Friday, April 03, 2009

How Hard Will MoCo be Hit by State Cuts?

The state’s budget crisis will inevitably impact state aid to counties. What will it cost Montgomery?

At the moment, the House and the Senate’s Budget and Taxation Committee (B&T) have passed different versions of the state’s FY10 budget. Each version contains different sets of cuts. Here’s how they would affect Montgomery County:

There are three principal differences between the budgets. The House budget cuts transportation aid to Montgomery by $11.2 million while the Senate cuts $24 million. The House withholds $12.1 million in local income taxes collected by the state but due to the county while the Senate does not do that. Those two items largely negate each other. But the Senate proposes to reduce Geographic Cost of Education Index (GCEI) funding, which steers extra education aid to expensive jurisdictions, by $12.4 million while the House does not. GCEI is one of the few programs in the state budget that disproportionately benefits Montgomery (along with Baltimore City and Prince George’s County). The Senate is making that cut, along with other items, because it would like to leave a larger general fund reserve than the House in case the Board of Public Works has to make more cuts after the General Assembly session ends.

So the overall impact of state aid cuts will cost Montgomery County $40.9-54.8 million. In his proposed budget, County Executive Ike Leggett did not assume any cuts in state aid. One of my Rockville sources defended that decision, saying, “To do otherwise would have been akin to placing a ‘kick me’ sign on the County’s backside.” Such is the gamesmanship played between the county and the state on all budgetary matters. But the fact remains that the County Council will now have to cut more money from somewhere.

Our prediction is that a new fight between the council and the county’s public employee unions will now ensue. In the recent contract renegotiations, most of the unions gave up their cost-of-living increases but not the step increases earned by employees who gain seniority. Those increases are mostly in the 1-2% range and account for an amount that may be in the low tens of millions. Some County Council Members will want to take them back while the unions will say they have given up enough.

Looks like we may be headed for another revolt.