Category Archives: budget

Gino Celebrates Big Win on Pay

By Adam Pagnucco.

MCGEO President Gino Renne has sent out a blast email to his MoCo government members celebrating his new agreement on pay increases. Gino is right to celebrate because overall, both the COVID pay he negotiated and the new deal constitute a huge win for labor.

Let’s go back to May 2020. Facing a budget-ravaging pandemic, the county council voted down compensation increases contained in the collective bargaining agreements negotiated by MCGEO, the fire fighters and the police, the three unions who together represent MoCo employees. Those agreements contained $28 million in FY21 compensation increases, amounting to $38 million on an annualized basis. Labor was outraged and proceeded to picket the home of Council Member Hans Riemer, who was particularly vocal in abrogating the agreements.

But just a month before, the unions negotiated COVID pay agreements with County Executive Marc Elrich that provided far more than their abrogated contracts. The county eventually paid out more than $80 million in accordance with those agreements, greatly exceeding the $400,917 spent by Park and Planning and more than double the cost of the unions’ rejected contracts. And as the price for agreeing to let COVID pay end, Gino negotiated a 3.5% service increment, a 1.5% general wage adjustment and longevity pay which, on an annualized basis, should deliver tens of millions more for his members. Plus he can negotiate even more pay increases for FY22.

Gino and Marc Elrich in March 2017.

This was a master clinic on negotiating strategy, a colossal win for the unions and another story adding to Gino’s legend. We reprint his blast email below.

*****

From: UFCW Local 1994 MCGEO info@mcgeo.org
Subject: [External] Montgomery County Members | Breaking News – Local 1994, FOP 35, IAFF 1664 & County Executive Reach Agreement on FY 21 Compensation Package and COVID Differentials
Reply-To: info info@mcgeo.org

[Action Alert]

Breaking News – Local 1994, FOP 35, IAFF 1664 & County Executive Reach Agreement on FY 21 Compensation Package and COVID Differentials

The CARES act which provided funding for local government operations during the pandemic ended December 31, 2020. When the CARES act ended, the county became responsible for all costs, to include COVID differential pay. Since January 1, the County Council has insisted that our COVID differential pay end immediately and they planned to pass a resolution to end it this past week. The differential was bargained between Local 1994 and the County Executive for the additional risk assumed during the pandemic. The three county government unions, FOP Lodge 35, IAFF Local 1664 and Local 1994, engaged the County Executive and members of the Council to voice our concerns over their attempt to end COVID differential pay, and reminded them that increments and general wage adjustments were not funded for FY21.

After multiple meetings with the County Executive and members of the Council, we agreed to a FY21 GWA of 1.5% to begin in the last pay period of June 2021 and a service increment and longevity step to those eligible consistent with the MCGEO Collective Bargaining Agreement. The service and longevity increases will be effective April 11, 2021, for those who missed their increment or longevity step between July 1, 2020, and April 11, 2021. Members who are eligible between April 12 and June 30 will receive their FY21 increments and longevity step on the date due.

Now that the Council has assured the County Executive and the Unions that a GWA and increments will be funded before the end of the fiscal year, effective tomorrow (2/14/2021), the COVID differential pay will end. Although we know that the COVID differential was not nearly enough money to assume the risk of a deadly pandemic, it helped to make working in these conditions bearable. Understand, Montgomery County employees received the highest COVID differential pay in the DMV, if not the nation. Other local jurisdictions who provided a COVID hazard pay ended it months ago. In the event a new stimulus package includes money for a hazard pay, we will be back to the bargaining table with the executive on your behalf.

As always, your best interests and the interests of your union brothers and sisters are paramount. Take care of one another.

In Solidarity,

Gino Renne

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Elrich Announces End to COVID Pay

By Adam Pagnucco.

In a blast email sent to county employees on Saturday night, County Executive Marc Elrich announced an end to the county’s COVID emergency pay program. The pay program, initiated in March of last year and providing some classifications of county employees an extra $3-10 per hour, was the most generous of its kind in the region and possibly one of the most generous in the nation. To illustrate its magnitude, Park and Planning – which has about one-ninth of the employees of county government – spent $400,917 on COVID pay while the county to date has spent more than $80 million. According to Elrich, the program will be replaced with a service increment (which in the past equated to a 3.5% increase for eligible employees), a longevity increase and a 1.5% general wage adjustment, both starting in the current fiscal year. That means most county employees will be receiving 5% raises with possibly more coming in the FY22 budget.

