Population, wage stagnation blamed for Montgomery Co. budget shortfall

The Montgomery County, Maryland council expects population stagnation, low inflation rate and a lack of new construction to be among factors contributing to a poor budget situation going into the next fiscal year.

Gene Smith, a legislative analyst for the county, forecasts a $130 million dollar budget gap to begin fiscal year 2021.

“Wage and salary growth is flat in Maryland and Montgomery County,” Acting Finance Director Michael Coveyou said. “This effects essentially 84 or 85 percent of the income tax.”

The next problem area is property taxes. Montgomery County expected the Federal Reserve to increase rates. Instead, they began to roll them back.

“Inflation estimates from a year ago, which were used to build our budget, are a little more than half of what they were estimated at that time,” Coveyou said. “This year, inflation has come in 1% lower than expected. What was expected was a little over 2%. That has a direct effect on property taxes we can levy. It cuts the amount of growth in half.”

Finally, he said construction has not kept pace with their estimates, so the levels of income anticipated from that area are not coming to fruition.

Councilmember Andrew Friedson was frustrated with the numbers, citing that just a few months ago they were given numbers that showed promise for next fiscal year only to be presented with lackluster figures weeks later.

“We need to redo the way we do projections. Clearly we have a problem. We’re not as good at this as we need to be,” he said. “The fact that a few months of data can turn our whole process into a tailspin. It’s not appropriate or reasonable.”

Councilmember Hans Riemer said the numbers show the county needs to review their economic development strategy.

“We need to do more in the county to attract and grow businesses,” Riemer said.

“Anything we can do to spur growth in the commercial sector, to make companies feel more supported, is going to help. That will pay off in higher wage job growth and salaries and that will flow in through more property and income taxes.”

The finance office informed the council that more data is coming out, and they hope to offer better numbers at next month’s meeting.

Riemer said if the numbers don’t change drastically, they’re going to have to look at major spending cuts.

Michelle Murillo

Michelle Murillo has been a part of the WTOP family since 2014. She started her career in Central Florida before working in radio in New York City and Philadelphia.

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