Monthly Archives: October 2017

Minimum Wage

Elrich Slams Berliner on Minimum Wage

The following is by Councilmember Marc Elrich (D-At Large):

Earlier this week, the Council’s HHS committee voted 2-1 (Berliner and Rice vs Leventhal) to delay the full implementation of the minimum wage by two years for BOTH large and small businesses. (My bill cosponsored by 4 of my colleagues would raise the minimum wage 2020 for businesses with more than 25 employees and 2022 for those under 25.) While everyone acknowledges that there will be some impact on some small businesses, yet again no evidence was presented that demonstrated that it would be a significant impact.  While there are numerous studies, the meta-analysis of those studies show slight to no impacts on employment.[1] Statements should be supported by data or analysis.  The absence of data is part of what made the PFM study so bad, because their original massive job loss assertions, and even their second lower revised figure, did not reflect the data from anywhere (as this blog and others have documented[2]).  On the other side of the scale, studies clearly show the devastating impacts of poverty on children and families. I taught for 17 years at a high poverty school, and I saw up close the impact of poverty on students.

We have an opportunity to move toward a decent standard of living for these workers who have been working hard at low wages. Councilmember Berliner’s amendment to delay large businesses by two years to 2022 puts us two years behind Target’s stated nationwide plan. That is particularly inappropriate given that our county is one of the wealthiest in the entire country.

Councilmember Berliner argued for the delay using Minneapolis as the model and said that Montgomery County should use the same timing as they had. Using Minneapolis’ implementation schedule as a model would assume that it is a comparable jurisdiction. But it is not. Below I compare the living wage in the two jurisdictions. There are some big differences.

This table compares the living wage NEEDED TODAY in each jurisdiction.

Living Wage Minneapolis Montgomery County
Single adult $11.36 $15.80
1 adult 1 child $24.68 $29.82
1 adult 2 children $31.04 $34.87
2 adults 2 children $16.85* $18.72*

*This number is per adult in the two-adult family
(Source: Living Wage Calculator, MIT)

In every case, more than $15 an hour is needed TODAY in Montgomery County, but the cost difference between living here versus Minneapolis is the equivalent of $4 an hour, or $2 an hour if 2 adults are working.

However, the most important factor in cost of living differences is housing. Housing costs are what drives the cost of living and necessitate a particular wage. Here is a comparison of housing costs:

Jurisdiction 1br  yr/mo 2br  yr/mo 3br  yr/mo
Minneapolis $7824/ 652 $12635/1075 $17967/1497
Montgomery $15684/1307 $19476/1645 $25728/2144
Difference – or how much higher it is MoCo $7860/655 $6841/570 $7761/646

(Source: Living Wage Calculator, MIT)

A MoCo resident would need between $570-655/month more than a Minneapolis resident to pay the difference in housing costs. For all other expenses combined, Montgomery County is a few hundred dollars per year more costly to live in than Minneapolis, but annual housing costs are between $6841 and $7860 higher for Montgomery County. To suggest that a wage in Minneapolis, or a schedule for raising wages, should be replicated in Montgomery County ignores the enormous cost difference between the two jurisdictions which leaves our working poor deeply mired in poverty. We are simply prolonging an untenable situation for tens of thousands of families.

Finally, there is one last incorrect assumption in delaying the implementation date, and that is that Minneapolis is noticeably more gentle to small business. It’s been said that the proposed rate of increase is too fast. However, the facts show a different story.

Here is the pace of increase in the two jurisdictions:

Jurisdiction Small business increase # of years Cost/year Large business

increase

 # of years Cost/year
Minneapolis $7.25 7 $1.03 $5.50 5 $1.10
Montgomery County $3.50 5 $.70 $3.50 3 $1.16

In other words, the impact in Minneapolis on small businesses is greater in terms of total increase than Montgomery County ($7.25 vs $3.50) and greater as a per-year expense ($1.03 vs .70) For large businesses, the difference in total increase in Minneapolis is also greater than MoCo ($5.50 vs $3.50) but is slightly less per year ($1.10 vs $1.16).

