Tag Archives: Adam Pagnucco

MoCo is Praying for a Federal Bailout

By Adam Pagnucco.

The COVID cuts have begun. County Executive Marc Elrich has sent a mid-year savings plan to the county council, which has tweaked it and given it tentative approval through a straw vote. The ostensible cut numbers are $44 million from the operating budget and another $28 million from the capital budget. That compares to revenue writedowns of $48 million in FY20 and $192 million in FY21, meaning that the cuts are roughly a third of the revenue loss.

But let’s be clear. The county has not adopted a true fiscal strategy as it did ten years ago, at least not yet. Its real strategy – if you can call it that – is to pray for a bailout from Washington.

Let’s look at what exactly these cuts are.

The most common form of “cut” in the savings plan comes in the form of lapses. The county budget defines lapse as, “The reduction of budgeted gross personnel costs by an amount believed unnecessary because of turnover, vacancies, and normal delays in filling positions. The amount of lapse will differ among departments and from year to year.”

Lapses occur naturally because of churn in the workforce. Imagine an employee leaves a position that has a cost of $100,000 a year at the end of a fiscal year. Now imagine that the county takes six months to fill the position. That lapse has cut the county’s cost of filling that position to $50,000 in the current fiscal year. However, that cost will jump to $100,000 in the next fiscal year assuming that it remains occupied. These costs are common throughout published budgets. By keeping lapsed positions vacant for longer, county departments can produce “savings.” No one is getting laid off through such practices and they are equivalent to deferring planned future spending, not making actual cuts. Department managers may wish to fill these positions but extending lapses means they will have to wait longer.

Elrich’s savings plan included over 60 lapsed positions in the savings package. Many of them were lapsed for only part of the fiscal year. It’s hard to tell the exact number because not all individual positions were listed. Their total combined cost was $7.0 million, or about a fifth of the administration’s operating budget reductions. The council added another $3.5 million by converting Elrich’s proposed abolition of vacant positions in the police department into lapses. Even though no employees are actually getting cut through these lapses, the $10.5 million counts as a “cut” because it means the county will be spending $10.5 million less than it was planning to spend in FY21.

In Elrich’s plan, nine county offices and departments – the Community Engagement Cluster, Consumer Protection, the County Council, Environmental Protection, Finance, Housing and Community Affairs, Legislative Oversight, the Housing Opportunities Commission and Procurement – relied exclusively on lapses for their share of “cuts.” Seven more – the Circuit Court, County Attorney, Human Rights, Inspector General, Management and Budget, Public Information and Technology Services – used lapses for a majority of their “cuts.”

Another set of reductions relates to turnover, telework, shifting funding to state money and adjustments for service reductions already set in place (like transit and recreation facilities). Examples of these kinds of cuts are $4.2 million in previously reduced transit service, a $2.9 million reduction for Next Gen 911 “in anticipation of state aid,” $1.9 million in “utility savings due to continued telework” and $766,713 in savings from recreation facilities that have been closed for months. Much of this is booking savings the county was already going to receive. Little of this represents new actual service cuts.

Most of the impactful cuts are concentrated in health and human services, the police department, transportation and the parks department. Then there is Montgomery College, which has agreed to direct $4.4 million of county money to its fund balance rather than spend it this year. That money will be available for the next annual budget. MCPS has been spared – for now. There are also modest adjustments to the capital budget related to cost savings on certain projects, delays on the state’s Purple Line project (which is tied to three related county projects) and deferrals of Ride On bus purchases. These trims will pale in comparison to a likely bloody capital project adjustment season early next year.

The county government knows that plucking low hanging fruit is far from sufficient to survive the current budget crisis, so why is it not doing more? Elrich answered that question in his savings plan transmission memo to the council. Elrich wrote:

Across the country, states and local governments are struggling to deliver vital services to residents and help communities to recover, while adjusting to a significant decline in revenues. Unlike other recessions, however, it is unlikely we will be able to climb our way out of this fiscal crisis without additional Federal aid unless we decimate the services that are so desperately needed by County residents. Do not get me wrong, we are grateful for the aid that the Federal government has already provided to Maryland and Montgomery County to help us navigate these uncertain times, and I am greatly appreciative of our State’s Congressional delegation for their continued assistance and leadership. Simply put, however, without additional aid from the Federal government, deep and draconian spending reductions may well be needed in order for us to balance our budget. These reductions will have lasting impacts on County residents, businesses and employees.

