are met—a projected moratorium, planning about to begin, and a path to project completion in five years—the Council is poised to fund Solution projects for Bethesda ES and Somerset ES.  The total amount to be budgeted for these two Solution projects is about $6.4 million.  When a specific project is ready to be budgeted, this $6.4 million will be used to help fund it.

Judith A. Resnik ES.  The current CIP has a fully funded addition at this Magruder Cluster school (which would bring its capacity up to 740), but the BOE deleted the construction funding in its request for the FY19-24 CIP.  Enrollment is trending downward, although in five years it is still projected to exceed the moratorium standard if there is no addition.  The BOE is continuing planning for an addition, however.  So, since all three of the above conditions are met, the Council is planning to fund a $2.7 million Solution project for Resnik ES.

The fourth Solution project is about $6.3 million for Einstein HS, which the Council had already initiated, and the BOE itself has recommended continuing it. Therefore, the sum of the four Solution projects is about $15.4 million.  All but $3.7 million would be programmed in the last three years of the CIP (FYs22-24).

Burnt Mills ES.  This school is projected to be 47% over capacity in 2023-24, so certainly Condition #1 is met.  However, MCPS is requesting the Council to set aside in the CIP $120 million (talk about your placeholders!) while it undertakes a thorough review of the prior revitalization/expansion program “in order to develop a multi-variable approach to determine the priority order of large-scale renovations, possibly including programmatic and capacity considerations” (Superintendent’s FY19 CIP Request, page 1-2).  Therefore, the Burnt Mills situation meets neither Condition #2 nor #3.  Once the BOE has determined a strategy for this school, its improvement would either be partially funded as a Solution project or fully funded from the outset.

Ashburton ES.  If the argument is being made that Solution projects are budgeted to meet the desires of new development, then consider the case of Ashburton in the Walter Johnson Cluster.  It is projected to be more than 22% over capacity five years from now, meeting Condition #1.  Just last fall the Council approved the Rock Spring Master Plan which allows for at least 2,300 more housing units than exists or is already approved.  Almost all the Rock Spring area is within the Ashburton ES service area.  Nevertheless, since MCPS is not undertaking planning for additional capacity that would further relieve Ashburton, its service area will go into a housing moratorium in July.

E. Brooke Lee MS Addition. When the Council approves the CIP, it assures that there is enough money to pay for the projects it is budgeting in each of the CIP’s six years.  The Council is approving a tighter CIP this year than in the past, because it recognizes that debt service on borrowing has grown too high.  (Debt service is an obligation that must be paid before anything else in the budget, including salaries.)  Earlier this year the Council asked for the Superintendent to provide it with a list of “non-recommended” projects that would be the first choices to be reduced or deferred, should the Council need them to meet the spending limits.

One of the projects on his list was to delay the construction funding for Lee MS by one year, although not to delay the first-year (FY19) design funds, which would allow the opportunity for the project to be reaccelerated next year.  In its worksession on April 17, several members of the Council expressed the desire to delay neither the design nor the construction funds for the Lee MS project.  To accommodate this desire, there is a shortfall of $8 million in FY20 and $9.5 million in FY21 for which funds must be found.  We will do our best to do that, but deleting the Solution projects would contribute nearly nothing to this effort; there is only $169,000 in Solution project funds in FY20, and only $3.6 million in FY21; the remaining $11.7 million is in FY22 and later.

Do Solution projects almost never get done in five years, as the Seventh State article claims?  In fact, almost every project does get done within five years, or, the BOE later decides that the project isn’t needed after all.   In the article, it is stated that most of the Solution projects added in FY15 did not translate into actual projects within five years, which would have been the 2019-2020 school year.  For FY15 the Council added Solution projects for five Downcounty Consortium elementary schools: Brookhaven, Glen Haven, Highland, Kemp Mill, and Sargent Shriver.  Two years later, however, the BOE retracted its request for these projects, noting that the projected seat deficits were no longer high enough for it to request funds for additions there (see the FY17 Educational Facilities Master Plan, pages 4-37 through 4-41).

Is “real money” being taken out of the MCPS for Solution projects?  In a word, no.  The Council never budgets all the money it could in the CIP.  This is because the Council needs to reserve funds for: (1) when construction bids come in over estimates; (2) for when projects that are in the planning stage are ready for construction funding later in the CIP period; and (3) for unanticipated opportunities or emergencies that arise.  For these reasons, the Council this year will probably set aside a capital reserve of about 9% of the funds available for budgeting, as has been recommended by the County Executive.  But, after all, a Solution project is but a designated reserve, so the Council—as it has in the past—will likely set an undesignated capital reserve less than the Executive recommended by the $15.4 million in these Solution projects.  Therefore, the Solution projects do not compete with other projects in the MCPS CIP, nor with those in the County Government, Montgomery College, or Park & Planning CIPs.  If anything, the Solution projects provide a first claim on the capital reserve.

In summary, Solution projects in the CIP in no way compete with other projects, and they avoid housing moratoria in certain situations where they are not warranted.

Glenn Orlin is the Deputy Director of the Office of the County Council.  He has been the Council’s CIP Coordinator for the last 26 years.

 

 

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Placeholders Have No Place in the MCPS Capital Budget

By Laura Stewart.

Have you ever heard of the term “placeholder” in the county budget? I never had, until as a PTA President, I started to advocate for an elementary school that had 9 portables. The terminology surrounding placeholders was confusing.  At first it sounded like a planning tool that might be helpful.  But as I have looked at the scenarios in front of us in this budget cycle, I believe that real solutions need to take place instead of placeholders.  I will explain by using two real life scenarios below, followed by a review of the consequences of the current County Council’s SSP (Subdivision Staging Policy.)

