Friday, December 21, 2007

Council and MCEA Set for New Round of Budget Clashes? Perhaps Not.

It's a lot easier to govern when economic times are good and the revenue flows into the treasury. In good times, officials can increase spending and sometimes even throw in a tax cut at the same time. Lean times make for tougher choices and unhappy voters as spending cuts are often combined with tax increases as the special sessions showed at the State level.

Although cuts made to the counties in the special session were smaller than feared, and Montgomery did well compared to other major jurisdictions, Montgomery County still faces a sizable budget deficit. According to the Gazette, the deficit is almost 10%:

Montgomery, with a $4.1 billion fiscal 2008 operating budget faces a $401 million deficit for fiscal 2009.
Will this lead to new clashes over spending between MCEA which wants to see increases in salaries, the bulk of the sizable school budget, and the County Council, which has to balance the budget?

There are lots of reasons to think so. In the Washington Post, Councilman Phil Andrews said that the deficit is due to high spending rather than slack revenues:
A record $401 million deficit predicted in Montgomery "is not a revenue problem," said County Council Vice President Phil Andrews (D-Gaithersburg-Rockville). "Our revenues are solid and strong. It's primarily the rate of spending at an unsustainable level that reveals itself when the economy slows down."
The same article links the spending increases, and thus the deficit, to pay agreements:
Montgomery, which unlike Virginia localities can impose an income tax, derives only 33 percent of its operating revenue through property taxes. This year, it negotiated labor agreements that give some workers cost-of-living increases totaling 17 percent over the next three years in addition to annual step increases of 3.5 percent, one reason why spending has grown an average of 7.8 percent annually since 2001. The accord was finalized this spring by County Executive Isiah Leggett (D) but is largely the legacy of his predecessor, Douglas M. Duncan (D).
Understandably, School Superintendent Jerry Weast has proposed the smallest year-on-year increase in spending since 1997:
Weast said county officials guided him to cap new spending at $110 million, or about 5.6 percent of the $1.99 billion budgeted for the county this fiscal year.
Nevertheless, one wonders where the County will find the money. The rate of increase is still several points above the rate of inflation. And it's not like the school system is a small part of the County budget. Based on the figures in the paper, the schools are roughly one-half of the County budget. Even if the rate of increase in spending is relatively low, the County may just not have the money.

Does this set a showdown between the Council and MCEA over the rate of increase in school spending?

Perhaps not.

County Executive Ike Leggett seemed happy with the budget request:

Leggett applauded the school system for proposing a budget plan that is "significantly below the rate of growth we've had in the budgets these last few years." The operating budget has nearly doubled in size under Weast's tenure, with yearly increases averaging 8 percent.

"This is closer to the range I would hope to be at," Leggett said of Weast's request, although he would not guarantee that the County Council would approve the entire amount. The spending request goes to the council for action in May.

Moreover, if the Council remains united, admittedly a big if, my guess is that MCEA will not be tempted to go to the wall unless the increases are unacceptably low. MCEA certainly showed great influence in the 2006 elections but even MCEA would not be a rush to try and dethrone the entire Council at once. County Executive Ike Leggett's satisfaction with the budget increase indicates that the proposed budget may be in range of the possible. The Council may trim but perhaps the outcome will be one MCEA, the Council, and the voters can accept.