Category Archives: Adam Pagnucco

A Reply to Nancy Floreen on MCPS Funding

By Adam Pagnucco.

Thanks to Council Member Nancy Floreen for writing about MCPS funding in recent years in response to my blog post.  First, a note of appreciation.  While we may disagree about MCPS, we agree wholeheartedly on the issue of economic growth, which is the anchor for the county budget.  The political winds on growth shift back and forth in county politics over the decades, but Floreen has consistently pushed an economic development agenda.  She was for jobs before jobs were cool!  All the things the county has done right in economic development – and there have been a few of them – have Floreen’s fingerprints all over them.  It’s one reason why your author admires her and is sad to see her leave the County Council.

Let’s begin with areas of agreement.  First, Floreen is absolutely right about the terrible days of the Great Recession.  The county had not faced anything like it since the 1930s.  Everything had to go on the table in those days – spending cuts, layoffs, furloughs, broken collective bargaining agreements and an energy tax hike – because the alternative was default.  Floreen was Council President in 2010, the worst year of the recession.  She, the County Executive and her colleagues saved the county from fiscal disaster.  That achievement should not be forgotten.

Second, Floreen mentions the state’s teacher pension shift as a stress point on county finances.  Again, she’s absolutely right.  For many years, the state’s payment of teacher pension benefits was the one state program that disproportionately benefited Montgomery County.  That’s because our high cost of living as well as our prioritization of schools leads us to pay higher teacher salaries than the rest of the state, which results in higher pensions.  In 2010, nearly all of MoCo’s state legislators running for election promised not to shift pension costs to the counties.  But in 2012, Governor Martin O’Malley pushed a plan to do exactly that and most of our state legislators voted for it.  The result is that Montgomery County pays roughly $60 million a year for teacher pensions now, more than any jurisdiction in the state.  Compare that to the size of last year’s property tax hike, which was $140 million a year.  No matter what is said about the county, the state should not be let off the hook.

Now to the areas of disagreement.  It’s interesting that Floreen says our blog post is misleading but does not actually refute any of the data on which we rely.  She simply picks other data and disagrees with our characterizations.  We are sympathetic to her problem: it’s hard to refute data that happens to be true!  One thing she contests is our choice of FY10 as a base year for comparison.  We picked FY10 because it was the peak year of overall county spending before the Great Recession fully kicked in.  So comparing FY10 to FY16, the year before the tax hike, is valid because it’s a peak-to-peak comparison that includes both the cuts to departments in the early part of the period as well as the restoration that occurred afterwards.

She also disagrees repeatedly with our referring to MCPS as going through austerity.  Our basis for doing so was the county’s local dollar spending per pupil, which comes from county budget documents and was not contested by Floreen.  In nominal terms, here is the county’s local spending per pupil from FY06 through FY17.

The data shows that the county cut its local per pupil contribution to MCPS for three straight years and froze it for four straight years.  This period greatly exceeds the length of the Great Recession.  The local per pupil contribution went up after last year’s property tax increase.

Last year’s per pupil bump looks significant, but here is the same data adjusted by the Washington-Baltimore CPI and presented in real terms using 2017 dollars.  (We estimated 2017 inflation at 2.02%, the average rate of the preceding years in the chart.)  Clearly, even with the tax hike, the county’s local-dollar commitment to schools is not what it once was.  And the CPI underestimates major cost drivers for the schools, such as the costs of serving rising numbers of students who live in poverty and need language services.

Floreen then talks about the county departments that were cut during the recession.  She’s right: they were cut.  But after the recession ended, most of them were restored to levels exceeding what they were before the recession.  Meanwhile, county dollars for MCPS were cut by $33 million between FY10 and FY16.  Floreen doesn’t deny that, but she notes that local dollars aren’t the only source for MCPS’s budget.  The schools get plenty of state money too.  Floreen says this:

What really matters is the total MCPS budget, not the State share versus the local share. The higher State spending for MCPS in recent years reflects that the State’s funding formulas, at long last, are starting to recognize our students’ actual needs, as shown in our higher ESOL and FARMS populations. The State aid increases, which were long overdue, enabled us to provide continued strong support for MCPS during the Great Recession without further decimating every other function of government.  Why is that not a good thing?