Elrich’s blast email is reprinted below.

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From: MCG.Postmaster MCG.Postmaster@montgomerycountymd.gov
Sent: Saturday, February 13, 2021
To: #MCG_All <#MCG_All@montgomerycountymd.gov>
Subject: A Message from the County Executive

Dear Montgomery County Government family,

I am inspired by the outstanding work of Montgomery County employees each and every day as we navigate the ongoing effects of the COVID-19 crisis. Countless dedicated County employees have risked their personal safety to continue to deliver the services necessary for our residents in response to the pandemic. In recognition of their work, the County has provided differential pay for all eligible County employees whose jobs have required in-person work. Because of the work and commitment of so many of you, we have been able to keep the county running throughout this pandemic.

Earlier today, my leadership team reached an agreement with our three employee bargaining units to restore some of the compensation increases that were not approved by the County Council last spring as the first wave of COVID hit our community. I am pleased to inform you that the agreement calls for service increments and longevity steps to start with the April 11th pay period. For all eligible employees whose anniversary dates were earlier in the fiscal year, their increments will begin with the April 11th pay period. The increase will not be retroactive. If your anniversary date is later in the fiscal year, the increment will begin during the appropriate later pay period. In addition, a 1.5% General Wage Adjustment for all employees, including unrepresented employees, will go into effect starting with the June 20th pay period. Finally, the agreement ends the hazard pay differential beginning tomorrow, February 14th. While this is short notice for this change in current policy, this deal provides every employee with the certainty of a permanent adjustment to their salaries.

This agreement will need to be approved by the County Council before it is formally adopted, but I am confident the Councilmembers will swiftly act to approve this measured proposal. Thank you again for your commitment to the health and safety of our residents as well as your commitment to your colleagues. With this deal, we can focus our attention and resources on building a stronger, fairer, and more successful Montgomery County for all.

With gratitude for all you have done and continue to do.

Marc Elrich
Montgomery County Executive

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Two Negotiating Strategies, Two Outcomes

By Adam Pagnucco.

In justifying the county’s creation of a $4 million per pay period emergency pay liability, representatives of county government depict it as a good deal for taxpayers. They say that the county’s collective bargaining agreements set much higher levels of emergency pay than the amount the county is now paying, so $4 million a pay period is actually a bargain. Setting aside whether the county’s existing emergency pay provisions actually apply to a pandemic – there is some doubt about that – the county’s claim is called into question by the emergency compensation program of one of its sister agencies, the Maryland-National Capital Park and Planning Commission, commonly referred to as Park and Planning.

MCGEO is the largest county employee union of both Montgomery County Government and Park and Planning. It is led by the fearsome Gino Renne, who has a long and famous history of playing hardball with politicians. The union’s prior collective bargaining agreements with both the county and Park and Planning had preexisting emergency pay provisions which the county cited in providing COVID pay. Unlike MCGEO’s preexisting agreement with the county, its preexisting agreement with Park and Planning has an emergency pay provision explicitly referring to “epidemics.” Despite that fact, negotiations between MCGEO and the two agencies yielded outcomes that were worlds apart.

MCGEO’s agreement with the county

Signed on April 3, the agreement gives employees in “front facing onsite work” an extra $10 per hour and employees in “back office onsite work” an extra $3 per hour. Teleworking employees do not receive extra pay. The differential counts for the purpose of calculating overtime pay.

The agreement is indefinite. Here is its language on duration:

This Agreement may re-open on June 20, 2020. However, if the declared Maryland State of Emergency related to COVID-19 extends beyond that time, the terms of this Agreement shall continue, or after collectively bargaining with MCGEO, will be modified based upon the circumstances at the time. In the event that the declared Maryland State of Emergency related to COVID-19 is rescinded before June 20, 2020, the date of the Declaration’s rescission shall be considered the last day of this Agreement, notwithstanding the pay periods indicated above defining when the COVID-19 Differential will be paid.

