Today, the U.S. Bureau of Labor Statistics (BLS) released its preliminary state-level unemployment numbers for April. In March, BLS estimated Maryland’s unemployment rate at 3.3%. In April, BLS estimated Maryland’s unemployment rate at 9.9%.
That’s a tripling of Maryland’s unemployment rate in one month.
Here are BLS’s estimates for the components of the unemployment rate in March and April, as well as in 2019.
Perhaps the most interesting estimate from BLS is that of the 415,359 people who lost their jobs in April, more than half (220,230) left the labor force entirely. That means they are without jobs and, according to BLS, not currently seeking work. In contrast, BLS defines unemployed people as having “no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week.”
As high as the April unemployment rate may be, it’s bound to be lower than the state’s unemployment rate today. That’s because BLS’s reference week for a monthly estimate is the week containing the 12th day of the month. State data indicates that 296,842 unemployment insurance claims were filed in the four weeks ending on April 11 while 310,946 more were filed in the five weeks thereafter. That means that May’s unemployment rate will be significantly higher than April’s.
Maryland’s labor force is not the only casualty of the COVID-19 crisis. BLS reports that D.C.’s unemployment rate rose from 6.0% in March to 11.1% in April. In Virginia, unemployment rose from 3.3% in March to 10.6% in April. Nationally, unemployment rose from 4.4% in March to 14.7% in April. The bright side for Maryland, D.C. and Virginia is that they all have unemployment rates significantly below most other states.
To put April’s unemployment rate in perspective, I pulled Maryland’s annual unemployment rate numbers from 1976 to 2019 and charted them below. Unemployment varies with the business cycle and peaked in 8.3% in 1982, 6.8% in 1992 and 7.7% in 2010. In each of those instances, the unemployment rate took three years to reach its peak. This time, the acceleration of unemployment took one month. What will next month look like?
BLS has not yet released county-level data for April. When it’s available, I will post it.
Comptroller Peter Franchot has called for the reopening of outdoor seating at restaurants. His statement on Facebook is reprinted below.
*****
At the start of today’s meeting of the Board of Public Works, I called for the State of Maryland to begin the process of allowing our restaurants to serve customers OUTSIDE on patios, sidewalks and even streets that are closed for vehicular traffic.
While I do not believe we are ready to allow indoor seating and service, based upon all of the available data, I feel that we have to make this allowance in order to give our restaurants – the cornerstone of a hospitality sector that employs 458,000 people in our state – a fighting chance to survive. They just cannot make it on carryout and deliveries alone.
This new outdoor seating policy would have to be done with true adherence to social distancing and other preventative best practices, and we know that it CAN be done. To state the obvious, outdoor seating is far safer than indoor seating, and my fear is that if we don’t make this common sense policy adjustment sooner rather than later, we won’t have a restaurant industry left to save.
In short, let’s do it safely, responsibly and soon. Let’s #TakeItOutside.
MCPS’s contested boundary analysis has dominated MoCo’s nasty school board race. It’s an issue definitely worthy of discussion, but it’s not the only one. Here are a few other issues that the school board candidates should address.
How can the Weast coalition be rebuilt?
Former MCPS Superintendent Jerry Weast, who ruled the schools from 1999 through 2011, was many things: a bureaucratic empire builder, a ruthless field general, a hardened wielder of data and much more. He was also one of the greatest coalition builders in the history of MoCo. Weast knew that his initiatives cost money and he knew he needed allies to get it. His talents for horse-trading, cooptation, message-building and political head-knocking served him well. He reached an understanding with MCPS’s stakeholders that they could participate in crafting his budgets, but in return, they had to stick together against the common enemy: elected officials with funding authority. When budget time came, those who thought about going against Weast’s budget not only had to deal with Weast himself and his ministry of propaganda; they also had to fight the county employee unions, the PTAs and even the Washington Post’s editorial page (which was firmly pro-Weast). Weast’s power was so feared that most of the time, he didn’t even have to fight – he simply cut deals with chastened politicians who moved on to easier prey.