So for small businesses, if the issue is pace, then the Minneapolis schedule is worse for their small business than what I’ve proposed, and for large businesses our target is 2020, no different than what Target has committed to nationally for 2020.

In short, Minneapolis is so different regarding affordability for its citizens that the impact of raising the minimum wage, and the urgency for raising the minimum wage, is simply not the same. Our residents are far more rent burdened and have far less disposable income. And if you’re worried about small employers, our steps are smaller, only 2/3 of the average annual increases that Minneapolis is implementing.

For one last comparison, I looked at Flagstaff, Arizona, which is also raising its minimum wage to $15.  Their living costs are slightly higher than Minneapolis but still much lower than Montgomery County.  And housing costs in particular are slightly higher than in Minneapolis, but about $6,000 a year lower than those costs in Montgomery County.  Yet they are raising their minimum wage for all businesses from $8.05 in November 2016, to $11.00 in January 2018, and then up to $15 an hour in January 2021.  So they are increasing by $7 per hour over just 5 years – a rate of increase that exceeds anything proposed in Montgomery County.

The minimum wage needs to reflect the costs that people have to bear in order to sustain themselves.  Prolonging the implementation simply erodes the value of the wage.  Frankly, in a perfect world we’d be close to $15 today and then let it rise with inflation.  Even my bill, with 2020 and 2022 implementation dates will mean that when $15 is reached it will be worth less than $15 today, and I wish we could do better, but the proposed delay just makes things worse and is completely divorced from the reality that low-income families face.

[1] http://jaredbernsteinblog.com/the-minimum-wage-increase-and-the-cbos-job-loss-estimate/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JaredBernstein+%28Jared+Bernstein%29 and https://www.hendrix.edu/news/news.aspx?id=64671

[2] http://www.epi.org/blog/the-montgomery-county-minimum-wage-impact-study-is-absurd-junk-science/

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Montgomery County

Valerie Ervin for County Executive?

A reliable source tells me that former County Councilmember Valerie Ervin (D-5) is planning to jump into the race for Montgomery County Executive. I’ve reached out to her for comment but have not yet received a response.

Valerie Ervin won election to the School Board in 2004 prior to winning the District 5 Council seat in 2006–the seat now held by Tom Hucker. A past President and Vice President of the County Council, she stepped down in the year before her term ended in 2014 to take a job with the non-profit Center for Working Families.

Ervin briefly sought the nomination for the Eighth Congressional District in 2016 before pulling out of the race, which she explained was due to the challenge of raising the enormous sums of money required to be competitive.

The new public financing system would likely make it easier for to run a competitive campaign for county executive without raising the huge sums required for a congressional contest. Still, she would need to act fast to catch up with other candidates.

If she enters the contest, Ervin will be the only woman, African-American, or nonwhite candidate in the race. As Montgomery County is now 19.5%  black and only 44.7% non-Hispanic white according to Census estimates from 2016, this could prove an advantage. African Americans likely punch above their weight in the Democratic primary, as a disproportionate share are Democrats and vote compared to other racial and ethnic groups.

Democratic primaries are also disproportionately female, with women regularly comprising around 60% of the electorate, and sometimes even higher. Still, Montgomery voters have shown that they vote based on a variety of factors. Being from the same group as a voter may help get a candidate in the door but concrete issues and reasons are needed to gain a vote.

As I’ve mentioned previously, while in office, Councilmember Ervin had the knack for being well-liked by both labor and business, though the bloom was definitely off the rose in her relationship with labor by the time she left office. Her recent work for the Center for Working Families, however, has burnished her progressive credentials–helpful in a year when many are still energized by Bernie Sanders or angry about Donald Trump.

On other hand, many remain disquieted that Ervin left her Council seat early. In 2016, she endorsed Donna Edwards for Senate over Chris Van Hollen, who remains extremely popular in Montgomery and won handily here in the primary.

Interestingly, if she runs, Ervin would be running against her former boss, Councilmember George Leventhal. Both are officials who have eclectic sets of supporters in the past but would be trying to appeal to the progressive vote in this election.

Consequently, an Ervin candidacy would not help Leventhal’s prospects. It also could well provide an alternative to some Elrich voters, particularly those who would welcome a nonwhite candidate or our first woman as county executive.