The county could renegotiate the agreement if MCGEO agrees to do it. Otherwise, the agreement lasts as long as the state’s declared emergency does. As of this writing, the emergency continues and so does the agreement. County council staff has previously noted that it provides by far the most generous COVID pay of any jurisdiction in the region.

MCGEO’s agreements with Park and Planning

MCGEO has had two memorandums of understanding and six agreements on the COVID emergency with Park and Planning through late January. Their effective dates are:

MOU signed 3/15/20
Agreement 1: 5/4/20 – 6/30/20
MOU signed 7/2/20
Agreement 2: 7/10/20 – 8/8/30
Agreement 3: 8/5/20 – 8/29/20
Agreement 4: 9/8/20 – 10/3/20
Agreement 5: 10/5/20 – 11/28/20
Agreement 6: 11/25/20 – 1/30/21

Of the agreements, only the first (lasting through June 30) contained extra pay. That agreement gave an extra $2.75 per hour for “onsite work” and an extra $4.50 per hour for child care aides performing “front facing onsite work.” Unlike the county’s agreement, emergency pay was not included in the calculation of overtime pay. The later agreements provided varying levels of leave and paid time off and have other language on health and safety, teleworking and scheduling but they do not provide emergency pay. Let’s note that time away from work does more to protect employee health than requiring them to report on-site with a pay differential.

No one will ever accuse MCGEO President Gino Renne of being an ineffective negotiator. He has delivered outstanding value to his members for many years. The difference here is in the negotiating strategies taken by the two agencies. Park and Planning utilized a series of short, time-limited agreements to adjust its compensation to changing circumstances. The county signed one open-ended agreement that locked in extra pay negotiated during the height of COVID’s first wave. Gino signed the agreements with both agencies despite their vast differences.

That’s not all. The county’s agreements with the police and fire fighters both provide indefinite emergency pay of $10 per hour for onsite work, with the extra pay counting for calculations of overtime. Of Park and Planning’s five agreements with its police union through late November, only one – lasting through June 30 – provided emergency pay and that was for $4.50 an hour. Once again, Park and Planning got a different result with a different negotiating strategy.

The results of these differing agreements are two-fold. First, there is a huge gap in the costs faced by the agencies. The county has about 9 times the employees of Park and Planning. The county has paid $4 million per pay period since April, which translates to $78 million as of last week. Park and Planning paid a total of $400,917.

Second, there is a tremendous inequity between county employees (many of whom are receiving an extra $3 or $10 per hour) and Park and Planning employees (who are getting paid time off and leave but not extra pay since June 30). That inequity extends to employees of MCPS and Montgomery College, who are not getting anything resembling the county’s pay. Expect these employees to ask – with justification – why they aren’t getting the same extra money as county workers.

The question of how to pay for the county’s huge new liability – one that was avoided by Park and Planning – will be a big factor in writing the next operating budget. We shall find out the consequences of all this when it arrives on March 15.

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Top Seventh State Stories, December 2020

By Adam Pagnucco.

These were the top stories on Seventh State in December ranked by page views.

1. What Happened to White Flint?
2. The Day of Reckoning is Near
3. Jawando Calls for a Tax Hike
4. Come on Now
5. Who’s the Boss?
6. MCEA to School Board: Reopening Should be Safe
7. Trump vs Hogan: Votes by MoCo Town
8. Council Overrides Veto, Attacks Elrich, Cuts Revenue for School Buildings
9 (tie). Minority Members of the U.S. House
9 (tie). Corporate MoCo Council Adopts Supply-Side Economics

The top three stories fit together and have meaning for the new year and beyond. The Day of Reckoning is Near summarizes the county’s dire fiscal picture as it heads into a challenging FY22 budget discussion in the spring. Jawando Calls for a Tax Hike kicks off an inevitable dialogue about taxes, one which will only get hotter before the executive makes his budget recommendation on March 15. And What Happened to White Flint? – December’s runaway winner – lays out the story of how the county’s premier development plan has been held back by our slow rate of job growth. Budget headaches, taxes and economic problems are about to collide.