Floreen is conceding a central point of our original post which is reinforced in the per pupil data above: the county depended on state aid to keep MCPS afloat while it restricted its own contributions to the school system.  Meanwhile, MCPS enrollment grew from 140,500 to 156,514 between FY10 and FY16, an 11% increase.  The Great Recession by itself can’t be cited as a justification for restricting county dollars for schools because the restrictions continued long after the trough of the recession had passed.  Indeed, fifteen other counties increased their local per pupil contributions after the recession ended, including nine controlled by Republicans.  The message here is, “The state was paying for our schools so we didn’t have to increase county per pupil spending on them.”  Is that “continued strong support for MCPS” as claimed above?  Is it satisfactory for parents and voters?  Let the readers decide.

Finally, Floreen repeats her longstanding point that last year’s 9% property tax hike was intended to support MCPS.  That’s true: MCPS did get a big share of that money.  But so did the rest of the government.  Last year, we laid out how the county could have cut the tax hike in half, still given MCPS all the money requested in the County Executive’s budget and done it without spending cuts to other agencies.  County Executive Ike Leggett, who originally proposed the tax hike, asked the council to cut the rate increase in half after the General Assembly passed a law easing the county’s liability from a U.S. Supreme Court decision on income taxes.  But the council chose to keep every penny of the original tax hike and spread it across every agency instead.  That’s not an Education First budget – it’s an Everything First budget.  The result of the tax hike was a tremendous boost for the 40-point triumph of term limits at the ballot box.  Even the council’s own spokesman at the time now says the tax hike was unnecessary and is vowing to stop another one if he is elected to Floreen’s open seat.

Look folks.  We get this is tough medicine.  We understand that elected officials don’t like to be criticized, especially around election time.  And we understand that Nancy Floreen, a Council Member we respect, would like to go out on top.  But it’s important to understand the past to prepare for the future.  The schools need small, steady increases in per pupil funding to deal with their challenges.  There can no longer be wild swings between extended periods of per pupil cuts and freezes followed by huge tax hikes intended to undo the effects of those cuts and freezes.  To fund MCPS fairly without raising taxes, the county will have to restrain the overall growth of the rest of the budget to pay for it.  There cannot be any more Everything First budgets.  With four Council Members leaving and the Executive race wide open, it will be up to the next generation of county officials to chart a better way forward.

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

By Adam Pagnucco.

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

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

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

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

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

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

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

The PTAs

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

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

The Realtors

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

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

So here’s the question.  What happens next?

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More on MCPS Funding

By Adam Pagnucco.

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

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

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

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

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

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

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

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

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Lessons Learned from the Giant Tax Hike, Part 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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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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Lessons Learned from the Giant Tax Hike, Part One

By Adam Pagnucco.

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

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

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

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

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

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

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

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

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

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

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

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

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Bill Fricks Up the Executive Field, Part Two

By Adam Pagnucco.

Delegate Bill Frick’s candidacy for Montgomery County Executive raises a number of questions that will impact both him and his rivals.  Here’s our shot at asking them and teasing out some answers.

Question 1: The Path Not Taken

Four years ago, the higher office Frick really wanted was Attorney General.  His path at that time was blocked by his district’s Senator, Brian Frosh, but it could be much more viable in the near future.  Frosh will be 76 years old at the end of his second term.  If Frick were to remain in the House and raise money, expand his connections and build a statewide network, he would be a strong contender to succeed Frosh.  Frick would also have a great rationale for an AG candidacy: his legislative history on consumer issues demonstrates that he would be an aggressive crusader against predatory banks, rapacious credit card companies and sleazy Internet scammers.  That’s a politically powerful message.  But a losing race for Executive would let other candidates jump ahead of him for an AG run.  It’s a huge opportunity cost that should not be paid lightly.

Question 2: Geography

How much are Frick and Council Member Roger Berliner handicapped by the fact that they represent much of the same area?  Berliner’s District 1, which includes Bethesda, Chevy Chase, Kensington, Potomac and Poolesville, contains 31% of all Super-Democrats (Dems who voted in all three of the 2006, 2010 and 2014 primaries).  Frick’s Bethesda-based District 16, which is inside District 1, contains 19% of all Super-Dems.  These areas are excellent bases from which to launch a countywide campaign.  But Frick and Berliner could split these votes, hurting both of them.  Also worth considering is that Council Member Marc Elrich will get votes in this region as well owing to his criticism of unpopular master plans passed by the County Council.