At the same time, I imagine Marc Elrich would not be shy about pointing out occasions where he and Valerie diverged on business or social justice issues. Labor unions with long memories, especially MCGEO and the Police union, might enjoy exacting revenge. Ervin had good relations with SEIU but it might also join other unions in backing Elrich.

At any rate, Ervin’s entry would sure shake up an already interesting race. Will she take the plunge?

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Council At-Large, Council District 2, Duchy Trachtenberg, taxes

Random Bits, October 2017

By Adam Pagnucco.

Chris Wilhelm is Winning the Sign Wars

MCPS teacher and progressive at-large council candidate Chris Wilhelm has covered parts of Georgia Avenue and University Boulevard with his campaign signs.  (It helps to speak Spanish!)  Yes, we know signs don’t vote.  But it shows that Wilhelm is working and that’s good for perceptions of his campaign.

Who Has Momentum in Council District 1?

Council District 1, which covers Bethesda, Chevy Chase, Potomac, Poolesville and a large part of Kensington, has more regularly voting Democrats and more political contributors than any other council district by far.  It’s a prime seat.  Right now, there are nine candidates in the race and there might be more on the way.  Many good candidates in this district, like Bill Conway, Gabe Albornoz, Emily Shetty, Samir Paul and Sara Love, are instead running for council at-large or the General Assembly.  There are lots of openings to choose from these days!

So who has the momentum right now?  You could say Delegate Ana Sol Gutierrez, who is the only sitting elected official who is running.  Or Reggie Oldak, who has qualified for matching funds in public financing.  Former Planning Board Member Meredith Wellington should appeal to land use voters oriented towards Marc Elrich.  Former Kensington Mayor Pete Fosselman was just endorsed by former Governor Martin O’Malley.

But we’re going with Andrew Friedson, who just had his kickoff boasting endorsements from his former employer, Comptroller Peter Franchot, along with Senators Brian Feldman (D-15) and Craig Zucker (D-14) and former long-time DNC member Susan Turnbull.  Feldman is an old hand in the Potomac portion of the district and has not been seriously challenged in 15 years.  Turnbull doesn’t usually play in local races but she has a national network in both the Democratic Party and the Jewish community.  If she is all in for Friedson, that’s a big deal.  Friedson, who is killing the field in social media, is feeling pumped up right now with good reason.

Where’s Duchy?

It’s unusual to see a large field of MoCo candidates without Duchy Trachtenberg among them.  She has a long electoral history, losing a District 1 County Council race in 2002 by a hair, winning an at-large council seat in 2006, losing reelection in 2010, briefly running for Congressional District 6 in 2012 and getting annihilated in a challenge to District 1 council incumbent Roger Berliner in 2014.  Now she has a full table of races to pick from, including council at-large, council District 1 and the District 16 General Assembly seats.  Say what you will about Duchy – and we’ve said plenty – but she can raise money, she has a network and she has campaign experience.  Is she done or is she just waiting to file at the last minute, as she has done before?

Can Greenberger’s Strategy Work?

Former County Council spokesman Neil Greenberger is torching his old bosses, saying they treat voters like ATMs and guaranteeing that if he is elected, there will be no property tax hikes.  This is a new strategy for a Democratic council candidate made possible by the 2008 passage of the Ficker amendment, which requires votes from all nine Council Members to go over the property tax charter limit.  Furthermore, it’s an unusual strategy from a historical perspective.  Most council candidates over the last few decades have emphasized schools, transportation, development (pro or con) and a handful of other left-leaning issues but have not been explicitly anti-tax.  That sentiment has mostly come from Republicans.

But two things have changed in Greenberger’s favor.  First, the passage of term limits was rooted partly in opposition to last year’s 9% property tax hike.  But it wasn’t just the increase alone that annoyed residents.  Unlike the 2010 energy tax hike, last year’s property tax increase was not driven by the catastrophic effects of a recession, but was a policy choice by the council that could easily have been much lower.  Voters didn’t see the tax hike as truly necessary, which increased their frustration with it.