The Great Recession killed the Weast coalition and it has not been rebuilt. The relationship between current MCPS management and the unions is particularly problematic. In the Weast era, the unions completed contract negotiations in the fall, but as of this writing, none of them have yet finalized new collective bargaining agreements with MCPS.
These guys want to know who will get the band back together.
The recent history of the county’s local per pupil funding demonstrates the consequences of the declining power of school advocates. The chart below shows local per pupil contributions to MCPS – in other words, the amount of local dollars the county appropriated per student, which excludes other sources of money (like state and federal aid). The green line shows nominal dollars while the red line shows real 2020 dollars (which have been adjusted for inflation).
In nominal dollars, the county’s local per pupil contribution peaked at $11,249 in FY09. It was then cut for three straight years and frozen for four straight years until it began increasing in FY17. The county’s per pupil contribution in FY20 ($10,923) is 2.9% below its FY09 peak.
When adjusting for inflation, the story becomes much worse. In 2020 dollars, the FY09 peak was $13,508. By FY20, the local per pupil contribution had fallen to 19.1% below the peak. During this period, the percentage of students receiving ESOL services and free and reduced price meals rose continuously, meaning that needs were increasing as local money per student was not keeping pace with inflation. This is the number one financial challenge faced by MCPS, at least prior to the era of COVID-19.
The school system needs money, and in a political context, extracting money requires power. School board candidates should lay out how they intend to rebuild and unify MCPS’s advocate community. The alternative is to go hat-in-hand to county funders just as one of the worst budget crises in county history erupts – a crisis from which MCPS will not be immune.
What happens when the next school year starts?
MCPS will likely continue online learning for the rest of this school year. But no one knows what will happen when the next school year begins. The options are many and all of them have drawbacks. How would school board candidates balance learning, resources and the health of students, school employees and families?
How can MCPS get more bang for its buck in the capital budget?
With enrollment continuing to grow and capital money tight (at best), MCPS will have to get more bang for its buck with whatever capital dollars it can acquire. School board candidates should be prepared to discuss how MCPS can best do that.
What is going on in the central office?
In FY17, MCPS spent $42,850,477 on administration spending. (This category, defined as Category 1 by the state, includes the central office but not school-based administration like principals.) The FY20 approved budget contains $56,084,530 in administration spending, a 31% increase. Over the same period, MCPS’s grand total spending went up from $2,426,611,128 to $2,680,574,773, an increase of 10%. Why has administration spending grown three times as fast as overall school spending? School board candidates should be asking that question and vowing to get answers.
Editor’s Note: MCPS has replied that nearly $9 million of the increase is due to replacing business systems. You can see their response here.
A student speaks about an issue.
Finally, the following was written by my kid, who is a 5th grade MCPS student. Candidates, pay heed as this guy is a future voter!
School lunches have been a problem for a really long time in MCPS, at least in my school. Most of the food that my school provides during our lunch time is pretty low quality. A lot of the food that my school serves is usually very sugary and unhealthy which shouldn’t be the case because there are students who eat that food 5 days a week which I assume is not good for our stomachs. Besides the lunches that students can bring from home, keep in mind that school lunches are the only type of food that is supposed to replenish our energy to keep us active throughout the day. In my opinion all types of students deserve a good lunch, because all of us are working very hard throughout the day. But if some students have to eat unhealthy food as the only source of energy to get them through the day, that is a problem. Point being, please do whatever is necessary to provide healthier lunches for the kids who need them.
PS: Even though I always bring lunch from home, the pizza that my school serves for lunch is straight up kind of disgusting.
If anything is worse than a nasty election, it’s nasty food. No matter how one feels about the boundary analysis, hopefully we can agree on that!
When Governor Larry Hogan announced a phase 1 reopening of Maryland’s economy on Friday night, several local jurisdictions (including MoCo) declined to go along. County Executive Marc Elrich said, “If there’s an uptick in cases, our hospitals can’t withstand an uptick… We will change the rules as soon as the science says we can change the rules. When that happens, we will start down the road of reopening things.” Elrich issued an executive order maintaining the current shutdown at the county level and the council approved it.