There is enormous uncertainty on whether there will be substantial new amounts of federal aid coming from Washington. U.S. Senate Majority Leader Mitch McConnell has previously said that he would rather let states and local governments go bankrupt than engage in “revenue replacement.” While House Democrats have included nearly a trillion dollars for state and local governments in their COVID relief bill, Senate Republicans seem content to merely allow already-expended aid to be used for broader purposes. (Right now, it can’t be used to plug deficits.) The latter approach offers little to MoCo, which is rapidly spending the $183 million in federal aid it has already received on COVID-related programs. Federal aid may ultimately be used as a bargaining chip to resolve other issues like unemployment benefits, stimulus checks, COVID liability and school reopening aid, which is not a happy place for states and local governments to be.

The county would be in better shape if it had done what county executive candidate Marc Elrich said he was going to do two years ago: undertake a genuine restructuring program in cooperation with the county’s unions to save money starting in the first 90 days of the term. Instead, the executive has added positions through his recommended budgets – some of which were trimmed by the council and others now lapsed – and the county’s top manager has spent his time running a book club while getting blasted by labor. The county’s budget director has also said that the county is looking at eliminating at least 100 vacant positions. (How does that save actual cash?) Now the county is praying that Mitch McConnell – who wants us to go bankrupt! – will bail us out.

Prayer is a great thing for matters of faith. It is much less useful for matters of budget.

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Nine Kings and Queens

By Adam Pagnucco.

Advocates of a nine-district county council in MoCo press on despite clear evidence that our at-large races have much more political competition than our district races. But there is no need to speculate about what a nine-district system would look like. For more than 30 years, a nine-district system was in use right next door to us in Prince George’s County. How did it work there?

Under Prince George’s County’s original charter in 1970, its county council had eleven members, all elected at-large. Five of them had to reside in one each of five districts while the other six could live anywhere in the county. The structure was quickly dominated by Democratic Party leaders who ran slates for state and county offices, but it began to disintegrate when non-slate members won races in 1978. In 1980, the county passed Question K, which replaced the old structure with 9 district-based council members who would be elected solely by voters in their districts. At the time, the Washington Post wrote:

With the council reduced from 11 to 9 members and its members elected from separate districts, there will be decidedly fewer countywide offices with which to form a slate. That was one goal that the amendment’s initiators — Republicans and Democrats who ran against the party slate in 1978 — intended. The supporters of K also said they designed the amendment to make the council more responsive to the electorate. Its opponents charged that the amendment will cause parochialism and an emphasis on district issues at the expense of the county.

Sound familiar?

The new structure was first used in 1982, which saw the defeat of numerous incumbents and power brokers. The system remained in place until 2016, when residents approved Question D to add 2 at-large members by a 67-33% vote. In 2018, a retiring district council member and a non-incumbent won the 2 new at-large seats, defeating seven other candidates including another retiring district council member and a former state delegate.

Another factor in Prince George’s elections are term limits, passed by voters in 1992. The county executive and county council members are limited to two consecutive four-year terms, though they can return after being out of office. Additionally, council members can serve two terms in district seats and then immediately run for two more terms in the at-large seats created in 2018. Prince George’s voters have rejected multiple attempts to repeal or extend term limits.

How well has the nine-district system promoted political competition in Prince George’s County?

The table below shows the distribution of the 60 county council elections held in Prince George’s from 1998 through 2018. Of those 60 elections, 32 were district races with an incumbent on the ballot, 22 were for open district seats, 5 were special elections for open district seats and one was an at-large election in 2018.

The first thing one notices is that the average number of primary candidates is much lower in races with incumbents (1.9) than in open seat district races (4.8) and special elections (6.6). The 2018 at-large race had 9 candidates.

Now let’s look at how incumbents fare in Prince George’s district races.

Fully half of the elections featuring an incumbent (16 of 32) had no opposition. Only 3 elections had an incumbent winning by less than 10 points. Ninety-one percent of the elections had an incumbent winning by 20 points or more or not having an opponent at all.

The combined record of incumbents running for reelection over the last two decades is 32-0.

Granted, elections work differently in Prince George’s and MoCo. Prince George’s politicians employ mixed slates of incumbent and non-incumbent state and county candidates who distribute sample ballots listing all of them. This gives incumbents, especially non-term limited state legislators, enormous influence in selecting and grooming new members of their political organizations. But the end result is not much different than in MoCo’s district council races since 1998, in which Democratic incumbents have an 18-1 record and regularly win blowouts.

The lesson from Prince George’s County is clear: in the context of all district seats, true competition usually only occurs when an incumbent does not run. Because Prince George’s limits incumbents to two consecutive four-year terms, that means true competition happens once every eight years for district seats (unless a vacancy occurs and a special election is held). In Montgomery County, which limits council members to three consecutive four-year terms, true competition would occur once every twelve years. That is a mammoth setback from MoCo’s at-large elections, which have at least some degree of competition in every primary and have sent three incumbents home.