Second, the number of votes needed to win an at-large seat could be much lower in this cycle than in the past.  Over the last four cycles, at-large candidates have needed around 40,000 votes to have a shot at victory.  (Incumbent Blair Ewing far exceeded that total in 2002 and still lost.)

That number may no longer hold.  No one knows what the turnout will be next year; informed observers disagree about that.  But the candidate field will be two to three times larger than in any other recent cycle and only one incumbent is running.  That could mean a very fractured electorate yielding a low win threshold and tight margins.  That favors candidates with medium-sized but intense bases, whether geographic, demographic or ideological.  In Greenberger’s case, if 100,000 Democrats vote, and 30,000 of them are sick of tax hikes, and Greenberger can actually communicate with them, he could win.  And so could anyone else who can put together 30,000 votes.

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Adam Pagnucco, Council At-Large, taxes

Greenberger Guarantees No Property Tax Hikes

By Adam Pagnucco.

Former County Council spokesman Neil Greenberger, who is running for an at-large seat, has released a campaign video guaranteeing that if he is elected, there will be no property tax hikes in the next term.  Greenberger cites a section of the Montgomery County charter that prevents property tax hikes above the rate of inflation unless all nine Council Members vote to do so.  If only one member votes no, the tax hike would fail.  The nine vote requirement is the result of a ballot question submitted by Robin Ficker which was approved by voters in 2008.

While other at-large candidates have been skeptical of further tax hikes, none of them so far have taken as hard a line against them as Greenberger.

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Adam Pagnucco, MCPS, schools

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

By Adam Pagnucco.

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

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

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

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

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

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

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

The PTAs

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

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

The Realtors

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

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

So here’s the question.  What happens next?

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Free Speech

Maryland Universities Mixed Commitment to Free Speech

Free speech is essential to academic inquiry not just by faculty but to students. Limits on free speech inhibit the open discussion and debate that exposes students to new ideas, challenges their existing beliefs, and their ability to argue and to analyze.

FIRE, the Foundation for Individual Rights in Education, keeps tabs on free speech rights at over 400 colleges and universities around the country? How did institutions in Maryland rated by FIRE fare?

FIRE Rating System

A “red light” institution has at least one policy that both clearly and substantially restricts freedom of speech. A “yellow light” institution is one whose policies restrict a more limited amount of protected expression or, by virtue of their vague wording, could too easily be used to restrict protected expression. If a college or university’s policies do not seriously imperil speech, that college or university receives a “green light.”

Green Light Institution

University of Maryland–College Park

Freedom of expression and an open environment to pursue scholarly inquiry and for sharing of information are encouraged, supported, and protected at the University of Maryland. These values lie at the core of our academic community. Censorship is not compatible with the tradition and goals of the university. Source: Policy on the Acceptable Use of Information Technology Resources.

Yellow Light Institutions

Frostburg State University

Fliers that will NOT be approved for posting: … Fliers containing content that would be considered offensive to the reasonable person (e.g. nudity, obscenities, etc.) Source: Residence Hall Posting Guidelines.

Three areas of the campus have been designated as “public forum” areas for use by approved student groups, off-campus organizations and individuals: 1) the area of the clock tower, 2) the University Drive triangle between Chesapeake Dining Hall and Annapolis Hall, and 3) the library quad. No other areas may be used for gatherings, speeches or distribution of literature unless first approved by the Office of the President. Source: Policy on Communication of Information.

Verbal/Written Assault includes verbal or written acts, including social media sites, which place a person in personal fear or which have the effect of harassing or intimidating a person. Source: Harassment Policies.

Towson University

To foster a safe and inclusive campus, the University will investigate all incidents motivated by bias. In order to prompt an investigation, the incident must be reported. . . .  [Bias incidents include] inflicting mental or emotional distress upon a person through a course of conduct involving abuse or disparagement of that person’s actual or perceived identity or group membership(s). Source: Reporting Hate Crimes and Bias Incidents.

Each user must accept the responsibility for his/her actions and agree to: … Use appropriate language, behavior and style. Source: Guidelines for Responsible Computing.

Chalking that includes discriminatory, threatening, harassing, lewd and/or obscene language is not allowed. The university reserves the right to remove anything that violates these guidelines and to bill the responsible individual or group. Source: Chalking Procedures.

