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County scrambles to find a solution to unforeseen budget shortfall

MoCo LogoROCKVILLE — Montgomery County Executive Isiah Leggett directed County departments to make two percent cuts after the discovery of a $120 million budget shortfall.

The cuts are meant to make up for $95 million in projected income tax receipts that won’t be collected for the current fiscal year, combined with last year’s budget shortfall of $20 million, the total comes to roughly $120 million missing from the County’s budget, which Leggett noted is an unusual occurrence considering that the decrease in tax revenue comes as Montgomery County’s unemployment rate has simultaneously decreased.

“The traditional wisdom is when you have higher employment and a larger tax base you don’t normally see those kinds of shifts,” Leggett said. “What we’re doing is analyzing why you have a shortfall in the income tax.”

Leggett said he would provide recommendations on cuts to the County Council sometime within the next ten days. Council Member Roger Berliner (D-1) said the Council will take Leggett’s suggestions, but the Council will ultimately decide where to make the cuts. Last year, the County Council passed its $5.6 billion budget for the fiscal year 2018. The County Council usually relies on projections for tax revenues to craft the spending needs in advance for the next fiscal year, which begin on July 1 of every year.

Berliner said the budget shortfall comes as a surprise given the County has nearly “full employment, “ and capital gains tax revenues should be high with the stock market doing well.

“Everyone’s expectations were that we would do well with our distribution that came out in November,” Berliner said.

While Leggett said no County agency is off the table for cuts, Berliner said that he would not support cuts to emergency services or schools.

“Are we going to reduce public safety? I don’t think so. The school budget has been pretty much established,” Berliner said. “Now you are looking at smaller pots of dollars of where you can make this up. So it looks like some agencies will need to do more.”

Leggett placed some of the blame for the budget shortfall on the County Council, which he said decided to add $20 million more to the budget than he suggested when he submitted his budget in March.

“We’re spending more than what I thought we should,” Leggett said.

While Leggett did not rule out any possible cuts, he said the County wouldn’t be able to use the same strategies it used the last time it had such a severe revenue shortfall. After the recession in 2009, the County declined to pay step increases for County employees in an attempt to save spending when tax revenue was down.

In addition to Montgomery County, other jurisdictions in the state such as Baltimore and Howard counties are also dealing with similar income tax revenue shortfalls.

@neal_earley

 

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