The effect of electing nine candidates and then allowing them to face creampuff (or no) opposition for twelve years would be to create nine kings and queens. That is comparable to what happened in Prince George’s County except our monarchs would rule 50% longer. The NIMBYism and parochialism of the Prince George’s nine-district system even acquired a name – “council courtesy,” under which the other eight members nearly always accepted a member’s position on development in his or her district. With neither the county executive nor the planning board trumping the council on land use powers, the council members were unchallenged overlords inside their domains. Then-special election candidate (and future Council Member) Derrick Leon Davis explained how this works on Kojo Nnamdi’s show in 2011.

In politics, there are few things more dangerous than elected officials who face little or no competition. The risk of being hurled from office by pitchfork-wielding voters is one of the few safeguards protecting the people from politicians afflicted by greed, ego, malice, sloth or sheer incompetence. Nine-district advocates have legitimate grievances and the county could use more district council seats. But competition is a far better solution to our problems than the crowning of kings and queens.

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Reopening Decisions by School District So Far

By Adam Pagnucco.

Editor’s note: this post has been updated to include Washington County, Maryland.

In the aftermath of discussion about MCPS’s reopening plans, let’s take a look at what other districts are planning. Bear in mind that jurisdictions in Maryland and Virginia are bound by state guidance and they have had different coronavirus infection rates. Below is a summary of the approaches taken by 18 school districts in the Washington-Baltimore region.

Opening with online only as first phase (7 districts)

Arlington County: Schools will begin on September 8 with full-time distance learning. Parents may choose a hybrid model combining distance learning and physical school, which will begin implementation in October.

Charles County: Schools will start with all virtual learning “with a goal of transitioning to Phase 2 as quickly as possible. Phase 2 would include in-person instruction for special populations of students.”

Harford County: Distance learning only for the first semester. A limited number of spaces in physical schools will be offered to students to help them access online instruction.

Howard County: Distance learning only through January 28.

Prince George’s County: Distance learning only for the first two quarters of the school year.

Prince William County: The school year will begin with distance learning only for the first quarter (September 8 through October 30). Afterwards, “the goal will be to transition to a 50% capacity model in the second quarter, with the option for students to remain virtual.”

Washington County: “Washington County Public Schools (WCPS) students will begin the 2020-2021 school year with all students in grades pre-k through 12 engaged in distance learning. The Board of Education unanimously agreed to adopt a model of full distance learning beginning August 31, 2020 and continuing until it is safe for students to physically return to school.”

Preliminary plan with online only as first phase (3 districts)

Calvert County: “On July 16th, the Board of Education of Calvert County Public Schools decided to continue the discussion of how to open the 2020-2021 school year. To ensure the safety of staff and students during the COVID-19 pandemic, the Board is in favor of starting the year online for all students. Board members recognize, however, that barriers exist for some students to learn online. The Board will continue to accept public comments about meeting the needs of students with limited or no internet connectivity or other challenges through July 22nd.”

Carroll County: Reopening will occur in three sequential phases: enhanced virtual/distance learning for all students, hybrid model combining distance learning and some in-person instruction and a traditional model. Parents may opt for online only for the entire fall semester.

Montgomery County: Schools will begin with distance learning and eventually phase in some in-person instruction. The teachers union and MCPS management have shared their perspectives on the plan.

Opening with choice model (1 district)

Fairfax County: Parents have been given a choice between full-time distance learning and a hybrid option with at least two days in physical schools.

Preliminary plan with hybrid or choice model (2 districts)

District of Columbia: According to a preliminary plan, parents may choose between all online learning or a hybrid of in-person and online. Mayor Muriel Bowser has said a final plan will be announced on July 31.

Frederick County: A draft plan suggests that most schools will open with a hybrid model in which students will be divided into two cohorts and alternate between two days in physical school and three days in virtual learning.

No plan yet (5 districts)

Alexandria City: The district is still in its planning process and does not yet have a draft plan.

Anne Arundel County: The district is still in its planning process and does not yet have a draft plan.

Baltimore City: The district is preparing a preliminary plan for consideration by the school board on July 28.

Baltimore County: No decision has been made.

Loudoun County: No plan has yet been released.

So far, no public school district in the region has said it will reopen with 100% traditional in-person instruction.

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MCPS Releases “Just the Facts” Video

By Adam Pagnucco.

MCPS has released the video below elaborating on its school reopening plan. The video was no doubt prompted by the Montgomery County Education Association’s statement that MCPS’s reopening was “wholly inadequate” in protecting students and staff.

Among the points made by MCPS Superintendent Jack Smith and some of his top staff are:

School will start on August 31 and be “all virtual.” Smith said, “When we phase it will depend on our health circumstances in our community and in our state.” Right now, the timing of when phases of in-school learning will begin is unknown.