Question 3: Prior Races

Consider this.  In the last four years, Frick has run for four different offices: Attorney General, Delegate, Congress and now Executive.  No other MoCo politician can say that.  Accordingly, there is some skepticism in the political community that he will be in the Executive race to the end.  That is going to play itself out with large contributors, who are critical since Frick will be using traditional campaign financing and there are only nine months left until the primary.  The last thing a big donor who cares about county government wants is to go all in for a candidate who drops out and runs for something else.  This is huge considering that Frick reported a balance of $45,818 in his state account in January and he cannot transfer funds directly from his federal account.  Frick needs to have a convincing argument to address this with donors or he will be unable to fund a competitive campaign.

Question 4: Counter-Attacks

Frick’s early strategy is to attack the County Council, a message that should get some traction among the majority of county Democrats who voted for term limits.  Frick told the Washington Post, “Our demands exceed our capacity, on our roads and in our classrooms… Too often, local leaders have been complacent, content to raise taxes and resist vital reforms, and our small businesses and parents grow more and more frustrated.”  In Bethesda Magazine, he criticized the “Rockville bubble” and blasted the council for protecting the liquor monopoly.  (Berliner is the one Council Member who agrees with Frick on that issue.)

But Frick has a record too and his new rivals are sure to bring it up.  While Frick attacks the county’s giant property tax hike, he voted for numerous state tax increases during the O’Malley years, including a 2012 state income tax hike of which MoCo residents paid 41% of the increase.  The Council Members will grill Frick on the state’s anemic performance in financing school construction in MoCo, a major issue for voters.  And Council Members Marc Elrich and George Leventhal, both of whom have co-sponsored a bill establishing a $15 minimum wage in MoCo, will ask Frick why he was not a co-sponsor of the state’s $15 minimum wage bill in the last General Assembly session.  In politics, no one gets to throw a sharp elbow without taking one in return.

Question 5: Other Candidates

We suspect that Frick may not be the last non-Council Member to enter the race.  Senator Cheryl Kagan (D-17) is sure to look at a field that includes four men and think, “In a primary electorate that is roughly 60% female, maybe there’s room for a woman in this race!”  Former Council Member Valerie Ervin, who polled an Executive race in 2013, might think, “Yeah, I got that, plus I have a base that no one else has!”  Businessman David Blair, who can self-finance, is polling and would be a true outsider candidate – even more than Frick.  Elrich, who has an immovable base of true believers who could be a fifth of the electorate or more, would no doubt welcome a large field.

And there could be even more surprises in an election that is shaping up to be one of the wildest in MoCo history.

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Bill Fricks Up the Executive Field, Part One

By Adam Pagnucco.

Delegate Bill Frick (D-16) has dropped out of the Congressional District 6 race and is running for County Executive.  This is the biggest story so far in the Executive race.  Council Members Roger Berliner, Marc Elrich and George Leventhal have been preparing to run for Executive for years but Frick has never before expressed interest in county office.  Additionally, Frick is the first person who is not a term-limited Council Member to declare for Executive and he may not be the last.

So  who is Bill Frick?  He’s a MoCo native who went to Northwestern and Harvard and is an attorney with Akin Gump downtown.  He was little known to the MoCo political community until he stunned the establishment by defeating a formidable field for a Delegate appointment in 2007.  He worked his way up in the House to become Parliamentarian and later House Majority Leader.  After first serving on Ways and Means, he joined the powerful House Economic Matters Committee, which decides all issues connected to alcohol, public utilities, insurance, banking, economic development and workers compensation.  He is the Chair of the Property & Casualty Insurance Subcommittee.  Frick is generally liked by his colleagues, often pranking them by stealing their phones and typing worshipful Facebook posts (“Bill Frick is my hero!”), but he is also respected as a substantive lawmaker.  His multiple, aborted runs for higher office (Attorney General in the prior term and CD6 until just recently) have raised questions among some of his colleagues about his political savvy but have not dented his popularity in Annapolis.

