County Executive’s

FY19 Operating Budget Forum Briefing

January 2018
Open Operating Budget – new and IMPROVED!

montgomerycountymd.gov/openbudget

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Office of Management and Budget: FY19 Operating Budget Forum Briefing

Open Capital Budget – including Projects and MAPS!

montgomerycountymd.gov/openbudget

Planning
Areas Projects

Schedules

Maps
Council
Districts

Office of Management and Budget: FY19 Operating Budget Forum Briefing

County Executive
priorities
Healthy and Sustainable
1 A Responsive and Accountable
County Government
5 Communities

2 Affordable Housing in an
Inclusive Community
6 Safe Streets and
Secure Neighborhoods

3 7
An Effective and Efficient A Strong and Vibrant
Transportation Network Economy

4
Vital Living for
8
Children Prepared to
Live and Learn All of Our Residents

Office of Management and Budget: FY19 Operating Budget Forum Briefing

Fiscally Responsible Government
Montgomery County is on the right path to sustainability

Closed $3.5 billion in budget gaps over the past 11 years

Slowed the rate of growth in expenditures

Successfully implemented plan to increase reserves, on track to

reaching 10% goal by 2020

Increased funding for Retiree Health Insurance (OPEB), fully funded

annual requirement in FY15

Permanent long-term cost reductions for:

• Employee compensation, group insurance, retiree health insurance,
and pensions
• Reduced over 1200 positions in the FY08-12 period

Office of Management and Budget: FY19 Operating Budget Forum Briefing

Budget Shortfalls Closed
by County Executive Leggett
$3.5 billion over 11 years
1200

1000

800

$975M
$Millions

600

400
$587M

$401M
200 $300M
$200M $238M $178M
$135M $136M $166M
$138M
0
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

*FY18 figure – Prior to current shortfall that is being closed through a savings plan

Office of Management and Budget: FY19 Operating Budget Forum Briefing

Fiscal Update

Office of Management and Budget

FY18 Expenditures by Function (millions)
WHERE THE MONEY GOES TOTAL EXPENDITURES - $5,442.4

Non-Departmental M-NCPPC*
Environment $337.5 $146.7
$126.6 6.2% 2.7%
Debt Service** Montgomery College
2.3%
$408.2 $309.3
7.5% 5.7%
General Government
$367.0
6.7%

Libraries, Culture & Recreation

$91.3
1.7%

Transportation
$220.5
4.1%

Health & Human Services

$304.7
5.6%

Public Safety
$616.0
Montgomery County Public Schools
11.3%
$2,514.6
46.2%

*Total M-NCPPC includes $5.7 million debt service. ** Debt Service figure includes both tax and non-tax supported**
Office of the County Executive
FY18 Approved Revenues (millions)
WHERE THE MONEY COMES FROM* TOTAL Revenues - $5,541.8

Charges for Services Fines & Miscellaneous

$347.1 $249.8
6.3% 4.5% Property Tax
$1,770.2
31.9%
Intergovernmental
$1,108.8
20.0%

Other Taxes
$322.7
5.8%
Transfer & Recordation Tax
$185.3
3.3%

Income Tax
$1,557.9
28.1%
* Includes cash to CIP and Reserves.
Office of the County Executive
FY18 Tax Supported Expenditures by Function
Tax Supported Expenditures Only Appropriation % of Total % Sum FTEs
1. MCPS $ 2,368,655,562 49.6% 49.6% 21,090.64
2. Public Safety $ 585,134,553 12.3% 61.8% 3,983.96
3. Debt Service $ 399,946,420 8.4% 70.2% -
4. General Govt. & Other Functions $ 292,501,107 6.1% 76.3% 1,142.89
5. Health and Human Services $ 270,173,985 5.7% 82.0% 1,211.74
6. College $ 262,759,376 5.5% 87.5% 1,802.10
7. Transportation $ 185,395,118 3.9% 91.4% 1,110.25
8. Retiree Health Insurance $ 163,442,320 3.4% 94.8% -
9. M-NCPPC (Park and Planning) $ 125,880,311 2.6% 97.4% 914.89
10. Libraries, Culture, & Recreation $ 87,552,931 1.8% 99.3% 853.73
11. Community Dev. and Housing $ 31,408,935 0.7% 99.9% 65.40
12. Environment $ 2,907,343 0.1% 100.0% 16.50