Elrich’s interest in protecting public health is understandable and commendable but there is a problem: the economy. Everyone understands that the economy has taken and will take collateral damage from COVID-19 restrictions. That said, the chief enemy of job creation is uncertainty and there is tons of that now. June 1 is coming and with it will be rent and mortgage payment deadlines. Many tenants and property owners will miss those deadlines in whole or in part just like they did in the prior two months. Worse yet, it’s hard for tenants and owners to work out flexible payment arrangements when no one knows when reopening will occur. That may cause many businesses to throw in the towel and cease operations permanently.
Given the above, how can the county reconcile the competing objectives of protecting public health and restarting the economy?
The executive has not set a date to ease restrictions. Instead, he has proposed the following 12 criteria that would guide any phased-in reopening:
Sustained (14 days) decreases (rolling average) in: i. The number of new cases in the setting of increased testing; ii. COVID-19 related hospitalization rate; iii. COVID-19 related ICU rate; iv. COVID-19 related fatalities; v. COVID-19 like and influenza like illnesses presenting to the health care system; vi. Percentage of Acute bed usage by COVID-19 related patients; vii. Percentage of ICU bed usage by COVID-19 related patients; viii. Percentage of emergency/critical care equipment by COVID-19 related patients (e.g. ventilators);
A sustained capacity to test 5% of population per month;
A sustained flattening or decrease in test positivity;
Sustained, robust system in place to contact initial interviews within 24 hours, and initiate contact tracing process within 48 hours of initial lab notification; and
Initiated and created meaningful infrastructure to identify and begin addressing demonstrated COVID related inequities in health outcomes, access to social support services
Let’s assume for the sake of discussion that these are the right criteria. (I may revisit that.) At the moment, only one of them – the number of cases – appears on the county’s COVID-19 page. The state’s COVID-19 page has more data, including cases, fatalities and hospital bed usage, but even the state’s page has nowhere near the data referenced by the county executive’s criteria.
At present, the public has no way to judge how close the county is to reaching the criteria the executive considers key to reopening. That must change.
The county should publish data series on every one of its criteria on its website. Each series should include an easy-to-understand chart explaining what the series is and what its trend is. Here is one example I constructed for new cases, which is the only series currently published by the county.
At the end of the 12 data series, the county should state how many of the executive’s 12 criteria are trending up, trending down or are stable. The county should also clearly indicate how many of the criteria need to be trending down or remaining stable for phase 1 reopening to begin.
Furthermore, the county should update the public via blast email and social media every day on this data.
Implementing this system accomplishes a number of criteria simultaneously. First, it bases the decision to reopen on science. Second, it makes the decision transparent to the public. And third, it provides real guidance to businesses, tenants and property owners on how close the county is getting to reopening. That will help everyone make the decisions they need to make on the basis of real information, not rumor and fear.
The county must implement this as soon as possible. The alternative is to leave residents and employers in the dark on how long the shutdown will last, thereby risking further permanent destruction of jobs and businesses.
Angry at the county council’s rejection of its revised collective bargaining agreement, MCGEO – the largest county employee union outside MCPS – protested at Council Member Hans Riemer’s house today.
Every council member except Tom Hucker and Will Jawando voted to reject the agreements, so why did the union target Riemer alone? MCGEO’s spokeswoman told WJLA-7, “Hans was the most vehement against the contract. He really led the charge.” MCGEO is also upset at Riemer for voting to reject both its original contract (which provided a peak raise of 9.4%) and its revised contract last year. Council Member Andrew Friedson was the only other council member to vote against both of those agreements along with Riemer.
MCGEO doesn’t like Hans Riemer.
This isn’t just about the contracts. Riemer’s repeated strong criticisms of County Executive Marc Elrich have led many to believe that Riemer is considering a challenge to Elrich in the next election. Riemer is in his third term on the council and term limits prevent him from running again for his current seat. None of this is lost on MCGEO, which claimed credit for Elrich’s election. By targeting Riemer, MCGEO accomplishes two objectives – defending its contract and punishing a potential rival to Elrich. Given MCGEO’s long history of tough tactics against politicians who vote against its contracts, this is likely just the opening move of a larger campaign against Riemer.