Scenario 1:

An elementary school has just received an addition due to housing turnover, new development, and a boundary change that was intended to address split articulation patterns and crowding at other schools.  After the addition was completed, the school immediately became over-crowded again and now has four portables. More development is underway in the area, and it will cause even more crowding at the school.

Due to county policy, future development goes into moratorium when a school is forecast to be over 120% capacity at year 5 in the budget, unless there is a “solution.” That solution can be a “placeholder,” money put in the budget that covers the extra seats a development will create, based on the County’s “student generation rates.”  This money is not tied to a specific plan. It is only there to prevent the area from going into moratorium. The school system promises to develop an actual project in time for the seats to materialize in the next 5 years.  This school gets assigned a “placeholder” by the Council since a capacity project is not included in the Board of Education’s recommended FY19 budget.

Scenario 2:

A school has been over 120% capacity since 2011 and is at 151% today.  A plan to address the overcapacity is not included in the Board of Education (BOE) Recommended FY 19-24 budget.  Since there are no pending development projects in this part of the county, no “solution project” is proposed by the County Council, and the area officially goes into a housing moratorium.

Scenario 1 is in Bethesda, scenario 2 is in East Silver Spring.  Neither community is happy with place holders!

I will first explain why the areas with development aren’t happy.  The scenario 1 school, Bethesda ES, is in an area where housing development continues.  In fact, there are an additional 11 buildings submitting applications in the area under a recently approved master plan. Somerset Elementary School is in a similar situation and the Council has proposed a placeholder for that school as well. There is no actual plan for another addition at the Bethesda school (which may not even be possible, given the small site size,) or a plan for a new elementary school nearby. New schools, even at properties MCPS already owns, are much more expensive than additions. Additions also can cost more than the placeholder price tag that is included in the budget. Placeholders are supposed to guarantee seats in 5 years, but the past has shown that projects almost never get done in that time period.  Of the last five placeholders that had a due date before 2018, only one project finished by the due date. Another 4 placeholders added in FY15 were postponed the following year. Continuing development with a placeholder causes schools to go way over capacity, often much more than the initial 120% threshold, by the time there is a real solution.

Now let’s look at Scenario two.  East Silver Spring does not have pending development. The school that is the most overcrowded in the area is Burnt Mills ES, at 151% and over 200 children are in portables. In fact, this school has been over the 120% threshold since 2011, when the feasibility study was done. No project for this school is in the FY2019-2024 CIP. They will be considered in the new renovation and expansion program in a future CIP, but there are limited funds and there are many schools that will be considered. There are no guarantees for this school. So this area is now officially in moratorium, and has been for a while.  Relief at Burnt Mills seems elusive without any project on the books. Parents feel like they do not get the attention that other areas with lots of development get.  They are not wrong. Even though placeholders aren’t solutions, at least the conversation about a possible solution takes place at the County Council.

Seven areas are in housing moratorium in Montgomery County, but only three had placeholders proposed to be added in this budget cycle, two in Bethesda and one in Gaithersburg. I’ve spoken to parents in Bethesda that would rather have a building moratorium take place so the County could take time to come up with a real planned solution. The Gaithersburg school, Judith A. Resnik ES, had an addition project scheduled with a completion date. The enrollment there is trending down slightly, but is still projected to be at 122% capacity within 5 years.  To avoid a moratorium, the County removed an actual project (the scheduled addition), and added a placeholder.

Real money is taken out of the MCPS budget for placeholders, instead of actually using those funds for planned projects. In fact, several projects that were proposed in the BOE Recommended FY19 Budget are slated to be delayed due to lack of funds, including Col. E. Brooke Lee Middle School. It is considered a “sick” building by many teachers and parents. Mold and other issues come up regularly. They were elated to have a project that had a completion date of September 2021, only to be deeply disappointed when they were included in the delay list. Placeholder money – used to avoid putting development in moratorium- could be allocated NOW to schools with greater needs than the areas with pending development. Placeholders compete for scarce funds in the CIP.

There is another unintended consequence of giving placeholder money to areas of higher growth. These areas tend to be more affluent. So the optics continues to perpetuate the perceived and the real divide between East County and West County. For instance, there are huge disparities in wealth in our two scenarios. Bethesda ES has a 7.3% Free and Reduced Meals Rate (FARMS.) Burnt Mills ES has 67.1% FARMS.  The affluent area gets the attention of councilmembers and solution/placeholder projects – that may or may not actually come to fruition – while poorer areas are left out. This policy also divides the County North and South too, because rural areas do not have the growth that down county areas receive.

I am in no way blaming Councilmembers or insinuating that they mean to ignore certain areas of the County. I know that many fight for scarce resources, and fight to bring economic growth in underperforming areas of the County. I am blaming the processes and policies that perpetuate inequalities and perception of inequalities in our school system. I propose changing the system.  We can come together as a community and find a better way forward. Let’s get developers, Council Members, the Board of Education, the MCPS Division of Long Range Planning, and the Planning Department together and come up with REAL solutions so we can finally build real classrooms for kids, no matter in which zip code they live.

Laura Stewart is the CIP Chair for the Montgomery County Council of PTAs.

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Team MoCo

By Adam Pagnucco.