Smith commented on the needs of students for physical school. He said, “We know that we have literally thousands and thousands of students who need to be in school if at all possible. We have students who are in poverty. We have students who have learning disabilities. We have students who are requiring English. We have students who really benefit from the structure, from their physical, social and psychological well-being. We have students who want the most rigorous experiences. In fact, every single student needs school. So we want to be ready to phase in when we’re able to come back in based on the health situation of our community. And when we are ready, we want to be able to start.”

The issue of discipline related to mask wearing came up. Deputy Superintendent Monifa McKnight gave this example: “We definitely are not going to discipline a six year old child who needs to take a break or struggles with adjusting to this new way of keeping themselves safe. But what we are going to do is teach them about it, teach them about the importance of it and how it contributes to their environment in a responsible way and help them and make note of things they struggle with wearing it so we can figure out ways to support them.” Nothing in the discussion contradicted MCEA’s statement that violating mask requirements would not result in discipline.

Communications Director Derek Turner said, “The next rumor I’ve heard is that only teachers and students are going to be cleaning classrooms.” (Note: MCEA said that “teachers and students will be primarily responsible for wiping down surfaces between classes” but did not say that they would be the only ones cleaning classrooms.) Associate Superintendent Essie McGuire said that building services workers would have more cleaning responsibilities than before but that teachers and students would have a role too. She said, “When we think about teachers and students, we’re really thinking about those personal spaces, the kind of in-the-moment, day-to-day cleaning that may just go with incidental use of your room or your personal space.”

McGuire said that MCPS has spent millions on personal protective equipment (PPE) and will continue to. When asked by Turner about whether just two masks would be provided for the entire year to teachers and students (as MCEA asserted), McGuire discussed how inventories of masks and other PPE would be available at schools but did not otherwise directly address the two-mask question.

McGuire said that different kinds of hand sanitizer dispensers would be available in different places inside schools. However, she did not directly contradict MCEA’s statement that “free-standing, hands-free sanitizer stations will not be available at school entrances because of their difficulty to obtain.”

McGuire said that there will not be a hard standard of 15 kids in a classroom. Classrooms will be evaluated based on their size and social distancing requirements to determine their appropriate student capacity. The actual number of students per classroom will vary.

On the degree of choice given to MCPS employees about whether they would be required to return to physical schools, Smith quoted a statement made by MCEA President Chris Lloyd in Bethesda Beat. Smith said:

I think this quote by Mr. Lloyd, the MCEA president, at the end of June, beginning of July in the Bethesda Beat really kind of sums up where we are. This is the quote. Lloyd said, “Many older teachers and those who are immune-compromised have told him they might not be comfortable returning to school buildings in the fall. But Lloyd said Superintendent Jack Smith has been clear with union leaders that teachers and students will have the flexibility to decide if they need to work remotely.” And so really that’s that issue of need and flexibility and choice, how all that works together. So we have to have a process for that. So we’re going to continue to work with individual employees and with individual families about what works for different families based on their needs and we have to be ready when we can phase in again to know who can and will work in schools, who will need to be in the virtual program and how that will continue to work together. So we’re going to continue this conversation in the next week, in the next month, in the next couple of months as we move forward and make plans for how to re-phase, reenter schools in a phased approach when we’re able to do so.

Smith ended the video with this statement.

This is a very, very tough situation. No one would have chosen this. Not one person would choose this. And we are all touched and affected by it. Every one of us, every person listening to me today has been touched in many ways by this. We must continue to work together on behalf of everyone to do the best job we can to make things work for our community, for our students, for our staff and the entire public education structure. It’s critically important for our future that we are able to continue forward with public education in the way that it serves our communities.

Amen to that, Dr. Smith.

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Elrich on Hot Mic: “Can I Say the Council is Fact Proof?”

By Adam Pagnucco.

It’s no secret that the relationship between the executive branch and the county council is not one of roses and chocolates. After rejecting County Executive Marc Elrich’s tax hike and rewriting his recommended budget, the council decided that his strategy for COVID-19 testing was inadequate and decided to create one of its own. But such things are positively amorous compared to the council’s likely reaction to Elrich’s joke – recorded on a hot mic – that the council is “fact proof.”

The joke was made during a Facebook video of Elrich and some of his top staffers preparing for a media briefing earlier today. The preparatory discussion should not have been shown, but it was – and eyeballs were on it. Elrich, county health officer Travis Gayles and county emergency management director Earl Stoddard were talking about how to discuss COVID-19 infection rates among Latinos in the wake of a Washington Post article on disproportionate cases in that community. So far, so good – public health data has multiple layers and is not always easily conveyed in casual discussion, especially in the press.