Offensive items or language shall not be displayed on a door (i.e., room, suite, quad, or apartment) or be viewable from outside a room, quad, suite, or apartment. Source: University Housing Policies.

Red Light Institution

Johns Hopkins University

Rude, disrespectful behavior is unwelcome and will not be tolerated. Source: Principles for Ensuring Equity, Civility and Respect for All.

Unacceptable use of IT Resources includes, but is not limited to: Intentional, non-incidental acquisition, storage, and/or display of sexually explicit images, except for acknowledged, legitimate medical, scholarly, educational, or forensic purposes. Exposure and/or display of such material may be offensive, constitute sexual harassment or create a hostile work environment. Source: Information Technology Use Policies.

On the more positive side:

Our university is committed to the steadfast protection of the right to academic freedom. This commitment emerges from the university’s time-honored role in the creation of knowledge and the sifting and winnowing of ideas. Without full and vigorous protection of this principle, the university’s capacity to discharge its hallowed mission would be compromised. Source: Academic Freedom at Johns Hopkins University.

Unrated Institutions

FIRE doesn’t rate Mt. St. Mary’s. Here is some information from the Student Conduct Code:

Mount St. Mary’s University, believing in [freedom of expression], will protect the freedom of action and freedom of speech for students, so long as their speech and actions are not of an inflammatory or demeaning nature, are truthful and accurate, and do not interfere with the students’ living and study conditions.

Students may invite and hear speakers of their choice on subjects of their choice, subject to the limitation that the University may withhold approval of an event or a speaker if holding such an event or providing a forum for the speaker is determined to be contrary to the mission of the University.

University Policies
R. Posting and Solicitation
a. Posting without approval of a University administration or staff member;
b. Posting on exterior of buildings, trees, lamp posts, stretched or hung across hallways, doors, ceilings, slipped under doors, or posting anywhere in residence halls without approval from Residence Life; . . .
d. Unapproved canvassing and other promotional activities; . . .
f. Posting or display of any material which goes against the Freedom of Expression statement.
g. Display of lewd, indecent, or obscene material.

Morgan State University

I also checked out Morgan State University’s guidelines but did not find any statements that would appear to limit student free speech rights in my quick scan of the Code of Student Conduct.

The Faculty Handbook states the following:

It is essential also that faculty members be granted the right to express their views in a responsible manner without fear of censorship, reprisal or penalty. In the academy, administrators, faculty, staff and students bear a mutual responsibility to exercise professional competence and to extend to each other the trust and mutual respect which foster an environment for the exercise of academic freedom as well as collegiality.

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Adam Pagnucco, MCPS

More on MCPS Funding

By Adam Pagnucco.

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

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

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

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

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

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

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

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

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Adam Pagnucco, Economy, taxes

Lessons Learned from the Giant Tax Hike, Part Three

By Adam Pagnucco.

If the next County Executive and County Council want to prevent another Giant Tax Hike, they will have to do something that has not been done for years: seriously improve the county’s economy.  Otherwise, no budget reforms will be enough to pay for the county’s needs.

There are many ways to assess a local economy, but for the purposes of this column, let’s look at two big measures: jobs and income.  From 2001 through 2016, the U.S. Bureau of Labor Statistics (BLS) calculates that total employment in the Washington metro area grew by 393,048 jobs, a growth rate of 14.6%.  In Montgomery County, total employment grew by 14,086, a growth rate of 3.1%.  Of 24 local jurisdictions measured by BLS, Montgomery’s job performance ranked 20th.  Among the large jurisdictions, only Prince George’s County fared worse.

Montgomery fared well in federal employment over this period, growing its federal jobs base by 18.9%.  That beat the metro area’s federal employment growth rate of 13.2%.  The county’s employment problems are concentrated in its private sector, which grew by just 1.0% between 2001 and 2016.  Montgomery’s private sector had 374,115 jobs in 2016, below its peak of 386,626 ten years before.  Over the last fifteen years, Montgomery’s private sector employment growth ranked 19th of 24 local jurisdictions.