Yesterday, we wrote about the recent history of MCPS and it was not a pretty picture.  The recession, new state laws, political conflict and the erosion of a once-strong consensus around the public schools resulted in MCPS getting lower funding increases than most of the rest of county government, especially when measured in local dollars.  But the good news here is that change is coming to MoCo with the sheer number of open seats in county elected offices.  There is a better way forward.  And today, we will plot out what that way can be.

First, let’s steal a page from the playbook of former MCPS Head Coach Jerry Weast and recognize this: nothing brings folks together like a common enemy.  The Axis powers brought together America and the Soviet Union.  The New England Patriots brought together nearly all NFL fans without ties to the Greater Boston area to root for the not-quite-as-bad Philadelphia Eagles.  And Donald Trump may just bring together the feuding members of Crosby, Stills, Nash and Young, who hate Trump more than they dislike each other.

The various factions of MoCo’s education family do not have a common enemy, but they do have a common challenge: dealing with Annapolis.  The state capital poses three problems for MoCo’s public schools.  First, the state has a Governor who has cut education funding before (especially state aid for MoCo) and is doing it again.  Second, while the state has improved recently, it still short changes MoCo on school construction money and the county cannot keep up with capacity needs on its own.  And third, a consultant advising the state’s Kirwan Commission on education reform has recommended massive cuts to state operating aid to MCPS.  If all three of these things proceed in a baleful direction, MCPS’s funding issues will get a lot worse and the entire county – parents, students, school employees, residents and businesses – will pay a steep price.

When you get past the details of MCPS’s recent money problems, one root cause stands out: political division in the wake of Weast’s departure.  The County Executive, the County Council, MCPS leadership, the MCPS unions and the PTAs all have different priorities and different views on MCPS funding, and they often go in different directions.  That has to stop or things won’t change.  We need a Team MoCo.  And here’s what that looks like.

County Council

The council has one job when it comes to the schools: funding them.  And since the schools are both a critical public policy priority as well as a big political priority for the voters, their funding situation must improve from the last eight years.  The council largely got this right in its FY18 budget, which gave MCPS a modest (roughly $20 million) increase over the state’s Maintenance of Effort requirement.  The policy of regular, modest per pupil local dollar increases that will – at the very least – keep pace with MCPS’s costs and needs should continue.

The council must not get involved in sensitive internal MCPS issues, especially in pressuring the system on its collective bargaining agreements.  Blowing up the union contracts in 2016 was a major mistake and caused a serious breach of trust.  Let MCPS management and the unions decide what the agreements look like in the context of their total budget.  If the council does not stay out of this, Team MoCo will crumble and the entire arrangement will fall apart.

Superintendent and Board of Education

If the council gives MCPS leadership the funding it needs, then MCPS leadership must reciprocate by giving the council what it needs: fiscal stability.  The state’s Maintenance of Effort (MOE) law, which was rewritten in 2012, sets each year’s local dollar per pupil funding as a base for future years.  Every time the base goes up, it becomes a new base and can only be lowered by a waiver from the State Board of Education.  This is a major concern for the council and was partially responsible for several years of per pupil cuts and freezes.  Given the immense implications of this for the county’s budget and AAA bond rating, the council is right to be wary of going too far above MOE.

Fortunately, § 5-202 (d) (9) of the state’s education law specifies that the State Board of Education shall grant an MOE waiver “in the amount that has been agreed on by the county and county board that is attributable to reductions in recurring costs.”  In other words, if the county falls into another big recession and it has to cut costs in the school system along with all the other agencies, it can get a waiver if the school board agrees.  This deal must be honored by MCPS: if the council extends its trust by funding them, MCPS must agree to reciprocate by helping to relieve the county of financial stress in dire circumstances.  Both sides must stick to this or relations will revert to the bad old years.

MCPS Unions and PTAs

MCEA and SEIU Local 500 are two of the most powerful players in county politics.  The PTAs do not endorse candidates, but they have listservs that include thousands of parents and therefore – at least in theory – have a big voice.  These organizations should function as the muscle of Team MoCo.  They will be getting regular funding increases and, in return, they should help the Team pressure Annapolis to get what is needed for the county.

MoCo Delegation

If Team MoCo gets its act together and strikes an equitable deal for local funding for the schools, the remaining challenges lie in Annapolis.  Rockville does not understand Annapolis.  It does not fully appreciate the obstacles faced by the delegation in pursuing county priorities: the perception of MoCo by the rest of the state as paved in gold; the competing priorities of other population centers in the state; the constraining effect of the legislature’s leadership; and the fiscal constraints of the state’s own tight budget.  Given those hurdles, it’s a heavy lift for the delegation to bring back Big Bacon to MoCo.  But it can be done: witness the Baltimore City delegation’s victory in getting the state to pump a billion dollars into the city’s school construction program.  The city legislators are not smarter than MoCo’s legislators (although they are more parochial).  A big reason for their win was that the entire city stuck together, from the Mayor to the City Council to the city legislators to the folks back home who wanted the money.  Team Baltimore got a billion dollars.  We need a Team MoCo to do something similar.

The role of the county leadership and its constituent groups is to set a mark for the delegation and do everything possible to help them stay organized and succeed.  This is not easy; the other jurisdictions and the presiding officers won’t just roll over for us.  Every member of Team MoCo has to tell our delegation with one unified voice, “We have your backs.  We know it’s a lift, but if you come through for us, we will celebrate you like the heroes you are.  You will never have to buy a drink for yourselves in Rockville ever again.  And if you don’t come through, you will not be served a drink in Rockville ever again!”  Good performance must be rewarded.  Bad performance must be met with accountability.