Welcome to 2021, folks!

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Follow the Money

By Adam Pagnucco.

To understand the growing strains on MoCo’s pandemic-stricken budget, it helps to follow the money. Here is an example.

Follow This Money

Last spring, the county council voted down compensation increases contained in the collective bargaining agreements negotiated by County Executive Marc Elrich with the three county employee unions: MCGEO, the fire fighters and the police. The increases totaled $22 million in the current fiscal year and $29 million annually thereafter. This was the sixth time that the county trimmed or eliminated raises for employees in the last eleven fiscal years. (The county zeroed out raises in FY11, 12, 13 and 21 and reduced collectively bargained raises in FY17 and 20.)

At around the same time, the executive granted the three unions indefinite COVID pay without seeking the consent of the council. There is no question that workers exposed to hazardous conditions deserve extra compensation. The issues are that the executive’s COVID pay far exceeds what any other government in the region (and maybe the entire nation) has granted and that it has no fixed end date. The cost of this pay is $4 million a pay period or roughly $100 million a year, more than three times the compensation increases contained in the now-abrogated contracts. Employees of the college, school district and park and planning are not getting the money. It must be noted that the president of the largest county union said two years ago, “Marc Elrich won the primary thanks to our shoe leather.” Subsequently, the inspector general found that workers were getting pay to which they were not entitled in at least one county department.

No county leaders argue that employees should get zero emergency pay. Instead, the problem now is that the county has little clue how to pay for it even as its budget has been crippled by the COVID recession. Originally, the extra pay was supposed to be mostly reimbursed by FEMA, but the county’s emergency management director called that into question in October. The emergency pay liability grows every day and the need to pay it off grows more desperate.

Now Follow This Money

The county received a $183 million allocation of federal CARES Act money last spring to help it pay for COVID expenses, including aid for pandemic-stricken residents and businesses. But there’s a catch: if the county doesn’t use the federal money for eligible purposes by December 30, it forfeits it. In October, the county council went nuclear upon finding out that the executive branch was slow to spend the federal money it had appropriated for various assistance programs, including aid for rent, food security, child care and more. Administration representatives said that they were trying to prevent fraud and waste and dealing with frustrating FEMA paperwork requirements.

Now it turns out that the money won’t all be spent by December 30. Council staff wrote last week:

CRF [Coronavirus Relief Fund] monies received by Montgomery County must be spent on costs incurred on or before December 30, 2020. Since March 2020, the County Council has enacted special appropriations to help Montgomery County residents and businesses endure the pandemic and its effects. Due to the restrictions on spending imposed by Congress, the Administration expects that $9,934,156 in CRF dollars will be unspent based on current spending patterns and demands. The list below details the special appropriations where funds will likely go unspent.

The table below shows the $9.9 million in unspent federal money by assistance program. The three biggest programs are child care, assistance to distressed common ownership communities and African American health care.

So it appears that families needing child care, residents of distressed common ownership communities and African Americans needing health care may not be getting the federal grant money the council allocated to them. (They might not be completely out of pocket as the executive has recommended the use of county reserves to help.) That said, the $9.9 million in federal grant money still needs to be used by December 30 or forfeited. What’s the administration’s plan for that?

The executive branch sent the council a resolution that says essentially: trust us. The resolution suggests a number of alternate uses for the federal grant money and then says this:

If any of the $9,934,156 is unable to be spent on the Council priority uses identified above in advance of the deadline established by Congress, these funds may also be used for any eligible expense previously authorized by the Council by Resolution 19-498.

And what does Resolution 19-498 authorize? Lots of things, including this:

Payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency, including any pay differential provided to employees responding to the public health crisis. [Bold added for emphasis]

Last Tuesday, the council approved the executive’s resolution to allow a potential transfer on an 8-1 vote with only Council Member Andrew Friedson dissenting.

