Friday, May 28, 2010

Consequences of the Budget, Part Five

Budgets have political consequences. This one was no exception. Here are a few things that stand out.

1. Dominance of the Bond Rating Agencies
In our very first blog post, we labeled MCEA the “800-pound gorilla of MoCo.” No more. Now the county has three 800-pound gorillas: Standard & Poor’s, Moody’s and Fitch. When the rating agencies began issuing warnings on the county’s AAA bond rating, the County Executive and the council immediately moved to increase the size of the energy tax hike, grab more money from furloughs and the school system and boost next year’s reserve from 5% to 6% of the general fund. One aggrieved labor leader compared the county to a third world country having to deal with the IMF. For years and years, the Post, taxpayer groups, conservatives and others have howled in the wind about fiscal discipline while the council regularly approved budget increases in the upper single digits (or more). The rating agencies have successfully bullied the elected officials into spending restraint – at least, for now.

2. The Unexpected
There were a number of surprises this year. First, Council Member Duchy Trachtenberg flipped her vote to yes on the ambulance fee, allowing it to pass 5-4. In explaining her change of mind to the Gazette, she said, “We no longer have the luxury of leaving insurance money on the table.” Well, if the ambulance fee was nothing more than insurance money, why not support it last year or the year before? The volunteer fire fighters are now vowing to unseat everyone who supported the fee, adding to Trachtenberg’s LONG list of enemies.

Second, long-time business allies Nancy Floreen and George Leventhal supported the energy tax against loud outcries from their friends. Floreen told them, “At this point we have to raise this revenue… We have no choice.” Leventhal said, “We’re in a box. We need the revenue... We’re faced with a lot of really hard choices.” All the Council Members wound up favoring an increase of some kind, though they disagreed on the amount and the final hike was a compromise.

Third, former Board of Education members Ervin and Navarro turned a lot of heads by taking on both the school system and the school unions. Ervin was out front early in supporting school furloughs and voted with Navarro and Trachtenberg in favor of them in the Management and Fiscal Policy Committee. That quickly became the position of the entire council. School officials and school union leaders were sorely disappointed with both women, whom they expected to defend them. One such official accused them of “hypocrisy” by pointing out the contrast between rhetorical statements about protecting kids and demands for teacher furloughs. Another official said that both women had “alienated” some in the school unions. This level of rage coming from the schools proves once and for all that neither Ervin nor Navarro can ever be characterized as servants of Jerry Weast or labor.

3. Sticking Together
The council was under intense pressure from all sides during the crisis. But rather than pull them apart, it actually pushed them together. Your author has heard multiple stories of Council Members who were barely on speaking terms with each other now being bosom buddies! None of them felt they had many choices, and all were battered and hardened by the abusive emails they received. (The ones containing grammatical errors that were sent by teachers provoked some gallows humor about the need to invest more in teacher training.) At the end, the Council Members had no one but each other. This may not last, but it was a unique moment during this term.

One benefit to this is that it becomes harder for endorsing organizations to differentiate between the incumbents. Labor is displeased with furloughs, but every Council Member supported them. Business is displeased with the energy tax hike, but every Council Member except Phil Andrews voted for it. (Andrews wanted an even steeper levy on business customers.) Every Council Member voted for the budget except Andrews and Knapp. Andrews voted against it because of the ambulance tax, while Knapp is displeased over “one-time solutions.” Unless an endorsing organization thinks it can take out seven or more incumbents, there’s not a lot to work with here.

One outraged observer sputtered, “A majority of this council is determined to appear united and unanimous out of a perceived need for incumbents to circle the wagons for the September primaries. That means that the majority will follow the minority to achieve the goal of unanimity. It is about them and their careers, not the taxpayers.” That’s fine, but what are you going to do about it?

4. Common Interest
The Council Members are not the only ones with common interest. The business community was hammered by the energy tax. County employees received no raises and some were furloughed. Non-profits and immigrants will endure large grant and service cuts. The smart growth community is constantly defending the Ride On system from route eliminations and schedule cuts. This is all going to continue.

The common enemy that all of these groups have is not the County Executive or the County Council: it’s the lack of economic growth. In our “Population, Jobs and Commutes in the Washington Region” series, we demonstrated that Montgomery County has lagged behind Fairfax and much of the rest of the region in population, employment and real wage growth for decades. That hurts the business community by limiting profits. It hurts county employees by limiting the tax base. It hurts the non-profits, the poor and the immigrant community by limiting services. And it hurts the pursuit of smart growth by limiting revenues necessary to build transit projects. Whether they know it or not, their interests are all intertwined. In the end, just like the politicians, all these groups have is each other. Only if these communities work together in pursuit of economic revitalization will MoCo’s long, slow fall come to an end.