One more thing: the delegation has an ace card.  Senate President Mike Miller and Speaker Mike Busch are not going to run the General Assembly for much longer.  Successors to their thrones are making the rounds and lining up votes, however quietly.  The MoCo legislators should tell all of them that whoever gives the county the best deal on schools will lock up all their votes.  It’s huge leverage that should not be wasted, but it will only be used if it pays off in political terms.  Team MoCo’s job is to make sure it does pay off so the Big Bacon gets served.

County Executive

This is the most critical person in this entire endeavor.  Every team needs a Captain.  In MoCo, that has to be the Executive.  This individual is the county’s spokesperson and the one everybody else will inevitably look to for leadership.  The Executive must be a troubleshooter who works out periodic squabbles between the different members of the family, charts out a general course on budgets and state action and makes sure everyone gets the credit they deserve.  Most of all, the Executive must be a LEADER.  The lesson from the aftermath of Weast is that without central leadership, everything can fall apart.  If we pick the right Executive, that won’t happen and Team MoCo can succeed.

And so if everything works out, everyone wins.  The county gets its fair share from the state.  MCPS stakeholders get the funding they need.  MCPS employees get fair compensation and the resources they need to do their jobs.  The elected officials get to be heroes.  And the county as a whole will maintain its status as one of the best places to live on Planet Earth.

We can do it, folks.  Yes we can!  If you agree, ask the candidates how they intend to play on our team and keep it in mind for Election Day.  Team MoCo will only come together if the voters demand it.

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Where Will the Apple Drop?

By Adam Pagnucco.

Many moons ago, when your author was young and blissfully new to the county, we wrote our very first blog post on the mighty Apple Ballot.  It was unimaginatively titled, “The 800 lb Gorilla of MoCo Politics.”  Then as now, the Apple was one of the most coveted endorsements in MoCo.  But my oh my, so much has changed.

Back in the Age of the Golden Apple, the Montgomery County Education Association (MCEA) was the centerpiece of a powerful political organization created by then-Superintendent Jerry Weast.  Weast was not a pro-union progressive by nature, but he understood that politics is a team sport and it was necessary to play it to get money.  So the Weast Machine included the education unions (MCEA, SEIU and the principals), the PTAs, the Washington Post editorial page and the school system’s internal Ministry of Propaganda.  (That was not its title, but you get the point!)  Weast traded real input in the MCPS budget for stakeholders in return for absolute loyalty in joint combat against the outside – especially the County Council.  Anyone who messed with the school system didn’t take on Weast alone – they had to go against the entire Machine.  Weast capitalized on his organization as well as productive relationships with County Executive Doug Duncan and County Council Education Committee Chair Mike Subin to get substantial and regular budget increases.  The whole system was greased by strong revenue growth and occasional tax hikes.

The District 18/Silver Spring version of the Apple Ballot from 2006.  This is the document that began your author’s career in blogging.

Those days are long gone.  Three major changes have occurred over the last ten years.

First, Weast jumped the shark – not once, but twice.  His first big sin was calling union leaders to his house to ask them to endorse Nancy Navarro in the 2008 Council District 4 special election.  That attracted criticism from multiple Council Members as inappropriate conduct by an appointed non-partisan administrator.  His second big sin was threatening to sue the county over a budget disagreement two years later.  These kinds of behavior helped convince Weast’s adversaries that he was not merely an irritant, but an actual threat, and prompted some to brand him a Rogue Superintendent.  That set the stage for the bitter budget battles to come.

Second, the county and regional economies were greatly weakened in the wake of the Great Recession.  The chart below shows growth in county revenue (excluding intergovernmental aid) over the last twenty years.  Red bars indicate years in which major tax hikes were passed.  From FY98 through FY09, a generally prosperous economy helped county revenues grow by an annual average of 6.2%.  But from FY10 through FY18, the days of the Great Recession and beyond, county revenues grew by an annual average of 3.1%.  (That does not include the recent $120 million budget shortfall.)  There is simply not as much money to go around as there used to be.  Accordingly, revitalizing the economy should be a huge policy objective for all of the county’s employee unions and everyone else who cares about funding local government.

Third, the local money that was available was not as directed to MCPS as it once was.  There are many reasons for that: the Holy War that broke out between the County Council and the school system in Weast’s final days; dissatisfaction with changes to the state’s Maintenance of Effort law; the state’s execrable decision to shift part of the teacher pension burden down to the counties, which is costing MoCo tens of millions of dollars every year and stifling funding for other priorities; and the growth of many other needs in the county’s budget.  Council Member Nancy Floreen defended the county’s record on MCPS funding and your author offered a reply.

Whatever the reasons, MCPS has not received operating fund increases commensurate with most of the rest of the government in recent years.  The chart below shows budgetary growth by major department and agency from FY10, the peak year before the Great Recession, through FY18.  The effects of the recently approved mid-year savings plan are shown at right.  Note that the time period includes the recession itself, the recovery years afterwards and the FY17 9% property tax hike which was marketed as a boost for education.  MCPS’s total funding increased by 13% over these eight years, roughly half the 25% increase for the total county government.  Non-local funding for the schools, the huge majority of which is state aid, went up by 33%.  But local funding for the schools went up by just 6% as the county spent its own money disproportionately on other activities.  Meanwhile, MCPS’s enrollment went up by 15% during this period.