But then Elrich’s delightfully snarky sense of humor kicked in as Facebook viewers watched. At 3:15, Elrich cracked, “Can I say the council is fact proof?” Gayles laughed and replied, “You’re welcome to say whatever you want to say!” Stoddard followed with, “I’m not sure how helpful it is, but you could say it!” As of this writing, the video has been removed – but not before it was recorded.

Elrich is a funny character when he wants to be and he has to be frustrated with the council. But I guarantee that no one on the council is amused. Given the immense powers the council possesses under the charter and its demonstrated willingness to use them against the executive, the council might just get the last laugh.

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Maryland Latinos Hit Hard by COVID-19

By Adam Pagnucco.

While the COVID-19 crisis has affected virtually everyone in the nation, it has not affected everyone equally. In a project for the Council for Advocacy and Policy Solutions, I analyzed COVID-19 infection rates by Maryland zip code to determine which demographic and economic factors were most associated with the spread of the virus. Many factors had some correlation, but none of the ones I examined had more of a correlation with COVID-19 than the Latino percentage of population.

For each of the more than 400 zip codes in Maryland, I collected the following data:

COVID-19 cases on 6/18/20
Average total income per tax return
Population per square mile
Median age
Percent Hispanic (any race)
Percent white non-Hispanic
Percent black
Percent Asian
Percent of population age 25 and older with less than high school graduate level of education
Percent of population age 25 and older with graduate and/or professional degree
Percent of population age 5 and older who speak a language other than English at home

I then used four techniques to identify correlations between each of these factors and the number of COVID-19 cases per 1,000 residents.

5 category comparison
For each factor, five categories ranging from low to high were measured. For example, for median age, COVID-19 cases per 1,000 residents were estimated for median ages of under 35, 35-39.9, 40-44.9, 45-49.9 and 50 or older.

Correlation coefficient
A correlation coefficient measures the correlation between two variables. A coefficient of 1.0 means that the two are perfectly and positively correlated. A coefficient of -1.0 means that the two are perfectly and negatively correlated. A coefficient of 0.0 means that the two are uncorrelated.

R-squared
R-squared measures the percentage of variation in one variable explained by the variation of a second variable. An R-squared of 100% means that 100% of the variation in one variable is explained by variation of a second variable. An R-squared of 0% means that 0% of the variation in one variable is explained by variation of a second variable. Unlike the correlation coefficient, R-squared cannot be negative and therefore does not indicate whether the correlation between two variables is positive or negative.

X-Y chart
Each data point is plotted on a chart with the x-axis representing one variable and the y-axis representing another. A line of best fit is also shown summarizing the correlation between the two variables.

Among the factors I studied, none had a stronger correlation with infection rate by zip code than the Hispanic/Latino percentage of the population. The summary table appears below.

As the Hispanic percentage of the population rises, so too does the infection rate. Maryland zip codes in which Hispanics account for 10% or more of the population had infection rates roughly five times greater than zip codes in which Hispanics accounted for less than 1% of the population. Overall, roughly half of the variation in infection rates among Maryland zip codes was explained by Hispanic percentage alone.

The chart below shows the distribution of zip code data points. The vertical axis plots the number of COVID-19 cases per thousand residents as of 6/18/20. The horizontal axis plots the Hispanic percentage of each zip code’s population. The association is not perfectly linear but the trend is plain.

The data do not demonstrate why this association exists. A possible reason might be heavy Latino presence in essential sectors like agriculture, food manufacturing, grocery stores, warehouses and delivery, all of which have heightened risks of virus exposure. Relatively low health insurance coverage exacerbates the issue.

The second highest correlation I found with infection rates was the percent of population age 5 and older who speak a language other than English at home. This factor is closely associated with the Hispanic population percentage.

Many of the other factors I examined had some correlation with infection rates although none of them were quite as strong as percentage Hispanic. This has a clear implication for policy makers: dealing with COVID-19 requires special attention to this demographic. If the virus spreads unchecked in this community, no other community will be safe.

The entire study, including results for other factors, can be found here.

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Elrich Charter Amendment Would Make Tax Hikes Easier

By Adam Pagnucco.

A document written by a special assistant to County Executive Marc Elrich lays out the administration’s views on the county’s charter limit on property taxes. And its approach is a simple one: make tax hikes easier.

The county’s charter limit on property taxes was approved by voters in 1990. In simple terms, it allows the county’s total volume of property tax collections to rise annually at the rate of inflation (with a few exceptions like new construction) unless the county council votes to override the limit. Under the original 1990 law, the limit could be overridden with a vote by seven council members. In 2008, tax activist Robin Ficker passed a charter amendment raising the override requirement to nine council votes. Two years ago, voters passed another amendment changing the override requirement to a unanimous vote of all current council members, a change designed to deal with council vacancies. Ficker has qualified another amendment to the charter this year which would revoke all overrides of the limit if approved by voters.