In terms of real per capita personal income, the Washington region enjoyed a long period of growth that peaked in 2007, the year before the Great Recession hit.  In the eight years since, the region’s per capita income has struggled to increase for the first time in more than three decades.  Montgomery has a higher per capita income than the regional average, but it has suffered from a similar pattern.

Of 19 local jurisdictions tracked by the U.S. Bureau of Economic Analysis (BEA), twelve had real per capita personal income gains between 2007 and 2015.  Montgomery was one of the seven jurisdictions that did not.  Its 1.7% drop is below the regional total of -0.2% and ranks 14th of 19 jurisdictions in the region.

In broad terms, the employment data and the income data agree: Montgomery County has still not recovered from the Great Recession.

The fragile state of the economy acts like a steel cage on the county’s budget.  The county’s needs in public schools, public safety, transportation, health and human services and countless other areas will not go away.  But unlike days past, the economy currently cannot generate the tax revenues to finance everything desired by those in office – and their constituents.  The county has passed four tax hikes since the Great Recession started – two property tax increases (FY09 and FY16), an energy tax hike (FY11) and a recordation tax hike (FY16).  Added to this is a series of recent laws imposing rising costs on employers.  While some local jurisdictions in the region (especially in Virginia) have passed tax hikes and the District of Columbia and Prince George’s have passed new employment laws, Montgomery County is the only local government that has passed both in significant magnitude.  There may be reason for that, but it has contributed to enormous competitive challenges for the county.

Progressive policies such as those favored by Montgomery County politicians cost lots of money.  That money can only be obtained over the long term through a robust economy.  Economic growth is affected by the totality of what the county does – its investments in education and transportation, its fiscal and taxation policies, its planning decisions and the nature of new laws and regulations it imposes on employers.  If any of these things negatively impacts economic growth, marketing programs, slogans and massive incentives for large businesses will not by themselves make up for it.

The Number One lesson from the Giant Tax Hike is that the next generation of county elected officials must prioritize job creation and income growth.  Failure to do so will result in more tax hikes and further long-term decline.

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transportation

Marc Elrich on Hogan’s Road Plan

The following post by Councilmember Marc Elrich (D-At Large) continues Seventh State’s series on reactions to Gov. Larry Hogan’s road proposal by candidates for county executive. It appeared previously on Maryland Matters.

Recently, Gov. Larry Hogan (R) announced his $9 billion proposal to add toll lanes to I-270, I-495 and the Baltimore-Washington Parkway. While a number of people have initially enthusiastically supported his proposal, I think it bears a lot more scrutiny.

The best thing about it is that the governor shows a willingness to invest in infrastructure, though how much is state money and how much is user tolls is not known.

One of the problems is that he’s proposing a sledge hammer for a project that needs a scalpel. The scope of the proposed solutions for I-270 and I-495 are overly grandiose and unnecessary. On I-270 a more sensible approach would be two reversible lanes from the county line to the Beltway, which is what the County Council proposed several years ago. There isn’t room for four lanes, and it’s an unnecessary expense, because the congestion on I-270 is directional – meaning from north to south in the morning and the reverse in the evening. (It is also known as peak direction.)

Neither side of the road needs these lanes outside of the peak direction at rush hour. Reversible lanes are the most efficient use of money and space. These lanes should be for express bus and high-occupancy vehicles only.

On I-495 there are serious space constraints, particularly between New Hampshire Avenue and 355. Not only are there many houses close and a major hospital almost immediately adjacent to the highway, but there are also legal constraints regarding encroachments on Rock Creek. Multiple lanes would be an environmental disaster for Rock Creek.

Additionally, large sections of the Montgomery County portion would be astoundingly expensive – remember the overpass bridges don’t have enough room for four lanes of new highway. Instead, a single reversible lane might fit within the existing width of the highway. Engineering data would be needed to confirm this, but there seem to be at least some places wide enough to add a lane now using the inside shoulder service lane. It may be possible to add two lanes past 355 going to Virginia – reversible lanes should be used there as well. Why build what you don’t need?