The Weast Machine has been shattered.  Its demise was due to the decline of the economy, conscious policy choices by county decision makers and, ironically, because of the school system’s own leadership as well.  The key moment came in the spring of 2016, when the County Council conditioned its offer of a substantial increase in MCPS funding on a requirement that it go to reducing class size and not to increasing teacher compensation.  The Weast Machine would have resisted that condition, but the system’s leadership agreed to it.  And so the council voted unanimously to instruct the school system to shift $37 million from employee compensation to class size reduction and the school system reduced teacher raises to comply.  The legacy of this moment is that there is no longer a united front between MCPS leaders and their unions – a major loss of leverage in the school system’s dealings with county electeds.  The end result was not so great for the council either as voters, displeased by the big tax hike that year and not mollified by the compensation changes, went on to overwhelmingly approve term limits.

MCEA runs a Facebook ad against the $25 million mid-year cut to MCPS.  The union flooded a town hall meeting with the County Executive to protest it but the County Council approved the cut unanimously.

MCEA will be deciding its 2018 endorsements for county office in the weeks to come.  In the contested races for County Executive, Council At-Large and Council Districts 1 and 3, the mighty Apple Ballot could play a huge role.  Where will the Apple drop?  That depends on how MCEA answers the following two questions.

What to Do With the Incumbents?

Incumbents usually win and MCEA has endorsed the majority of them, including ones who were lukewarm on their issues, in the past.  But in this case, most of the incumbent Council Members voted for multiple very tough budgets, all of them supported reducing teacher raises as a condition of approving more MCPS funding and all of them just voted for a $25 million mid-year cut to MCPS.  Can those strikes be offset by other considerations?

How to Find Someone Better?

Let’s be fair to the incumbents: the recession, the new Maintenance of Effort law and the partial shift of teacher pension funding to the counties created very hard choices.  No matter what they did, the incumbents would have offended someone.  Would the legions of challengers now vying for the Apple’s attention really have done better?  Which ones among them understand the very real and very complicated budget issues that face policy makers?  Which ones will aggressively pursue economic revival, which is necessary for financing all county services – not just MCPS – and supporting justified raises for county employees?  Which ones have the competence to deliver and the character to fight for teachers, parents and students alike?

When those questions are answered, we will know where the Apple drops.

End Note: For those who wish to study MCPS’s funding history, we reprint the following graphic from the County Executive’s recommended FY18 budget below.

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No-Win Situation: Council Angers Two Influential Groups at the Same Time

By Adam Pagnucco.

Suppose you’re a County Council incumbent gearing up for the next election.  There are eight months to go.  The economy isn’t great.  A big, unpopular tax hike was passed a year ago.  Seventy percent of the voters just voted for term limits.  Dozens of challengers with all kinds of messages carrying the powerful weapon of public financing are fanning out through the county.  So what do you do?

There may not be a lot of good options these days, but antagonizing two of the more powerful groups in the county would not be a high priority on anyone’s list.  And that’s what happened last Tuesday.

The pebble in the council’s shoe this time was debt service.  Much of the county’s six-year capital budget is financed by bonds, and of those, the biggest single financing source for projects is General Obligation (GO) bonds.  GO bonds are not tied to specific revenue sources as some other bonds are; rather, they are backed by the full faith and credit of the county.  The county is rightly proud of its AAA GO bond rating, the highest rating offered by credit agencies, and kept it even through the terrible years of the Great Recession.  But maintaining a AAA rating, which allows the privilege of paying the lowest interest rates on the market, is difficult.  When a local jurisdiction carries too much debt relative to its resources, it risks a downgrade and higher interest rates.  County leadership is justifiably careful about this and has acted to protect its bond rating in the past.

Recently, County Executive Ike Leggett requested that the council cut the level of GO bonds issued in future years, saying that the current amount is excessive and might be regarded as a credit risk.  Last Tuesday, the council unanimously voted to cut the six-year issue of GO bonds from $2.04 billion (the level in the last capital budget) to $1.86 billion.  On an annual basis, GO bond issuances would decline from $340 million in FY18 to $300 million in FY22-24.

The concerns of the Executive and the council about GO bonds are legitimate.  Bonds are paid off through debt service, which is part of the operating budget and competes with other types of spending.  But debt service is a different kind of spending than any other county expenditure.  Once bonds are issued, they MUST be paid one way or the other or the alternative is default.  Below is the recent history of county debt service payments in comparison to the total tax-supported budget.  Debt service roughly doubled between FY05 and FY18.  As a percent of the tax-supported budget, it fell from 7.3% in FY04 to 6.0% in FY09, but has since risen to 8.5% in FY18.  If it keeps rising, it will eventually squeeze out money for public schools operations, public safety and a range of valuable services.

Much of the increase in debt service has been driven by school construction.  The county’s six-year capital budget in FY05-10 included $786 million in local funding for school construction.  By the FY17-22 capital budget, that total had risen to $1.4 billion.  That’s real money, folks!  And while the state kicks in school construction money too, it could do a better job of it.

The council’s cut of GO bonds is normally the kind of action that occurs after an election, not right before one.  Now the county’s elected officials are in trouble with two influential groups.

The PTAs

The Parent Teacher Associations (PTAs) have one of the largest networks in the county.  Almost every one of the county’s 200 or so public schools has a PTA.  Most have groups of officers and many have volunteer committees.  Perhaps most importantly, most have listservs with parents on them.  No one really knows exactly how many parents are on the PTA listservs, but it is at least in the thousands.  The PTAs don’t endorse candidates, but they have a large latent communication capacity to inform parents about the actions of politicians.  Accordingly, they are one of the great sleeping giants of county politics.