Elrich made his dislike of the current charter limit structure plain in his most recent recommended budget. In his budget message, Elrich wrote:

When the County Council proposed to the voters our current Charter limit on property taxes in 1990, few people could have foreseen the dramatic changes that would take place in Montgomery County and around the globe. In the past 30 years, our school population has grown by 65 percent and our overall population has grown by 40 percent. The services we provide are now more complex and seek to address a range of challenges, from traffic congestion and climate change to health care disparities and linguistic diversity. And over the past four decades, our property tax rate has declined by 35 percent.

We have all witnessed other local governments regionally and nationally experience generational decline due to conflicting, irreconcilable fiscal policies. Montgomery County is at the precipice of such a decline if we cannot get ourselves out of this cycle of self-enforced structural deficits and inequitable, unpredictable revenue caps. Therefore, I will be sending the Council a proposal for a Charter amendment that will revise our revenue cap to provide certainty to homeowners. This proposal will eliminate our old, cumbersome revenue cap and replace it with a three percent cap on the increase in any homeowner’s taxable assessment. This will give our taxpayers real protection from unexpected increases in property values. It will also provide the County Government with a higher degree of predictable tax revenues like every other jurisdiction in our region.

Without such a change in the Charter, our community could be facing a situation in FY21 where a recession and deflation cripple our ability to provide emergency services and a quality public education system. This perfect storm would threaten lives and diminish the value of properties in our County. I will not stand by and let our community be harmed by the ghosts of voters from four decades ago.

An internal document written by one of Elrich’s special assistants, Debbie Spielberg, lays out the administration’s specific objections to the current charter limit. (Spielberg is the Hand of Elrich. No one in the administration is closer to the boss.) Among Spielberg’s criticisms are that the current charter limit structure does not capture growth in the tax base, is vulnerable to underestimates that affect the taxable base subject to the limit forever and leaves open the possibility of having a zero inflation rate stop increases in collections. Spielberg is right on all of these points. She also alleges that the charter limit has caused MoCo to have a lower property tax rate than most of its neighbors. This point is more complicated. MoCo’s property tax rate was in the middle of the pack for Maryland counties in FY20 and is lower than much of Northern Virginia because those localities do not charge income taxes. Spielberg’s memo is reproduced below.

The administration is fearful of what would happen if voters pass the new Ficker amendment, which would remove the county council’s ability to break the charter limit. Spielberg’s memo proposes an alternative charter amendment that would do three things.

  1. It would apply the charter limit to the property tax rate, not the volume of collections.
  2. It would allow six council votes to raise the tax rate. The current override requirement is a unanimous vote by all current council members.
  3. It would limit the growth in the taxable value of an owner-occupied residential property to 3% per year.

Elrich’s official charter amendment request to the council appears below. The council and the voters – but not the executive directly – can place charter amendments on the ballot.

The obvious impact of this proposal would be to make property tax hikes easier. Instead of one council member being able to block an increase, now four would be required to obstruct it.

The less obvious impact has to do with the distribution of future tax increases. Right now, the county limits the annual increase of taxable assessments on principal residences to 10%. The administration’s proposal would lower that to 3%. That looks good for homeowners but let’s think about the properties that are not principal residences: commercial properties and residential rental properties. If homeowners are shielded from tax hikes, commercial entities and residential renters will pay more. This is a significant policy shift with two consequences. First, it would impede the county’s commercial sector from recovering from the COVID-19 economic crisis. (Let’s remember that MoCo had major competitiveness issues before the virus arrived.) Second, renters – especially low-income residents and small businesses – have been dramatically affected by the current economic downturn. How much more can they pay? Policy makers should think carefully about having them assume more of future tax burdens.

The looming prospect of a new Ficker amendment has generated both this concept as well as another amendment on property taxes now before the county council. (The council’s version would require a unanimous council vote to raise the tax rate and contains no redistribution of the tax burden.) If one or both alternatives to Ficker make it to the ballot, voters will face complicated choices on tax policy. And they will do it during one of the worst recessions ever.

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Crash!

By Adam Pagnucco.

You heard that deafening noise, yeah? It came from Rockville, specifically from Monroe Street. It was the sound of the county budget being blown to smithereens. And it probably won’t be the last loud noise heard echoing from the county seat.

Why the explosion? That’s what it sounds like when the county writes down half a billion dollars over two years.

A dryly titled document known as “Update on County Tax Revenue Estimates” will be reviewed by the county council tomorrow. Budget writers tend not to be very dramatic people. That’s one reason why summer blockbusters tend not to be centered on budget analyses. But this blockbuster contains more exploding ordinance than a World War II battlefield. Ground zero is MoCo.