The union has published more than 30 photos of its protest at Riemer’s home. Some of them show Riemer’s house itself. I won’t be reposting actual images of the house, but here are a few of the protestors.
April 2020 will be forever remembered as the month that my sources kicked down the doors and took over the blog. Over and over, their collective judgment on the most influential people in MoCo grabbed eyeballs and riveted readers. What will they be asked next?
But the BIG story was the post about the “overtime scam” in the fire department, which at this writing is one of the top ten most-read stories in the history of Seventh State. This one was a bombshell spawned by an inspector general report about out-of-control overtime spending that has been so far ignored by the press and the politicians aside from one mention in Bethesda Beat. Once the county council wraps up the budget (for the moment anyway), it must investigate this abuse and take action to prevent it from recurring.
For the first time in its history, the Montgomery County Government will be applying for a line of credit. That’s a sign of how seriously county officials are taking the deep economic downturn caused by the COVID-19 crisis.
MoCo’s general obligation bonds have enjoyed a AAA rating since the 1970s. The county almost lost its credit rating in 2010 but avoided that fate through doubling the energy tax, implementing massive spending cuts and passing a plan to increase reserves to 10% of revenues in ten years. (The county has since met that target.) As bad as that year and others surrounding it were, the county never had to take out a credit line.
Now it will.
County budget director Rich Madaleno confirmed that the county planned to apply for a credit line in a conversation with the county council yesterday. The county’s Office of Legislative Oversight (OLO) has posted documentation on how a credit line would function in the context of county government. County governments, especially well-managed ones, hardly ever use debt to fund operating expenses. Indeed, section 312 of the county’s charter states, “No indebtedness for a term of more than one year shall be incurred by the County to meet current operating expenses.” So if MoCo borrows against the line, it would have to pay back the money pretty quickly.
When questioned about the purpose of the credit line by Council Member Andrew Friedson, Madaleno replied:
It’s to make sure in the extremely rare case that if there were a cash flow issue because of what you well know is the schedule of disbursements – we do not collect the income tax, the state does – we get them on set schedules. If we have to pay bills while two weeks before the February distribution or the November distribution you have in essence a credit card. And as any consumer knows, in these sorts of situations, you would want that credit card in hand and not be applying for it at the register because you don’t know if you’re going to get it and what the rates are going to be. This is a best practice. This is not at all, not at all and you can ask Mr. Coveyou [the county’s finance director] – this is not at all an action being taken because we are concerned about liquidity. This is a backup insurance plan as you would want a smart organization to have in its back pocket.
Let’s remember that the county has had to deal with state distribution schedules of income taxes for decades and never needed a line of credit until now. The difference between now and those other decades is the sheer havoc the COVID-19 crisis could wreak on county finances. Consider that the current worst case scenario estimates up to a $600 million revenue loss in FY20 and FY21 combined and that the current projection for ending reserves in FY21 is $554 million. No one should take comfort from those numbers, particularly given the possibility of their getting worse.
A sneak preview of a county budget briefing six months from now.
The amount of the county’s credit line has not been established but multiple sources suggest that it could be in the hundreds of millions of dollars. No information is available yet on which financial institution(s) would issue it.
Montgomery County is not alone. State and local governments around the country either have or are seeking lines of credit, including the State of New York ($3 billion), the State of Illinois ($1.2 billion), the City of Louisville in Kentucky ($240 million), the State of Rhode Island ($150 million), Cook County in Illinois ($100 million), the City of Portland in Oregon ($100 million), the City of New Orleans in Louisiana ($100 million), Fauquier County in Virginia ($50 million) and the City of Montgomery in Alabama ($35 million). By far the most cited reason for these credit lines is to hedge against the revenue impacts of COVID-19.
Madaleno could be right that this is a smart backup insurance plan. Even Friedson, who has been hammering the Elrich administration’s budgetary practices of late, called it a “prudent action.” But let’s not delude ourselves. Montgomery County Government is preparing for a serious recession.