Frick has been a busy legislator over the years with a focus on consumer issues.  He has attracted news by introducing legislation to crack down on credit card companies and Internet scamming.  His bill to tighten renewable energy standards was vetoed by the Governor but passed after an override by the General Assembly.  Frick achieved countywide renown by introducing legislation in 2015 to allow MoCo voters to decide whether to end the county’s liquor monopoly.  It was a tremendous act of political courage that few MoCo politicians can match.  It provoked the county government employees union, which represents liquor monopoly workers, to target his wife and call for an investigation, none of which went anywhere.  The union may never endorse Frick in a future race, but for those who want to End the Monopoly, Frick is an eternal hero.

One more thing:  He is one of the most witty, charming and likable humans on Planet Earth. No one other than George Clooney, Bill Clinton or Bono is going to win a personality contest with Bill Frick.

Frick holds court in 2010.  Is this how MoCo voters will react to him?

For all of his undeniable assets as a candidate, Frick’s entry into the race provokes more questions than answers.  We will examine those questions in Part Two.

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Candidates, Hug Your Treasurer

By Adam Pagnucco.

Political campaigns have all kinds of characters in them.  There are the campaign managers, the best of whom are data nerds, bartenders, therapists and trouble shooters all at once.  Then there are the hard core supporters, always ready to insist that their candidate is the reincarnation of Mandela and eager to pounce on dissenters online.  There are the cross-eyed pundits, tossing out great gobs of bloggy drivel onto an unsuspecting populace.  And of course there are the candidates, their toothy daytime smiles concealing roiling anxiety in the dead of night.

But no one pays attention to the true MVPs of political races: the Treasurers.  Money is the lifeblood of all campaigns and these are the people who control it.  Without a competent Treasurer, a campaign can’t collect its money, pay its bills, file its reports or do much of anything at all.  And the workload is often far greater than anyone, even the candidates themselves, can ever understand.

I was a Treasurer once.  Senator Rich Madaleno asked me to assume that role for the District 18 slate back in 2008.  It was not the first nor the last dumb thing I have done for a politician I like!  The account records (actually, the disorganized piles of random papers) were delivered to me in shoe boxes.  Shortly afterwards, I began receiving notices from the State Board of Elections that the previous report filings were deficient and needed to be corrected.  But the state didn’t say what the flaws were.  Phone calls to the state offices were laughably useless.  So I had to reconstruct every single transaction in the history of the account(!!!!!) and re-file every single report that had ever been sent in.  This required weeks of agony, but dammit, no account with my name on it was going to get fined.  Even bloggers have standards!

Dear future candidates: don’t ever ask me to be a Treasurer again.  I would rather gargle cockroaches.

This year, the normally substantial challenges of being a Treasurer are compounded for a uniquely unfortunate subset of them: the Treasurers responsible for MoCo’s public campaign financing accounts.  The reason is that the state requires evidence of a contributor’s in-county residency before approving public matching funds for that contribution.  That’s easy to do with online contributions: all a campaign has to do is add a couple fields illustrating residency and collecting a digital signature.  But what happens if a dinosaur (like, say, your author) pays with a written check?  Well folks, that’s when the fun begins!

All contributions eligible for matching funds must be accompanied by proof of residency that is provided to the state.  For physical checks or cash, that means the donor must complete and sign a written form indicating residency in Montgomery County.  Somebody (that might be you, Mr. or Ms. Treasurer!) has to make sure that form is filled out and collected.  If a check or cash shows up in the mail, that means tracking down contact information for the contributor and getting hold of them.  “Thank you for contributing to Politician X, ma’am.  Could you fill out and sign this form showing that you live in MoCo and send it back to us?”  “Well, I’m out of stamps and my scanner is busted.”  “I’m out of the country for two weeks.”  “I’ll think about it and get back to you.”  “I just donated to you.  Why are you bugging me?  I want my money back!”  And these are the G-rated responses.

Campaigns love this like they love tarantulas in the shower.  One campaign surrogate says his campaign “absolutely hates it” when they get paper checks because of the time required to chase down donors.  One candidate with prior electoral experience estimates that the time taken to deal with these administrative issues is 40% greater than it is under the old traditional system.  Another candidate simply says, “Oy.  Vey.”  And again, these are the G-rated responses.

Nothing can be done to remedy these issues in the short term.  And let’s remember: the state is within its rights to demand proof of residency to prevent mistaken distributions of public matching funds.  But candidates in public financing must absolutely do one thing.

Hug your Treasurer.  Do it today!  Tell them you love them.  Or it might be YOU who has to chase down those donors!

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