And so federal grant money set aside by the council for families needing child care, residents of distressed common ownership communities and African Americans needing health care is now subject to diversion to pay off part of the soaring emergency pay liability created by the executive. But even if that happens, it’s not the end of the story. There is only $9.9 million in unspent federal money in play here whereas the total emergency pay liability accounts for $4 million a pay period, or $100 million a year. A reallocation would buy the county about five weeks of time. After that, the liability resumes spraying red ink.

What will happen next as the day of reckoning draws near?

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The Day of Reckoning is Near

By Adam Pagnucco.

I worked at the county council during part of the Great Recession. Those were terrible years. Under County Executive Ike Leggett’s leadership, the county slaughtered every sacred cow to stave off fiscal disaster. It busted collective bargaining agreements, cut employee benefits, instituted furloughs, doubled the energy tax and cut positions by roughly 1,000 people. The county did those things for the sake of fiscal survival.

Never did we dream of cutting county government by 12% in one year. But that is the all-out disaster projected by the executive branch in its new fiscal plan, which was sent to the county council last night.

At first, the new fiscal plan doesn’t seem that bad. It projects lower shortfalls during the current fiscal year than the previous plan from July does. But it confirms what sage budget observers have been predicting for a while: Fiscal Year 21 is tough but Fiscal Year 22 will be much worse. The difference between them is reminiscent of the gap between a paper cut and decapitation.

To understand just how bad the projection for next year is, let’s go over the moving parts of the operating budget. Each fiscal year starts with a beginning reserve, targeted by the county as 10% of adjusted governmental revenues. (The 10% level was initiated by Leggett to stave off a bond rating cut ten years ago.) Next, the county projects its revenues, of which the biggest are property taxes, income taxes, other taxes and state aid (which mostly goes to MCPS and Montgomery College). After adjusting for net transfers, debt service, cash for the capital budget and a few other items, what’s left is allocated to the county’s agencies. Of those, there are four big ones: MCPS, Montgomery College, Park and Planning and Montgomery County Government (MCG), the latter of which is governed directly by the county executive. State-mandated minimums apply to local dollars going to MCPS and the college but not to MCG or Park and Planning. At the end, the fiscal year’s ending reserve is supposed to be set at 10% of adjusted revenues and carries over to the next fiscal year.

It sounds smooth and some years it is, but sometimes things go wrong. The current fiscal plan shows a LOT going wrong, including:

1. A drop in the projected reserve percentage in FY21 from 10.2% to 7.6%, a decline of nearly $140 million. That matters because it means less money will be available for FY22 than previously believed.

2. Declines in estimated FY21 receipts of income taxes ($58 million), transfer and recordation taxes ($19 million) and other taxes ($25 million) that are offset by assumed receipts of federal money, particularly FEMA reimbursements. The federal money is not assumed in FY22 but much of the tax revenue declines remain.

3. An increase in FY21 agency spending of $108 million, some of which is due to the executive’s COVID emergency pay program.

And so lower reserves, less tax revenues and higher spending in FY21 bleeds over to FY22, when the red ink really begins to gush. According to projections, getting reserves back to a 10% level in FY22 will require an extra $127 million. That has to come from somewhere, and since revenues won’t be growing, it will have to come out of allocations to the agencies. But remember – as we said above, MCPS and Montgomery College are subject to state-mandated spending minimums. The fiscal plan projects just 0.5% cuts to both of those agencies. That leaves Park and Planning and Montgomery County Government (MCG) to bear the brunt of the cuts.

Do the math and the fiscal plan projects cuts to Park and Planning and MCG of 12% in FY22. If you include one-time COVID-related spending in FY21, the cut to MCG appears even higher at 17%.

That’s right, folks: a 12% cut to the agencies that pay for police, fire service, parks, libraries, health and human services, transportation, environmental protection, courts, corrections, housing, recreation and most functions of government other than education.

Montgomery County has never seen anything like that before.

The Leggett administration used to send us ominous fiscal plans in December to warn the council against exuberant spending increases only to reveal rosier projections in March. It’s tempting to believe there may be a bit of that here except that the pandemic’s economic effects are truly unprecedented. If this projection is anywhere close to the truth, it would be a planet-shattering cataclysm for all stakeholders in county government – employees, residents and businesses alike. Layoffs would be inevitable. Benefit cuts for employees and vulnerable residents might be unavoidable. Terminated Ride On routes, less street maintenance, cuts to fire service, deferred police recruiting, cuts to child care and social assistance, extractions of cash from capital projects – you name it, it’s all on the table. It makes the Great Recession look like a rain drop on a sunny day.