In addition to being one of MoCo’s nastiest races of all time, this year’s school board election is arguably the strangest ever. Consider a list of typical election activities that are hampered or altogether prohibited by the COVID-19 lockdown.
Door knocking – Fuhgeddaboutit.
In-person campaign coffees and fundraisers – Fuhgeddaboutit.
Lit handouts at Metro stations – Fuhgeddaboutit.
Lit drops – It’s not clear if this counts as essential travel. It’s also not clear if this will creep out voters.
Campaign forums – They are not possible to do in person. There are opportunities to do these online but there will be far fewer of them than in a regular cycle.
Poll coverage – Fuhgeddaboutit!!
So what’s left? No candidate currently has the money to do serious mail. Blast emails are possible, but if anyone has an email list, I’m not on it. (For the record, I have been added to TONS of political email lists!) Signs have been distributed along with the usual instances of illegal placement. Bethesda Beat is covered with school board ads. (Steve Hull wins every election!) Social media ads are cost effective and several candidates have used them, but they can’t replace all of the other campaign tools that have been knocked out by the virus. Then there is the word of mouth being circulated by supporters of one candidate or another, but to see it, you have to be connected to the partisans. The HUGE majority of voters are not in these bubbles.
Let’s remember that this is a presidential primary and all county voters with all party affiliations can vote. In the 2016 primary, 183,479 people voted in MoCo’s at-large school board race. That far exceeds the number who vote in mid-term Democratic primaries for governor, county executive and county council at-large, races which have much more financing than school board contests. The two candidates who emerged from the 2016 primary had more than 50,000 votes each. This year’s winning number could be higher if the all-mail election encourages higher turnout as it did in Rockville and also because of national factors.
Given all of these limitations, you would have to be crazy to be a campaign manager in this race!
That said, there are certain factors that could make a difference.
The Apple Ballot
The Montgomery County Education Association (MCEA) has an excellent record of getting its endorsed school board candidates through primaries. MCEA’s choice this year is Universities at Shady Grove professor Sunil Dasgupta, who proudly puts the Apple Ballot front and center on his website. Historically, the union’s most effective tactic has been distribution of Apple Ballots at voting precincts, but that is now impossible due to COVID-19 restrictions and the state’s transition to a mostly mail election. The teachers can still use social media and they have sent at least one mailer promoting their candidate. One note of caution comes from February 2008, when an ice storm shut down MCEA’s poll coverage, resulting in a rare defeat for its candidate in a primary.
The Washington Post
Along with the Apple Ballot, the Post’s endorsement is one of the top two in school board races and has a great record of helping candidates win. At first it seemed the Post was going to sit out the primary (as it has done before), but over the weekend, the newspaper endorsed former PTA president Lynne Harris. This is a huge problem for anti-boundary analysis leader Stephen Austin, who now faces one candidate with the Apple, another one with the Post and a primary from which only two candidates will emerge. One question: with Harris’s lack of funding and the Post endorsement coming so late, will she have the time and bandwidth to capitalize on it?
Stephen Austin’s Facebook Group
Say what you will about Austin and his group, but his page is larger than any other MCPS-related site that could play a part in this election. Consider these Facebook page statistics at this writing.
None of the candidates’ pages are large enough to have any organic effect on the election though they can be used for ads. But through his “neighbors for local schools” page, Austin can reach out to roughly 8,000 people, an advantage that no other candidate has. In an election with no poll coverage by the Apple Ballot, no ground-level campaigning and no serious money for any candidate, how big of an advantage is this?
One Montgomery’s Attack Piece
The brutal One Montgomery attack piece in Maryland Matters linking Austin to Trump supporters and anti-LGBTQ activists has gotten a lot of attention on his critics’ pages. But has it really penetrated beyond the progressive circles that were unlikely to vote for Austin anyway? For this piece to be truly effective, someone has to place a four- or five-digit social media ad buy to push it out to the general public. Otherwise it will be just one more thing to argue about for the relative handful of folks inside the bubble.