Perhaps the number one issue for the PTAs is school construction.  Last year, they strongly supported a recordation tax increase proposed by Council Member Nancy Floreen that was marketed at the time as being mostly intended to pay for more schools.  The size of that tax hike (roughly $200 million over six years) is close to the size of the present cut in GO bond issuances ($180 million over six years).  That suggests that the tax hike will be at least partially supplanted and – after capital money is moved around – will now be effectively used to reduce future debt service, not to finance additional school construction as the council promised.  That is not going over well with the PTAs.

The Realtors

The Realtors are one of the most active political players in the county, especially inside the business community.  They spent $45,000 on direct contributions to county-level candidates in the 2014 cycle – including to County Executive Leggett and eight winning council candidates – and spent tens of thousands more on mailers promoting their endorsees.  Nonetheless, they were targeted by the recordation tax increase and fiercely resisted it.  If the increase were marketed as paying down debt service, which now could be the case through the backdoor, the PTAs would never have come out to support it and it would probably have died.  Now the rationale used to defeat the Realtors – school construction – has been put in question by subsequent action of the council.

The PTAs and the Realtors may have disagreed about the recordation tax hike, but they may now both see it alongside the GO bond cut as a bait and switch.  One big group got a tax increase it didn’t want.  The other big group may not get the spending increase it did want.  Neither group is happy.

So here’s the question.  What happens next?

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More on MCPS Funding

By Adam Pagnucco.

Word has reached Seventh State that the governing establishment in Rockville is displeased with our recent post on MCPS funding, questioning whether our data is accurate.  Let’s establish the data’s presence in the public record.

The assertion in our post generating the most unhappiness is that the county cut local support for MCPS while it gave most other functions of government double digit increases over the FY10-16 period.  Local funding for MCPS can be found in the County Executive’s recommended budget.  The table excerpted below shows a $33 million cut in local funding for MCPS between FY10 and FY16.  That happened at the same time that enrollment grew from 140,500 to 156,514, an 11% increase.  Another item of interest is how dependent the county is now becoming on state aid for school operating funds.  For much of the 1980s and 1990s, at least 80% of MCPS’s operating budget was financed with local funds.  Now, the local share is down to roughly two-thirds.

As for the other departments and agencies, actual funding for FY10 can be found here and approved funding for FY16 can be found here.  Those data points, along with the MCPS local funding history above, are assembled in the table below which shows how much of an outlier MCPS was during the FY10-16 period.  Three notes.  The Department of Environmental Protection’s big increase is due to a hike in the water quality protection charge, which is used to finance stormwater projects mandated by the state.  It does not reflect a significantly greater draw on property tax revenues.  The Department of Housing and Community Affairs’ budget drop reflects a significant one-time expenditure for the Housing Investment Fund in FY10.  It does not illustrate a slash in the department’s operating activities.  The Department of Transportation’s operating budget is not included in this data because it was subject to departmental restructuring in FY11, preventing an apples-to-apples comparison.

Data on the county’s local per pupil contribution to MCPS can be found in this Office of Legislative Oversight report appendix and in County Council budget packets like this one.  This information was the basis of our statements that the county cut per pupil local funding for three straight years and froze it for four straight years, as illustrated by charts we published a year ago.  The Maryland State Department of Education’s Fact Books are our source for the actions of other counties after the Maintenance of Effort (MOE) law was changed.  During the first three years of the new MOE law, most other counties – including ones controlled by Republicans – increased their local per pupil contributions while Montgomery County did not.

Let’s be fair.  There is an intellectually honest argument to explain these actions.  Here’s a statement from Hypothetical Council Member X, who has decided to level with constituents about the county’s history of funding public schools.

Yes, we cut MCPS during the Great Recession.  We had to.  Our reserves were being drained to zero and we were about to lose our bond rating.  We were raising the energy tax, breaking our collective bargaining agreements, furloughing county employees and laying some of them off.  State law prevented us from cutting MCPS like the other agencies, so we did what we had to do.  The state also shifted a portion of its responsibility for paying teacher pensions down to the counties and now we are paying $60 million a year for that.  But it’s true that we squeezed MCPS longer and harder than any other part of county government and that was a mistake.  We tried to reverse that with the 9% property tax hike.  Going forward, we should give MCPS small and steady increases so we don’t run into problems with our schools again and we will pay for it by restraining growth in the rest of the government.

There’s a reason why intellectually honest arguments are not often used in politics: they are not pretty!  But it’s time to be honest about where we have been and where we are headed.  That SHOULD be what the next election is about.

One more thing.  The establishment may choose to respond with a guest blog.  We welcome fact-based debate.  But we caution anyone who responds that they must acknowledge and address the data we present here that appears in the county’s own budget documents.  Failure to do so will be perceived as political pap and puffery by Seventh State’s discerning readers.

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Lessons Learned from the Giant Tax Hike, Part One

By Adam Pagnucco.

Unfortunately for those Council Members who voted in its favor, last year’s 9% property tax hike won’t go away.  The issue came up at the first County Executive forum, at which the three Council Members who voted for it defended it under heavy criticism from their Republican rival, Robin Ficker.  It is sure to be mentioned again as several County Council candidates, including some Democrats, are openly wary of more tax hikes.  And there is a general sense that the 40-point passage of term limits last year was driven at least partially by the tax increase.  All local politicians have taken notice.