$ 4,775,757,961 32,192.10

Office of Management and Budget

FY19 Fiscal Projection
Revenue Challenges
FY17 audited actuals below FY17 estimates for the following major taxes:
• Income Tax: -$19.8 million
• Transfer and Recordation Taxes: -$1.4 million
• Energy Tax: -$9.7 million
• Property Tax: -$5.4 million
November 2017 Tax Revenue forecast was much lower than expected – forecast has
been revised downward for FY18 and FY19 by a total of $180.9 million.
Income Tax Uncertainty
• MD State Comptroller v. Wynne - Projections assume losses of $14.2 million in
FY19 and $28.5 million in FY20 and $142.3 million between FY19-FY24
• FY18 income tax projections are $78.8 million below the FY18 budget
• FY19 income tax projections are $54.3 million below Finance’s March 2017
estimate
• Impact of Federal Tax law changes
Next revenue update - Late February

Office of Management and Budget

FY19 Fiscal Projection
High structural cost increases for:

• Debt Service, Reserves, Retiree Health Insurance

• Maintenance-of-Effort requirement for MCPS and College

Cost pressure is actually higher because other factors must be

accounted for including:

• Labor agreements – ongoing negotiations with the Fraternal Order of

Police
• Cost increases for group insurance, workers compensation, and
general inflation
• Operating cost of new facilities and infrastructure

Office of Management and Budget

FY19 Fiscal Projection (as of Dec 2017)
Change in Resources $Millions
Additional Revenues $27.1
Additional Fixed Costs
Debt Service $20.9
CIP Current Revenue / PAYGO $31.5
Reserves / Set Asides $183.5
Total Additional Fixed Costs $235.9

Available for Agency Operating Budget (additional revenues less -$208.8

additional fixed costs)
Reflects $180.9 million revenue shortfall

Available for MCG and MNCPPC -$203.8

% Reduction from FY18 Budget Office
-11.7%of Management and Budget
Actions taken to
Close the Gap in Prior Years
1 Withheld steps and general wage adjustments

2 Required increased employee contributions to retirement

and health benefit plans

3 Maintained MCPS at Maintenance of Effort (MOE) level

or below for six years

Reduced the number of employees by over 1000 (or 10%) and

4 maintained a lower per capita employee ratio (still below the FY 06
level)

Slowed the rate of growth in expenditures from double digit annual

5 percentage growth prior to FY 08, to an average of 2.7 percent over
the last 10 years.
Office of the County Executive
 Affordable Housing Support
by County Executive Leggett

$902 million and 59,000 units over 11 years

$140

$120
$120

$100 $105
$102
$Millions

$80 $85
$82
$75 $74
$60 $70 $67 $67
$58

$40

$20

$0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Includes Operating, Capital, PILOTS and Discounted Land Value recommended
Office of the County Executive
 Reserves By Year
$500

$450
$457

$400 $413
$402
$380
$350
$355

$300
$300
$Millions

$250
$250

$200
$200 $198 $195
$179 $182
$150

$100

$50

$0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Office of the County Executive

Unemployment Rate By Year
6.0%

5.0% 5.6%
5.3% 5.2%
5.3%
5.0%

4.0%
4.4%
4.0%

3.0%
3.2% 3.4%

2.0%

1.0%

0.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016

Office of the County Executive

Required Retiree Health Trust Contribution
$450 30.0%
27.8%

$400 24.3%
$411 25.0%
$350 21.7%

19.3% $335
$300 20.0%
$287
$Millions

$250
14.0%
$239 15.0%
$200

$150 10.0%
$153
6.6%

$100
3.0% 2.6% 5.0%
2.2%
1.3% $92
$50
$35 $38 $48
$0 $14 0.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
recommended
Assets Funded Ratio
Office of the County Executive
Our Budget