Assuming the revenue projections hold, there are only three ways to avoid an evisceration of county government. The county can get a federal bailout (as it has been futilely praying for since last summer). The county can raid its reserves and retiree health funds, going significantly below its reserve target of 10% and risking its bond rating. Or it can raise taxes. It could also use some combination of the above in concert with cuts to spread the pain.

Given the ferocity of the pandemic, some degree of budget unrest was certain. The county could have prepared for this better by instituting a real FY21 savings plan rather than the nothing burger it passed in July, sticking to its hiring freeze rather than ending it, not spending freely from its reserves and behaving responsibly on emergency pay rather than creating a new $100 million a year liability. But it’s too late.

The day of reckoning is near.

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Fix it or Own it

By Adam Pagnucco.

Once again, the county council has expressed its displeasure at the administration of County Executive Marc Elrich. And once again, executive branch officials were invited to a Zoom thrashing that was less pleasant than most root canals. Chief Administrative Officer Rich Madaleno plays more defense now than beloved former Washington Capitals goalie Braden Holtby.

Right or wrong, this is turning into a regular thing.

The current object of the council’s ire is the executive branch’s administration of the county’s COVID emergency pay program. The program was first established way back in April by the executive and has continued without interference from the council since then. It is based on the erroneous notion that it was mandated in the county’s union contracts when in fact those contracts referred to emergency pay in the context of weather events. The program is bleeding the county budget by $4 million a pay period, or $100 million a calendar year, and was discovered by the inspector general to be plagued with mismanagement and inflated costs in at least one department. Unlike COVID pay programs in other jurisdictions, MoCo’s has no defined end date.

One of the more troublesome revelations from the inspector general’s report was that managers at the Department of Permitting Services deliberately violated county policy in handing out undeserved COVID pay to employees. Madaleno’s first response in the Washington Post was to characterize it as an “unfortunate mistake.” He walked that back in discussion with the council, but then his deputy chief administrative officer and the current permitting services director both told the council that it was a mistake. It was not. The inspector general said that the managers who awarded the extra pay “decided to allow inspectors to claim front facing differential for their entire workday rather than ‘nickel and dime’ them by asking that they account for individual hours.” This was not a mistake. It was insubordination.

Council Member Andrew Friedson lays out remedies for the conduct found in the inspector general’s report.

Several council members called for an independent investigation, but if the administration continues to believe that this was a mistake rather than insubordination, whether accountability occurs is an open question. Other managers are watching. So are employees who may be thinking of calling the inspector general because of issues going on in their departments. If no one is held to account, why bother?

By the way, while we are on the topic of scandals, was anyone ever disciplined for the $908,000 in overtime paid by the fire department that a whistleblower said was a “scam?”

There is more. The COVID pay program has expended tens of millions of dollars with no end in sight. The council has allowed this to fester for months while it has drained the county’s beleaguered budget. The executive branch has claimed that FEMA will reimburse it for most of this money, but the inspector general has questioned that and so has the county’s own emergency management director.

In the meantime, the county has huge needs for which this money won’t be available. For example, MCPS plans to resume some in-person instruction in January. With the county’s share of federal grant money either gone or spoken for, how will the county help MCPS pay for building improvements, personal protective equipment and any emergency pay for their employees? (The largest COVID contact tracing study to date has found that children are key spreaders of the coronavirus.) MCPS Superintendent Jack Smith has said the district “absolutely will have to hire more people” if it reopens. The county executive is asking for $3 million for HVAC improvements in seven schools but MCPS has more than 200 schools. That’s not going to be enough.