There is no question that the Giant Tax Hike is widely unpopular, but it cannot be undone, so let’s learn from it.  Next year, the county will have a new Executive and at least four new Council Members.  All candidates taking office will assume responsibility for a county with needs that have not abated and a budget that remains challenging.  What lessons can these new office holders learn from the Giant Tax Hike?  In this series, we present three of them.

Let’s start with Montgomery County Public Schools (MCPS).  Tax hike supporters point to MCPS’s needs as a reason for the increase and they have a point.  MCPS has enormous and permanent needs.  The school system is a huge asset that requires continuous large investments to maintain.  But while all of that is true, the sad fact is that the county imposed seven years of austerity on MCPS while lavishing double-digit increases on nearly every other function of government.  Once MCPS’s problems became too large to ignore, then and only then was the tax hike passed.

MCPS’s funding issues began when the Great Recession started impacting the county’s budget in 2009.  The County Council has significant power to cut most parts of the budget but the school system is an exception.  MCPS is covered by the state’s Maintenance of Effort (MOE) law, which establishes local per pupil contributions to school districts as a floor for funding levels in future years.  The intent of the law is to prevent counties from supplanting state aid for schools by cutting their own local school funding and moving that money to other functions.  Under the old MOE law, when a county wanted to cut its own local per pupil contribution, it needed a waiver from the State Board of Education or it would forfeit any increase in state aid for public schools.  This penalty did not deter several counties from cutting local per pupil spending during the recession.

In Montgomery’s case, the county cut its per pupil contribution three times.  In FY10, the county’s cut was forgiven by legislation passed in the General Assembly.  In FY11, the county obtained a waiver for a cut from the State Board of Education, who warned the county not to cut again.  In FY12, the county cut its local per pupil contribution for a third time without even asking for a waiver.  Egged on by the teachers union, the General Assembly got fed up and changed the MOE law.  From now on, if a county tries to cut its per pupil contribution without a waiver, the state would send the county’s income tax revenues directly to its school system to make it whole.  There would be no more messing around with MOE.

This presented a budgetary challenge for counties.  From now on, increases to local per pupil contributions would be almost locked in and very difficult to escape without the cooperation of local school boards.  The new law was a risk factor that had to be managed.  MoCo’s County Council reacted by freezing the county’s per pupil contribution for four straight years after three years of cuts.  By FY16, the county’s per pupil contribution was $9,759 – well below the prior peak of $11,249 in FY09.  Factoring in inflation, in real terms, the county’s per pupil investment in MCPS was 24% lower.  That caused huge budgetary strain in the public schools.

The budget was only one reason for the county’s behavior.  There was also politics.  Over the years, former Superintendent Jerry Weast had constructed a machine combining the school unions, the PTAs and the Washington Post editorial board to aid him in obtaining budget increases.  Increasingly, the council viewed him as going too far.  That perception became more acute when he held a meeting with union leaders at his home in 2008 and directed them to endorse Nancy Navarro in the District 4 special election.  Further strains appeared when Weast threatened to sue the county over MOE and the council accused the school board of lying about its budgetary needs in Weast’s last year.  Weast’s successor, Josh Starr, was caught in the aftermath.  He was unlucky enough to serve during MCPS’s austerity years and the budget squeeze effectively sabotaged his tenure.

While MCPS starved, the rest of the county government was well fed.  Between FY10 and FY16, the county cut local funding for MCPS but increased it by double digits for most other government functions.  The police department, the fire department, the libraries and almost every other department recovered nicely from the recession.  The council itself enjoyed a 19% increase for its own operations.  MCPS was almost alone in austerity.  (Housing had a significant decline only because of a one-time large expenditure to the Housing Investment Fund in FY10).  This profligacy throughout county government made it harder to afford an increase for MCPS without raising taxes later on.

MCPS might have collapsed if it were not for state aid increases.  Over the FY10-16 period, the county cut local operating funds for the schools by $33 million, but state operating aid went up by $192 million.

Meanwhile, many other counties reacted to the new MOE law differently.  While MoCo froze its local per pupil contribution to its schools, fifteen other counties increased their contributions during the first three years of the new law.  Nine of these counties were controlled by Republicans.  That’s right, folks – supposedly progressive MoCo lagged Republican counties in increasing local support for schools.

After seven years of squeezing MCPS, the county finally relented and increased its per pupil contribution, but it did so with a 9% property tax increase.  And it wasn’t just the schools that got more money – once again, nearly every other department got a bump.  There’s a lesson here for the next generation of county leaders.  MOE does indeed present a risk for the county budget, but it’s a risk that can and should be managed.  Seven years of austerity for MCPS cannot be imposed without major strains on public school operations.  A far better approach is to implement small but steady increases to per pupil funding while moderating growth in the rest of the government to pay for it.  That’s the best way to maintain one of the county’s greatest assets without imposing giant tax hikes.

In Part Two, we will look at another lesson to be learned.

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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.

HELL NO.

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MoCo’s Giant Tax Hike, Part Two

By Adam Pagnucco.

The County Council is calling its recently passed budget an “Education First” budget since it included an increase above the state-required minimum level for Montgomery County Public Schools.  Let’s evaluate that claim.