Gov. Hogan is missing two bigger picture problems: transit in general and Metro in particular. If money is available for highway expansion, then money is available for Metro. Metro cannot fail – in fact, it needs to improve and absorb more riders from the roads. A Metro fail would devolve into a widespread road disaster because most people would use local roads, not the highways, to get around.

Because no highway goes into Washington, D.C., a Metro failure adds thousands of cars on Georgia, Connecticut and Wisconsin avenues. Those additional cars would flood the commute to the city as well as make a mess for those commuters trying to access the job centers along 355.

The second overarching problem is that the governor is not looking at the big picture. The Beltway and I-270 have congestion problems, but what happens when exiting these roads is equally problematic. Even if, for example, cars on the Beltway arrive quickly to Georgia Avenue at rush hour, they would face a long queue simply to exit the Beltway and then a slow slog on Georgia. In other words, the local road network is already overwhelmed and no amount of highway lanes can change that situation. So even if cars spend less time on 495 getting to an exit and then they are stuck on the exit ramp or on the road, where are the savings?

The realities of the commutes necessitate a commitment to local transit. Local transit is the only way to clear enough space off the roads so that people can get to their destinations in a reasonable amount of time.

Because building new local road lanes won’t work, increasing transit usage on the local road network is central to any solution.

The whole point of the Bus Rapid Transit (BRT) network that I proposed was to increase mobility on local roads and take a load off the already overwhelmed road network. (I first proposed the BRT network in 2008 and it is slowly developing.) BRT built right and desirable to use will provide actual congestion relief – just imagine what the roads would function like without a Metro and if those passengers returned to their cars.

Any plan that doesn’t integrate the local roads and the highways is simply not going to work. The governor should look more carefully at what is needed, rather than just declaring the addition of four lanes to the highway at great public expense, whether four lanes are needed or not. A more strategic assessment would free up capital that could go toward a more comprehensive, successful solution.

And, there are two other things to consider. A public private partnership, or P3, may be the most expensive way to fund a project and that is going to reverberate in tolls. Essentially, people with money to spend get a better highway experience and those without the means, remain in a poor experience. If money is the ticket to the new lanes, then you’re disincentivizing car pools, van pools and buses.

We need to get cars off the road, rather than finding extravagant ways to keep them on the road. This is a huge public expenditure with no accompanying analysis of what the state won’t be able to fund as a result – I’m worried about education, transit funding, and other critical infrastructure. Since none of us believes that there’s an infinite well of money, an expenditure like this on three roads may well mean that other critical projects don’t get done.

Another unknown is the impact of increased telecommuting. If we could get 15-20 percent of the workforce telecommuting each work day, we’d be dealing with a far less expensive problem to solve and probably have a much better travel environment.

I know the governor’s announcement makes a great news splash, and it certainly allows Gov. Hogan to say “I’m committed,” but it’s not very well thought out beyond that. I’d like to take the actual state dollars he’s offering and then have a real conversation about a comprehensive solution to the problem that actually makes better connections where trips start and where they end. And transit must be the central part of that conversation.

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Adam Pagnucco, budget, Montgomery County Council, taxes

Lessons Learned from the Giant Tax Hike, Part Two

By Adam Pagnucco.

The untold story of last year’s 9% property tax hike is that it was not merely the product of needed funding for public schools or the adverse consequences of a U.S. Supreme Court decision on income taxes.  It was also the product of an innate bias towards more spending built into the County Council’s budget process.  That bias created mounting pressure to fund ever-growing spending programs accumulated over many years which contributed to the tax increase.  The next generation of county elected officials must reform this process or they too will eventually feel compelled to raise taxes.

All state and local operating budgets must be balanced each year as a matter of law.  At the state level, the General Assembly may cut spending items in the Governor’s budget but they generally cannot add to them.  (The legislature can and does pass laws mandating spending on certain items in future years.)  Several counties with Executives follow the state’s model, as does the City of Baltimore.  But the Montgomery County charter grants all final budgetary authority to the County Council, which can do almost anything it wants to the Executive’s recommended budget.  It can add, subtract or rearrange spending items subject only to requirements in state law, such as mandatory minimum funding levels for public schools and the college.  Other than that, the only constraint on the council’s power is that the budget it passes must be balanced for the fiscal year.