The COVID-19 crisis is now blowing up budget after budget all over the world and we are not immune. In FY21 (the current fiscal year), the county was supposed to receive roughly $4 billion in locally generated tax revenues. (The county gets another $2 billion in intergovernmental aid, grants and non-tax revenues). Of the $4 billion or so in local taxes, here are the projected writedowns as of last week.

FY20 (last year): $47.7 million
FY21 (this year): $192.0 million
FY22 (next year): $282.0 million
FY23: $275.9 million
FY24: $272.8 million
FY25: $225.2 million
FY26: $173.9 million

There is bound to be variation in the out years because economic forecasting is about as certain an art as selecting number one draft picks. But when combining last year, this year and next year, the total writedown is $522 million. That’s the biggest writedown since the Great Recession.

The biggest contributor by far to the shortfall is income taxes, which have been written down through FY22 by $357 million, or 68% of the total writedown. The county’s finance department reported that income tax receipts were down $19 million from their estimate in May and $20 million from their estimate in June. Finance expects personal income, wage and salary income and income from dividends, interest and rent to fall in calendar year 2020 and then rise by a fraction of their prior annual growth over the last decade in calendar year 2021. Finance also expects resident employment to fall by 1.82% in 2020 and a further 0.05% in 2021. All of these declines will hit income taxes.

Relative to their immense size, property taxes are not written down by very much (just $41 million from FY20 through FY22). The reason is because the county’s charter limit allows property tax collections (aside from new construction and a few other categories) to rise at the rate of inflation regardless of what happens to assessments. There are two wild cards here. First, what if the rate of inflation goes to zero or even goes negative because of the collapsing world economy? And second, what if massive failures to pay rent cause property owners to file more tax appeals? If the real estate market fails, that will just add to the wreckage.

Two other wild cards might be thrown the county’s way. First is Governor Larry Hogan’s plan to shift and shaft the counties, which was defeated at the Board of Public Works but may yet return at a later date. Second is the fate of additional federal aid for counties, which is backed by Democrats in Congress but draws a wary eye from Republicans (including U.S. Senate Majority Leader Mitch McConnell). The federal government has so far allocated $183 million of aid to MoCo, but it is targeted to expenses directly attributable to COVID-19. The county needs money to cover its plummeting local revenues. If Hogan and McConnell get their way, all MoCo will get is more shrapnel.

So what does all this mean? The loud noises might not be over, folks. Could we someday hear the wailing squeals of sacred cows, prodded by unforgiving steel as they are dragged away to slaughter?

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MoCo’s Book Club

By Adam Pagnucco.

You might think of Montgomery County Government as an entity that finances schools, deploys police and fire fighters, maintains roads, administers social services, operates libraries and more. Yes, it is all of those things. But under the Elrich administration, it became one more thing:

A book club.

Imagine that you write a book. You think it’s a great book. It’s all about how to run a local government. And then you get a dream job actually running a local government. And it’s not just any local government – it’s a very prestigious one, with more than 8,000 employees who will now be working for you. You think this government is doing OK, but it could do a lot better if it was run in accordance with what your book says. So what are you going to do?

Encourage as many of your employees to read that book as possible.

That is one of the biggest themes pervading the bombshell report written by the ethics commission and the inspector general (IG) about Chief Administrative Officer (CAO) Andrew Kleine, the top manager in county government. Ethics complaints made by county employees last year resulted in Kleine admitting to breaking two provisions of county ethics law over issues related to his book, City on the Line, and his participation in getting two of his private business partners county contracts.

Kleine is not the star of the report. His book is. Over and over, it’s about the book.

The IG noted many details about the promotion of Kleine’s book inside county government. Consider the following excerpts from the report.

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Multiple County employees reported to the IG that Mr. Kleine often spoke about his book to County employees and that they felt they needed to read it. OMB [the Office of Management and Budget] referred to City on the Line in its budget training sessions, after which County employees from various departments emailed that they needed a copy.

On December 10, 2018, Mr. Kleine retweeted a tweet from the program director of the political science program at UMBC at Shady Grove that stated, “#MoCo agency bosses are reading/having staff read incoming Chief Administrative Officer’s @awkleine’s book City on the Line. You should too. Available at Amazon for $35 http://a.co./d/hf7xUtV @UMBCpolisci @MarcElrich”

On December 18, 2018, a County Department Director emailed that City on the Line was “assigned to him as mandatory reading.” The CAO supervises County department directors and would be the person who could require certain work assignments from Department Directors.

On April 29, 2019, the Director of OMB emailed staff, “To help the office plan for outcome budgeting and the Turn the Curve initiative, we have five copies of the books City on the Line and Trying Hard is Not Good Enough. Please see me or Darlene if you want to borrow one. I also have coupons if you want to purchase your own copy of City.”

On June 6, 2019, an OMB employee emailed a telework plan that included reading City on the Line.