However these factors mix, there are two likely scenarios. If Dasgupta and Harris emerge from the primary, this will turn into a traditional Apple vs Post race. But if Austin breaks through to claim one of the primary spots, this will be more insider vs outsider with school boundaries front and center. Jay Guan, the fundraising leader who has mailed a postcard, may also have a chance.
There is more to an election than tactics; there is also policy at stake. Part Three will conclude with a few issues that have been overshadowed by the boundary analysis war but nevertheless warrant attention from the candidates.
Yesterday afternoon, the county council rejected the hidden tax hike that was buried in the county executive’s recommended budget.
The primary issue that bothered the council was the lack of transparency surrounding the tax hike. It was not mentioned in the executive’s budget but it would have raised $5.1 million next year and more money cumulatively in later years. Tax increase proposals attract major attention at budget time with much discussion and public testimony. But this one, which was not published but still included in revenue numbers, flew under the radar until near the end of the FY21 budget process.
Multiple council members complained about process issues. Council Member Hans Riemer noted the failure of the budget to mention the tax hike and said, “This is about our values and our approach to government… The reason why I am so concerned about this proposal is because I really think it flies in the face of our approach to good government and to transparency.” Council Member Andrew Friedson said, “Public policy means public input. And we cannot have transparent and accountable policy making unless there are transparent and accountable decisions for how we make those decisions, how we calculate the policies that we make.”
Council Member Evan Glass put on his CNN journalist hat to investigate what happened. Glass asked council staff how the issue surfaced. Staff replied, “I did not read anything published that this was included,” and said the issue was uncovered through discussions with executive staff. Glass then asked budget director Rich Madaleno why the administration proceeded with it. Madaleno defended the executive’s proposal as an appropriate calculation of the charter limit and said the executive would have discussed this upon release of the budget but that event was canceled because of COVID-19 concerns. Madaleno also said this:
Council Member Riemer is correct that in the final iteration of the budget book the piece that explained this was taken out for revision and did not make it back in before it went to the printer. For that I am profoundly sorry but other than that there would have been deep conversation and of course many of you have heard the county executive say over and over that he thinks the charter interpretation is wrong and has been talking about that for months.
Glass acknowledged that he had heard Elrich express various opinions at forums. (Remember those back in the good old days?) But he replied, “To say something in a forum but then not convey it to the council or not to, as you noted, not to even include the cover page in the budget for whatever reason is a problem.”
Even Council Member Gabe “Mr. Rogers” Albornoz had nothing nice to say about the process for considering the tax hike. When Mr. Rogers is unhappy, there is a problem.
Riemer proceeded to claim that the executive’s proposal was actually illegal because it allegedly violated the charter. The charter’s exact language on the property tax charter limit says:
Unless approved by an affirmative vote of all current Councilmembers, the Council shall not levy an ad valorem tax on real property to finance the budgets that will produce total revenue that exceeds the total revenue produced by the tax on real property in the preceding fiscal year plus a percentage of the previous year’s real property tax revenues that equals any increase in the Consumer Price Index as computed under this section. This limit does not apply to revenue from: (1) newly constructed property, (2) newly rezoned property, (3) property that, because of a change in state law, is assessed differently than it was assessed in the previous tax year, (4) property that has undergone a change in use, and (5) any development district tax used to fund capital improvement projects.
So the charter applies the rate of inflation to adjust “the total revenue produced by the tax on real property in the preceding fiscal year” to calculate the charter limit. The methodology used by the finance department for the last 30 years uses actual taxes paid on real property, including partial-year taxes on newly constructed property which was in use for only part of the year, to calculate current year total revenues. The executive’s new methodology would use taxes that new construction would have paid if billed on an annual basis to calculate current year revenue even though full-year taxes on those properties were not actually collected.
Riemer alleged that the use of hypothetical revenues rather than actual revenues to calculate the charter limit violates the plain language of the charter and asked a council attorney for his opinion. After explaining the technical issues and the possible steps for analysis by the courts, the council attorney replied, “My opinion is that the courts if asked – the court of appeals if asked – would ultimately rule for all the reasons I explained that this provision means actual revenue received during the relevant year for newly constructed property and not the potential revenue you could have received had everything been online for a full year.”