Office of Management and Budget: FY18 Operating Budget Forum Briefing

 Two Budgets One County

Operating Budget: Services Capital Budget: Facilities

K-12 education Schools, College facilities

Community College education Roads and bridges
Public safety: Police, Fire, Courts, Water and sewer facilities
Corrections
Information technology
Transportation: Roads, Traffic, Bus infrastructure
Social Services: Health, Income Libraries
Maintenance, other
Police and fire stations
Environmental protection
General government facilities
Parks, recreation, and libraries
Funded primarily through the
Land use planning and regulation issuance of bonds (borrowing)
Trash collection and disposal
Economic development
Debt Service

Office of Management and Budget: FY19 Operating Budget Forum Briefing

 Operating Budget Process

Departments
MCPS, College, County Council
Prepare County Executive County Council County Council
MNCPPC submit OMB Reviews Reviews CE’s
Submissions Transmits Public Hearings Approves Budget
budgets to County Submissions and Recommended
prepares options for Recommended and Taxes
Executive Budget
the County Executive Budget to the
/Council
County Council

Office of Management and Budget: FY19 Operating Budget Forum Briefing

Operating Budget County Budget is divided into two parts

Tax Supported Non-Tax Supported

Excludes grants and services Funds are self-sustaining and generally not
supported by fees and charges subject to fluctuations in tax receipts
(non-tax supported funds)

Total Non-Tax Supported Funds:

$674.6 million

Grants:
$222.9 million

Self-Supporting funds:
$451.7 million

Office of Management and Budget: FY19 Operating Budget Forum Briefing

County Executive’s Fiscal Plan

Resources Uses of Resources

Debt service
Net transfers to and from Current revenue to support
the General Fund the Capital Budget
Revenues Year-end reserves
Agency expenditures

The budget is balanced when projected resources

are equal to projected uses, including funding
reserves to the policy level.
Office of Management and Budget: FY19 Operating Budget Forum Briefing
FY19-FY24 Fiscal Plan
Selected Fiscal Assumptions: Resources

Property tax revenues are projected at the Charter Limit

Other tax revenues and user fees are projected at their current rates
Level (flat) funding of existing intergovernmental aid formulas, which could
change after the Governor releases the State budget
Latest revenue estimate: Net decrease in anticipated County revenues of
$180.9 million ($94.9 million in FY18 and $86.0 million in FY19) compared to
estimates assumed at the time the FY18 budget was approved
By law, the greater of 50% of excess revenue or 0.5% of revenues must be
allocated to the reserves

Office of Management and Budget: FY19 Operating Budget Forum Briefing

FY19-FY24 Fiscal Plan
Selected Fiscal Assumptions: Expenditures

Under these assumptions, total agency expenditures must be

reduced 4.8% to produce a balanced budget in FY19.

Because of State law requiring a certain level of funding for

MCPS and Montgomery College, County Government and Park
and Planning could sustain reductions of nearly 11.7%.

Office of Management and Budget: FY19 Operating Budget Forum Briefing

Community
Participation
Letters/emails to the County Executive and Councilmembers

Boards, Commissions, and Advisory Board members are appointed by the County Executive, and
confirmed by the County Council

Executive Branch sponsored budget forums across the County, where residents and businesses provide
input on their priorities

County Executive meets with business leaders, directors of non-profit organizations, and other advocacy
groups

County Charter requires the Council to hold a public hearing not earlier than 21 days after receipt of the
budget from the Executive

Public hearings related to budgets, legislation, and regulations are advertised in local press

County Council town hall meetings

Letters to local press

Citizen participation groups (Taxpayers’ League, etc.)

Office of Management and Budget: FY19 Operating Budget Forum Briefing