On July 1, 2019, the Director of OMB emailed his staff a compilation of takeaways from City on the Line.

On August 6, 2019, an OMB employee asked an OMB staff member and a Recreation Department budget specialist to draft a presentation for the Training Implementation Workgroup. “You can use City on the Line, Chapter 3… as a reference.”

A speaker note on the OMB & Training Implementation Workgroup September 2019 presentation, “Outcome Based Budgeting FY21 Operating Budget” stated that, “We can use the example – from City on the Line Pg 58/59.”

On August 14, 2019, an OMB employee emailed other staff, “As a suggestion, it may be advantageous to read the following materials to gain a better understanding of Outcome Based Budgeting and Turn the Curve thinking: City on the Line and Trying Hard is Not Good Enough.”

On August 19, 2019, a Recreation Department emailed, “Could you please order me a copy of City on the Line… we are discussing it in our work sessions and I am the only person in the group who does not have a copy. Plus we are receiving work assignments related to the information in the book.”

On August 19, 2019, a Department of Permitting Services employee emailed a request for City on the Line via 2-day shipping from Amazon and wrote, “I normally wouldn’t pay this, but we need this book to reference for outcome budgeting, which is a new way of budgeting this year.”

On August 23, 2019, a Department of Police employee emailed, “In the budget meetings I am going to they keep referring to a book ‘City on the Line.’”

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And so the book was integrated into the operations of county government. Employees were being encouraged to read it and some felt left in the dark if they didn’t. That means books had to be acquired and someone had to pay for them. According to the report, the county spent approximately $3,000 to buy 89 copies of Kleine’s book. Kleine earned total royalties from all purchases of $3,157 on the book through the end of 2018. Royalties paid in 2019 and 2020 are not mentioned in the IG report.

Even this guy thinks all this book stuff is getting out of hand.

Kleine also promoted the book at events outside the county government while on work time. The screen shot below from the IG’s report details how 80 hours of Kleine’s official work time – charged to taxpayers – included book promotion.

Did Kleine’s activities create an appearance of improper influence? Here is what the IG’s report had to say about that:

Redactions like the ones above are made to protect witnesses. Because Kleine is still the CAO, these witnesses presumably remain Kleine’s subordinates if they are still employed by the county.

What should we make of all this?

Throughout the report, Kleine comes across as a man who wants to be a celebrity, a public management guru, who preaches things like “Turn the Curve” to build his brand, sell books, make speeches and get consultant contracts. There’s nothing inherently wrong with that but that’s not why taxpayers are paying him $280,000 a year. We need a nuts-and-bolts operations manager in this role, someone who makes the trains run on time and works on behalf of the taxpayers with no other agenda at play.

It’s incredible that this needs to be said, but the CAO should be running county government, not converting it into a royalty-generating book club.

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Council Puts Elrich on the Spot Over Kleine

By Adam Pagnucco.

The Montgomery County Council has issued the statement below about Chief Administrative Officer (CAO) Andrew Kleine. Kleine, who is the highest ranking manager in county government and is answerable only to County Executive Marc Elrich, has admitted to two ethics violations related to promoting his book and helping two of his business partners get county contracts. The council says that it is “disappointed and troubled by the actions” of Kleine and intends to hold an “oversight meeting” on the matter. That said, only Elrich can decide what happens to Kleine.

The council’s statement appears below.

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Montgomery County Council statement on July 1 Ethics Commission agreement with Chief Administrative Officer Kleine

ROCKVILLE, Md., July 7, 2020–Council President Sidney Katz made the following statement on behalf of the Montgomery County Council about the July 1 Ethics Commission agreement with Chief Administrative Officer Andrew Kleine.

Our system of representative government depends on the people maintaining the highest trust in their elected officials and government employees. All Montgomery County residents expect and deserve public employees who are impartial and use independent and sound judgment when making decisions that impact more than one million community members.

The Council is disappointed and troubled by the actions of Chief Administrative Officer Kleine. We greatly appreciate the Montgomery County Ethics Commission and the Office of the Inspector General for investigating Mr. Kleine’s actions and bringing these issues to light. Montgomery County’s ethics law applies to all County government employees and elected officials and has standards in place to guard against conflicts of interest and improper influence and includes comprehensive ethical standards for conducting County business.

The Montgomery County Charter provides that Mr. Kleine serves at the pleasure of County Executive Elrich. As one of the highest-ranking employees in Montgomery County, Mr. Kleine has a heightened responsibility to instill trust among the public, employees and government leaders. While we acknowledge that Mr. Kleine has taken responsibility for his actions, we also encourage him to do everything in his power to work on rebuilding the community’s trust. Moreover, the Council will conduct an oversight meeting on this matter in July.

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