Riemer was bothered by both the transparency issue and the legal risks of the executive’s proposal and he linked the two.
The fundamental issue here is, given how risky it is, the fact that the county council and even more importantly, the public was not informed of this proposal is highly problematic. If you look at the county executive’s budget, you will not find an explanation of this decision. It’s not there. The county executive did not present a budget explaining this method of calculation. The fact is it is a $5 million increase in property taxes from all payers of property taxes in the county. But there is no explanation of that in the county’s budget. It is unthinkable to me that we would have a tax increase that has not actually been transparently presented to the community and, what more, is actually illegal. It is a violation of the charter. The combination of those two aspects of this proposal are just profoundly troubling.
Let’s remember that the principal charter limit activist in the county – Robin Ficker – is an attorney who has sued the county before and prevailed multipletimes. A legal challenge to a change in charter limit administration is far from a hypothetical thing.
It’s not clear that a majority of the council agrees with Riemer on opposing the merits of the executive’s proposal. But there was obvious discomfort in dealing with this issue both late and without public input. That goes on top of other tensions with the executive branch on the budget and issues ranging beyond that. Add in stir craziness during the lockdown and these are strange times in Rockville.
After 40 minutes of discussion, the council killed the executive’s hidden tax hike on a 9-0 vote.
Folks, I have been reading county budgets for almost 15 years and I don’t remember seeing anything like this.
The issue at hand is how the county calculates the charter limit on property taxes. In concept, it’s a simple procedure. The county’s finance department uses two data points: the estimated amount of real property tax revenues collected in the current fiscal year and the percentage growth of the consumer price index from the previous calendar year. Tack on inflation to the current fiscal year’s property tax revenue and that’s the charter limit for the next fiscal year. (The county can collect additional property tax revenues on a few other categories of property outside the charter limit.)
Sounds easy, yeah? But what about taxes collected from properties newly built during the current fiscal year? For the last 30 years, the county’s finance department has included the actual taxes paid on those properties in its calculation of current year revenues. So if a property was built halfway through the fiscal year, half of its annual tax bill is included in current year revenues. If a property was built nine months into the fiscal year, then one-quarter of its annual tax bill is counted. And so on. Add in these pro-rated tax bills to full-year tax bills for existing properties and that’s the current year property tax collections. Tack on inflation and that’s the charter limit.
The Elrich administration used a new methodology to calculate the charter limit in its FY21 recommended budget. Instead of using the actual tax bills paid by newly built properties in the current fiscal year, it included full-year tax bills in its estimate of current revenues even though those bills were not actually paid for the full year. That allowed the administration to calculate slightly higher current year property tax revenues. Tack on inflation and the charter limit is slightly higher. And so there is more room to raise the property tax rate than there would be otherwise.
In other words, it’s a tax hike.
It’s not a very large tax hike. Council staff estimates that the new methodology allows the county to raise an extra $5.1 million in the FY21 budget, or 0.24 cents per $100 of assessed value. (By contrast, the executive’s openly recommended tax hike was 3.18 cents.) But if this new methodology is adopted, it will compound over time and eventually raise tens of millions of dollars more than under the old methodology.
Basing tax estimates on taxes not actually received is a questionable practice at best, but let’s set aside the merits of the policy for now. The disturbing thing about this is that it was not disclosed to the public through the budget. Search the county’s 831 page budget for “charter limit” and you won’t find any discussion of this methodology change. Instead, the matter first surfaced in a council staff memo released late last week. The council held a closed session to discuss the legal ramifications of the change on Wednesday. The council will now decide the matter today.
Regardless of how one feels about taxes, let’s agree that decisions concerning them are important and warrant public scrutiny and participation. The issue was not publicly known when testimony was heard on the budget, so residents were denied the opportunity to weigh in. That is a direct result of the administration’s failure to disclose the issue in its published budget.
