The Structural Deficit in Action

Now that Montgomery County’s delegation has been a party to, if not the prime mover of, the largest tax increase in Maryland’s history we get this bit of news from the Washington Post in a front page story headlined Montgomery Bracing for A Record Shortfall: $401 Million Gap May Mean Tax Increases, Service Cuts.

In sobering terms, Montgomery County’s elected leaders began to confront the government’s deepest-ever projected budget shortfall yesterday, warning residents of possible tax increases and tempering expectations for what the county can afford as they try to close a $401 million gap.

County Executive Isiah Leggett (D) has called on departments and agencies to shave 2 percent of existing spending, including $36 million from the public schools, a figure that education officials said would be “extraordinarily difficult to meet.”

In his call for belt-tightening, Leggett said the numbers suggest that even with spending cuts and tax increases, residents should be prepared for a reduction in public services.

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“Our worst fears, as it relates to the housing market and the national economy, are being realized,” Leggett said yesterday. “There may be delays and outright cuts; it means we will not be hiring as readily as we may have anticipated, and it could mean some local revenue enhancements.”

It’s too soon to know which areas would be affected by the shortfall, 9.6 percent of the $4.2 billion in projected spending for fiscal 2009, which begins in July. To cope with a budget gap four years ago, county leaders cut library hours, postponed maintenance on equipment and delayed salary increases for county employees for several months.

Among the big-ticket items in the coming year are the county’s health-care program for uninsured residents, early childhood education, the technology system and funding to put more police officers on the street.

“This is not an easy exercise,” said County Council member Duchy Trachtenberg (D-At Large), chairwoman of the council’s Management and Fiscal Policy Committee. “Some hard decisions will have to be made.”

Spending for the budget year that begins in July is expected to increase by 8.5 percent, but revenue is not keeping pace. Montgomery, like much of the Washington region, has been hit by slowdowns in job growth and the housing market. Transfer and recordation taxes collected when property changes hands are projected to be $71 million less than expected. Income tax estimates for fiscal 2008 and 2009 are collectively $107 million less than projected.

The $401 million gap could widen as the county negotiates costly health and retirement benefit contracts for employees and calculates the effects of new income tax exemptions passed in Annapolis, in addition to $500 million in state budget cuts.

I am overwhelmed by schadenfreude.

MoCo elected a delegation that voted to increase taxes by bazillions of dollars and somehow not only managed to ensure that MoCo didn’t get diddly squat in the porcess but were able to coordinate that tax hike with a major budget crisis at home that will also require a tax hike.

Couldn’t happen to a nicer bunch.

In the dead tree version of the Washington Post the story is finished up on the same page as this headline,Montgomery School Board Approves Boost For Facilities.

The Montgomery County school board approved a $269 million facilities spending plan last night for the next fiscal year, a $30 million increase over the budget approved by the County Council for the current year.

School officials said they increased the capital budget, originally set at $258 million, after learning that the county would probably receive substantially more than the $40 million in state aid budgeted by the County Council for the fiscal year that begins July 1.

The mind boggles.

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