Every March 15, the Executive is required by the charter to send a recommended budget to the council.  The council then begins its process for reviewing and changing the budget that lasts roughly two months.  The council’s vehicle for altering the Executive’s recommended budget is the reconciliation list (commonly called the rec list), which is a ledger of spending additions and deductions.  Each council committee, and the full council itself, can post additions or deductions to the rec list.  The last step in the process is figuring out how to finance some portion of the additions since they always exceed the deductions.

In theory, there are two sound places to go to fund additions to the Executive’s budget: new tax revenues or offsetting spending cuts.  In practice, the council’s use of these resources is limited.  Tax increases are typically proposed by the Executive, who distributes the revenues they generate across spending items in the recommended budget.  In such cases, the new revenue is not available for further spending desired by the council unless it alters the Executive’s choices.  The council could also cut the Executive’s spending items and use the money for its own items.  But the Executive’s spending proposals have constituencies who will squeal if they are diverted or cut.  No one likes to be the bad guy at budget time!

Page one of the council’s final draft reconciliation list for FY18.  These are some of the new spending items the council wanted to fund last spring.  The challenge was how to pay for them.

If new taxes and spending cuts are insufficient to pay for new spending desired by the council, other funding sources must be identified.  In the past, favorite sources for funding included setting aside less reserve money than proposed by the Executive, setting aside less money for retiree health benefits, occasional transfers of cash from the capital budget and other one-time fixes.  In FY12, the Executive proposed $10 million for snow removal and the council redirected $4.1 million of that for new spending on the reconciliation list.  Snow removal costs must be paid, so if they were to ultimately prove larger than budgeted funds, the council’s action would be tantamount to a backdoor drawdown of the reserve.

Since FY05, the council has added a combined $245 million to the Executive’s budgets through its reconciliation lists.  One does not have to be a certified public accountant to see what the effect of these additions will be over time.  Many spending items added by the council are ongoing, such as hires of new employees and expansions of programs expected to continue indefinitely.  But some of the funding sources for the new spending are one-time in nature, like capital budget transfers and reserve drawdowns.  Repeated use of one-time funding sources for ongoing spending creates enormous long-term pressure on the budget.  Eventually, especially when a downturn comes, the new spending must be trimmed or taxes must be raised.  Guess which is more likely to occur?

Why does this happen?  It’s not because elected officials are stupid.  It’s because of the incentives they face.  From mid-March through mid-May every year, Council Members are besieged by requests for more spending from the community.  Every year, there are three nights of hearings jam-packed with constituents wanting more money for their favored programs.  They are followed by dozens of meetings with groups who want even more than that.  Aside from occasional admonishments from council administrator Steve Farber and Executive Branch budget officials, there are almost no voices for moderation in the budget process.  And here’s the thing: whether it’s hiring social workers, funding more childcare assistance, deploying more police officers in communities that need them, removing more tree stumps or much, much more, almost all the new spending proposals have merit.  Given the incredible pressure brought to bear by groups with genuine funding needs, it’s kind of a miracle that the budget gets balanced at all.

All of this creates serious problems for the County Executive.  The charter grants the Executive a line item veto over spending items, but this is never used because the council would simply override it.  The Executive could abstain from including the council’s new spending in next year’s budget, but again, the council could just put it back in.  For the most part, the Executive and his top aides grumble in private and put on a happy face for Wall Street, but they did go public in objecting to a $10 million draw from the reserve two years ago.  Instead of fighting the council, the Executive’s staff simply tries to figure out how to retain and pay for the council’s new spending in next year’s budget.  And each year, the job gets a little harder without new revenue.

This process is a big reason why the county has had seven major tax hikes in the last sixteen fiscal years.

Next year, a new County Executive and at least four new Council Members will take office.  This new generation of officials will have a choice.  They can keep the existing budget process and eventually come under pressure for yet another tax hike, as happened last year.  Or they can reform it by requiring that new ongoing spending be offset by actual ongoing spending cuts, not one-time measures.  Failure to learn this lesson will mean repeating history.

We will conclude with one last lesson from the Giant Tax Hike in Part Three.

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