The council and the school system have had strained relations for a decade.  The problems began under former Superintendent Jerry Weast, who antagonized several Council Members with his hard-charging, overdriven style.  Nevertheless, Weast won several major budget increases for MCPS during his tenure.  Then came the Great Recession, which forced the county to make substantial spending cuts across all of its agencies.  One obstacle to cuts at MCPS was the state’s Maintenance of Effort (MOE) law, which sets a local jurisdiction’s per-pupil contribution to public schools as a base which cannot be lowered in future years unless a waiver is obtained from the state’s Board of Education.  In Fiscal Years 2010, 2011 and 2012, the county cuts its per-pupil contribution to MCPS, and in 2012, it did so without applying for a waiver.  As a result, the General Assembly changed the MOE law to force counties to apply for waivers or else have their income tax revenues sent directly to school systems.  At the same time, the General Assembly shifted a portion of teacher pension funding responsibilities, once solely the province of the state, down to the counties.  The combination of these two changes provoked outrage from county officials, some of whom vowed to never support a dime over MOE for MCPS in the future.

The chart below, which shows the recent history of Montgomery County’s local per-pupil contribution to the schools, illustrates the effects of these events.  After rising through FY09, the per-pupil contribution fell for three straight years and then was frozen for four straight years.  This year, the Executive proposed and the council approved an increased per-pupil contribution.  (Roughly $300 of the increase is accounted for by the county’s payment of teacher pensions.)  This is why the County Council is calling its budget an “Education First” budget.

County Per-Pupil Spending on MCPS Nominal

But three items of context apply here.

First, the above chart does not include the effects of inflation, which erode dollar contributions over time.  The chart below shows per-pupil contributions in real dollars using 2017 as a base.  (Inflation in 2016 and 2017 is assumed to be 2.1%, the average of 2007-2015.)  Adjusted for inflation, the county’s current per-pupil funding is nowhere close to what it was before the Great Recession struck.

County Per-Pupil Spending on MCPS Real

Second, while MCPS was living under austerity, other county departments were receiving sizeable funding increases.  The chart below compares funding increases across several county departments and agencies including MCPS between FY10 (the pre-recession peak year) and FY16.  In terms of county dollars only, MCPS’s budget was cut from $1.57 billion to $1.54 billion over this period, a 2% cut, while many other departments enjoyed double-digit increases.  Can one good year make up for seven years of austerity for the public schools?

Change in County Spending FY10-FY16

Third, while county officials criticize the General Assembly for tightening the MOE law and shifting teacher pensions, it is the state that has been pumping substantial funding increases into MCPS’s operating budget.  The chart below shows that while county funding for MCPS was cut by $33 million between FY10 and FY16, state aid to MCPS rose by $192 million.

MCPS Local Money vs State Aid

The bottom line is that the new FY17 budget does add $110 million in local money to MCPS, an amount which exceeds the state-required maintenance of effort by $89 million.  But this one funding increase comes after seven years of reduced and frozen per-pupil contributions, a period during which the rest of the government enjoyed double-digit increases.  Council President Nancy Floreen has described the budget as “a historic partnership with the Board of Education” and “a plan for the future.”  Does that mean that the council will continue to exceed maintenance of effort and give the school system increases that match the rest of the government in future years?  Or will this be a one-year respite, after which austerity will return?

We will have more in Part Three.

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PTA, MCPS Place Leventhal in Time-Out

MoCoCouncil

Montgomery County Council President George Leventhal has been pressing very hard for the Council to approve $31 million for needed upgrades to the County Council office building.

Reaction by MCCPTA Leaders

PTA members were not jumping for joy at the prospect in light of MCPS’s severe school construction needs. Cheryl Peirce, Chair of the Montgomery County Council of Parent-Teacher Associations (MCCPTA) Capital Improvements Program (CIP) Committee, sent out one alert regarding the proposal:

In light of our recent testimony to the County Council on February 24th for funding for our school buildings and systems, as well as efforts we (MCCPTA, MCPS, County Council, state delegation) have undertaken this year and last in Annapolis, a decision to consider a $30M+ renovation of the County Council offices has raised questions among Board of Education members and many MCCPTA leaders.

Other online critics have been less diplomatic, suggesting that the Council can use portables.

Reaction from the School Board and the County Exec

As Bill Turque reported in the Washington Post, School Board Member Pat O’Neill had already expressed opposition to the proposal:

“We have 9,300 children in [classroom trailers],” O’Neill said. “We have children sitting in some classrooms with coats on” because of poor heating systems.

County Executive Ike Leggett opposed the plan and did not include the funds in the budget he submitted to the Council.

Leventhal on Critics

Leventhal punched back hard:

“In the school system’s view, 100 percent of the budget should be available for school construction,” he said. “Their plan is that any available dollar should go to school construction.”

Earlier comments–that seemingly include colleagues who failed to line up behind the plan–expressed equal regard for opponents:

Leventhal, with some sarcasm, said the council could elect to “remain in this outmoded, falling-apart decrepit building forever.”

On Tuesday night, Bill Turque reported that the renovation plan had been “set aside.”

My Take

Leventhal is absolutely right that the council building needs renovation. The heating and A/C are terrible–you really don’t want an office on the sunny side in summer. It may even be, as George said, “odiferous,” though I’ve never noticed it on my visits.

But it ultimately is a question of priorities. Thousands of students are learning in portables and school buildings also have similar problems with the heating and the A/C. Our new governor does not seem real keen on funding school construction, so the County cannot depend on money raining down from the State.

George Leventhal is not a happy person today. Fortunately, both MCCPTA and MCPS have lots of experience in handling ill-tempered people of all ages. The effectiveness of both organizations during this episode signals that neither should be ignored over the next four years.

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