County spending is within the purview of the county council. If the council is dissatisfied with the executive branch’s management of it, the council must step in. The council may not be able to do much about money that has already been spent, but it can pass legislation governing it in the future. Such legislation should define emergency pay, specify who gets it and who does not, set its levels, specify the conditions under which it is paid, establish an approval process, establish a fixed duration with a possible extension process and mandate regular reporting. If county managers refuse to obey their chief administrative officer, let’s see if they will refuse to obey county law. More than that, let’s see if county leaders can reestablish respect for taxpayer funds rather than allowing them to be treated as “other people’s money.”

Complain all you want about this, council members. But in the end, if you think it’s a problem, you must fix it. Or own it.

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Council Outraged at COVID Pay Scandal

By Adam Pagnucco.

The county council has released a statement expressing outrage at the COVID pay scandal, which was uncovered by the county’s inspector general today. The statement appears below.

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Council calls for immediate Executive action to stop improper differential pay and an independent investigation across Montgomery County Government

ROCKVILLE, Md., Nov. 6, 2020—Today the Office of the Inspector General issued a Report of Investigation revealing that Department of Permitting Services inspectors improperly received COVID-19 differential pay. The Council will have an oversight meeting about this issue on Tuesday, Nov. 10 with Inspector General Megan Limarzi and Chief Administrative Officer Rich Madaleno. The Council made the following statement about the report.

The Council is outraged by the differential pay issues identified in the Department of Permitting Services by the Office of the Inspector General. We are calling for an independent investigation across all Montgomery County Government departments and immediate action by County Executive Elrich to stop improper differential pay. Every dollar that was improperly paid needs to be recovered immediately, and those who committed these egregious acts must be held accountable.

The Council thanks those who reported their concerns to the Office of the Inspector General. We also appreciate the ongoing diligent work of Inspector General Limarzi and her team to provide objective oversight and protect the integrity of county government operations and programs. The Council will continue to take legislative and budget action to empower the Office of the Inspector General with the resources needed to protect our taxpayers.

#

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Scandal: County Employees Got COVID Pay They Were Not Entitled to Get

By Adam Pagnucco.

MoCo Inspector General Megan Davey Limarzi, who previously uncovered an overtime scam in the fire department, has done it again. She has issued a new report detailing COVID emergency payments to employees of the Department of Permitting Services (DPS) who were not entitled to receive them under county policy. Moreover, she hints that this may be happening in other departments too. The whole thing is a massive scandal due to – at the very least – poor management in county government.

COVID emergency pay was set in three collective bargaining agreements with the police, the fire fighters and MCGEO in early April. Two categories of emergency pay were established:

Front facing onsite: work that cannot be performed by telework, involves physical interaction with the public, and cannot be performed with appropriate social distancing. This work would receive an additional $10 per hour.

Back office onsite: work that cannot be performed by telework and does not involve regular physical interaction with the public. This work would receive an additional $3 per hour.

Work performed through telework was ineligible for emergency pay.

In May, the Office of Inspector General (OIG) received complaints that DPS was allowing inspectors to receive front facing emergency pay ($10 per hour) for work performed at home. The complaints alleged that employees were “defrauding the system” and “taking advantage of undeserved hazard pay.”

That’s exactly what the OIG found was occurring in four out of five DPS divisions. The OIG wrote:

Our investigation uncovered that DPS management enacted a COVID differential pay policy that was contrary to the Administration’s policy, resulting in overpayment of front facing COVID differential pay to DPS inspectors from approximately March 29 to August 29, 2020. We also found that DPS inspection data on its website, the Data Montgomery website, and in internal records is incomplete and not entirely accurate.

The reason for the overpayments was that work performed remotely was allowed to be paid an extra $10 per hour as if it had been performed in physical interaction with the public. That violated county policy, which held that each hour of work had to be evaluated separately to determine whether it was eligible for an extra $10 per hour (front facing), $3 per hour (back office) or nothing (telework). The violation occurred because DPS management allowed it. The OIG wrote:

The former Acting DPS Director and the four Division Chiefs stated that collectively they decided to allow inspectors to claim front facing differential for their entire workday rather than ‘nickel and dime’ them by asking that they account for individual hours.

Notably, Fire Prevention and Code Enforcement inspectors correctly followed County policy and did not claim front facing differential for their entire workday. The Division Chief told us that he did not know that the former Acting Director interpreted the policy differently. He also did not know that the other divisions were allowing their inspectors to claim all their workhours as qualifying for front facing differential.

