{"id":10599,"date":"2018-05-23T07:00:10","date_gmt":"2018-05-23T11:00:10","guid":{"rendered":"https:\/\/www.theseventhstate.com\/?p=10599"},"modified":"2018-05-22T12:43:23","modified_gmt":"2018-05-22T16:43:23","slug":"lets-get-real","status":"publish","type":"post","link":"https:\/\/www.theseventhstate.com\/?p=10599","title":{"rendered":"This Has to Change"},"content":{"rendered":"

By Adam Pagnucco.<\/em><\/p>\n

Going into this year\u2019s budget deliberations, the County Council was told two important things.<\/p>\n

First, county budget director Jennifer Hughes wrote the following<\/a> on April 5.<\/p>\n

The County Executive’s recommended budget, released on March 15, 2018, closed a $208 million budget gap, raising the cumulative amount of budgetary shortfalls resolved in County Executive Leggett’s proposed budgets to more than $3.7 billion. Due to many economic pressures, the shortfalls between projected budget demands and projected revenues will likely continue into the foreseeable future. Our income tax revenues are projected to grow only modestly and the economic recovery continues to be modest and fitful. Additionally, we have not yet adjusted our revenue projections to reflect the effects of H.R. 1, the Tax Cuts and Jobs Act of 2017 (TCJA). There will be an impact on our revenues due to TCJA although the magnitude of the impact is uncertain at this time.<\/p><\/blockquote>\n

Second, the council\u2019s own senior legislative analysts wrote this<\/a> on April 27.<\/p>\n

FY18 tax revenue is now estimated to be $106.1 million below the FY18 approved budget, and $11.1 million below the estimate from December’s estimate. FY19 tax revenue projections are $76.8 million below the FY19 projections made less than one year ago.<\/p><\/blockquote>\n

So shortfalls \u201cwill likely continue into the foreseeable future\u201d because the economic recovery is \u201cmodest and fitful.\u201d\u00a0 The GOP\u2019s federal tax law could be a problem.\u00a0 And next year is already projected to see a $76.8 million shortfall after this year\u2019s shortfall<\/a>, which was over $100 million.<\/p>\n

Suppose you were an elected official reading that information.\u00a0 What would you do?\u00a0 Perhaps you might say, \u201cWow, things are kind of tight.\u00a0 We need to cut back a little because if there is a downturn, we are going to have a problem.\u201d<\/p>\n

That\u2019s not what happened.\u00a0 Instead, the council tapped a total of $77.7 million in one-time fund transfers to finance ongoing spending both this year and next year.\u00a0 Here are the one-shot revenue sources we know about<\/a>:<\/p>\n

$62.4 million in retiree health fund money<\/a> (for FY18)<\/p>\n

$4 million from the Public Election Fund (FY19)<\/p>\n

$10.5 million from the Employee Health Benefit Self Insurance Fund (FY19)<\/p>\n

$800,000 inter-fund from Park and Planning (FY19)<\/p>\n

$77.7 million total<\/p>\n

Believe it or not, there could have been more.\u00a0 There were serious discussions of financing additional spending by tapping into retiree health money a second time.<\/p>\n

The council was justified in taking money out of the Public Election Fund since its balance ($11 million) far exceeds the likely total cost of public financing this cycle.\u00a0 But the $10.5 million transfer out of the county employees\u2019 health insurance fund is problematic since it contains premiums paid by employees<\/em> in addition to taxpayer money.\u00a0 A group of employees has already sued to stop such transfers although both the Circuit Court for Montgomery County and the Court of Special Appeals<\/a> have ruled against them.<\/p>\n

This continues a pattern we have written about before<\/a>: the council\u2019s practice of using one-shot revenues to pay for ongoing spending on top of the Executive\u2019s budget.\u00a0 The council has used such methods to add many millions to the budget over the years, though it\u2019s hard to tell exactly how much came from one-time sources because their financing methods are not posted along with the items that are added<\/a>.\u00a0 As a result, this is all rather opaque even for someone such as your author who used to participate in the council\u2019s budget process.\u00a0 (Yes, that makes me part of the problem!)<\/p>\n

The council might reply by citing the fact that the county has enjoyed a triple-A bond rating for a long time.\u00a0 That\u2019s true.\u00a0 There is much to recommend about the county\u2019s financial practices, including its top-notch pension plan funding ratio (currently 92%<\/a>) and its reserve ratio, now close to ten percent of revenues.\u00a0 But the bond rating agencies care primarily about one thing: can bond issuers repay their debt?\u00a0\u00a0 Because the county contains a subset of very wealthy neighborhoods<\/a> and has demonstrated a repeated willingness to raise taxes on them (along with the rest of us), we have a pretty low risk of default.\u00a0 That probably allows us to get away with using band-aids a little more than some other triple-A jurisdictions that have less resources , like Prince George\u2019s<\/a>.<\/p>\n

Ultimately, the bond ratings agencies\u2019 interests are not identical to county residents.\u00a0 The ratings agencies are perfectly happy to see more tax hikes that go to debt service.\u00a0 They are less concerned with whether residents get better services to go along with higher taxes.\u00a0 That\u2019s our business.\u00a0 And here is what is happening, folks.\u00a0 The economy is not as great as our elected officials say it is.\u00a0 Even Ike Leggett\u2019s own budget director says, \u201cthe economic recovery continues to be modest and fitful.<\/a>\u201d\u00a0 The county is resorting to band-aids, transfers and using money that is supposed to go to health insurance to add more ongoing spending.\u00a0 Eventually, if it keeps doing such things, those options are going to dry up when the next recession comes.\u00a0 And if the next downturn is bad enough, there will be three options on the table.<\/p>\n

Raise taxes \u2013 again<\/p>\n

Lay off county employees<\/p>\n

Lose the bond rating<\/p>\n

This has to change.\u00a0 We need elected officials who can prioritize spending and exercise restraint now to head off problems later.\u00a0 If you agree, remember that on Election Day.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Adam Pagnucco. Going into this year\u2019s budget deliberations, the County Council was told two important things. First, county budget director Jennifer Hughes wrote the following on April 5. The County Executive’s recommended budget, released on March 15, 2018, closed a $208 million budget gap, raising the cumulative amount of budgetary shortfalls resolved in County … Continue reading This Has to Change<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[151,33],"tags":[1545,1368],"class_list":["post-10599","post","type-post","status-publish","format-standard","hentry","category-adam-pagnucco","category-budget","tag-adam-pagnucco","tag-budget"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p4mKJE-2KX","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/10599","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10599"}],"version-history":[{"count":7,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/10599\/revisions"}],"predecessor-version":[{"id":10653,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/10599\/revisions\/10653"}],"wp:attachment":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}