The OIG could not figure out how much of the emergency pay was ineligible under county policy. That’s because “we were not able to obtain accurate information on the number of inspections conducted by DPS inspectors, how inspections were conducted, and their duration.” The OIG did note that when DPS finally adjusted its policy to match county policy, front facing differential hours claimed fell by 27% and the number of DPS employees claiming 80 hours of front facing pay per pay period fell by 90%.

Finally, the OIG made this ominous statement. “Additionally, we found that other County departments may also be misapplying the COVID differential pay policy and possibly paying undeserving employees COVID differential pay.” The report does not present evidence to back this up but one senses that this may ultimately be only the beginning of a much larger investigation.

The OIG recommended that the executive branch review DPS and all other county departments to ensure that COVID pay was being administered in compliance with county policy. The OIG also recommended that the county not use CARES Act money or apply for FEMA reimbursements for COVID emergency pay until all payments had been verified as complying with county policy. Chief Administrative Officer Rich Madaleno replied that county departments would review the pay and follow the collective bargaining agreements and regulations which established the pay. He also said that the county would “make all appropriate adjustments” to any FEMA reimbursement requests or uses of CARES Act money.

So let’s review this astonishing report. Top management in one of the county’s most important departments was willing to disobey county policy and overcharge taxpayers rather than have work hours properly reported. Management also lacked complete or accurate records on the actual work performed by its employees. The county’s budget monitoring processes failed to catch this and it would probably still be going on if it weren’t for the OIG. The county’s ability to seek FEMA reimbursements for this pay could be endangered. (Let’s remember that the total amount of COVID emergency pay is projected to be $100 million over the course of a calendar year and currently has no fixed end date.) And the county’s response is not “heads are going to roll and we will get our money back,” but rather that they will follow regulations and collective bargaining agreements.

Who knows what will happen now, but here’s a prediction: the county council’s review of this report is going to be must-see TV. A preview appears below.

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Moody’s: Passage of Question A is a “Credit Positive”

By Adam Pagnucco.

Moody’s Investors Service, one of the three major Wall Street bond rating agencies, has released an issuer comment characterizing the passage of Question A as a “credit positive” for Montgomery County. The comment is reprinted below.

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Montgomery (County of) MD

Voters amend limits to property tax revenue collections, a credit positive

On November 3, voters in Montgomery County (Aaa stable) approved a charter amendment on property tax limitations which enables the county to raise property tax rates without revenue constraints, a credit positive.

The approved measure (Question A) replaces the existing limit and enables a unanimous vote by County Council to adopt a tax rate on real property that can exceed the rate from the previous year. The amendment is credit positive for county operations because property tax revenue is not subject to any restrictions based on inflation, and revenue growth can be captured through tax base expansion in addition to any approved rate increases. The county’s previous charter limit, a self-imposed tax cap that was enacted in 1990, limited property tax revenue growth to the rate of inflation (CPI index) and an amount based on new construction.

A second charter amendment on the ballot (Question B) was rejected, which aimed to remove the county’s ability to increase revenue above inflation. The failure of the measure is also positive because it enables the county to retain flexibility to increase this revenue source when needed to balance the budget, particularly as its income tax rate is already levied at the maximum state cap of 3.2%. Montgomery County is just one of five counties in Maryland with a charter amendment limiting property tax revenue increases, and the ability to adjust the tax rate accordingly is important, particularly as most of the county’s debt is secured by its limited ad valorem tax and full faith and credit pledge.

Income taxes are the county’s primary general fund revenue source (43.5% of total fiscal 2019 revenue), followed by property taxes (36.6%) and other local taxes (7.8%).

The county demonstrated willingness to override its prior charter limit in May 2016 when it approved a 9.9% increase in property tax revenue to support rising debt service and insurance costs, as well as an increase in the Maintenance of Effort (MOE) for K-12 schools and the community college, mandated by the State of Maryland (Aaa stable). Without the increase, the county faced a $178 million budget gap in fiscal 2017 (ended June 30, 2017).

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