The State Board of Education denied the Maintenance of Effort (MOE) waivers for school funding for all three counties (Montgomery, Prince George’s and Wicomico) that applied. And contrary to what we were hearing, former Montgomery County Council Member Blair Ewing supported Montgomery’s request and dissented from the State Board’s decision.

In its decision for Montgomery County, the State Board cites state law holding that a county may obtain a waiver if the board determines “that the county’s fiscal condition significantly impedes the county’s ability to fund the maintenance of effort requirement.” The Board’s regulations list four factors it would consider in deciding on a waiver:

(a). External environmental factors such as a loss of major industry or business;
(b). Tax bases;
(c). Rate of inflation to growth of student population;
(d). The maintenance of effort requirement relative to the county’s statutory ability to raise revenues.

Moreover, a county asking for a waiver bears a burden of proof that the above factors prevent it from maintaining its current level of per-pupil school spending, thus requiring a waiver. Should a county not receive a waiver and fail to meet its MOE requirement, its increase of state aid would be at risk.

On Montgomery, the Board found the following:

(a). While the county is suffering an economic downturn, it has not lost a major industry or business. The Board noted that 21 of the other 24 counties also suffered from the recession and did not request waivers.

(b). The Board found that while Montgomery had revenue reductions, it did not have an erosion of its tax base. It cited the county’s relatively low unemployment rate and the presence of the federal government as protecting its tax base relative to the rest of the state.

(c). The Board stated that Montgomery’s student population had grown by just 1,424 in the year ending September 30, 2008 so inflation or student growth was not an issue.

(d). The Board differentiated between two limitations on the county’s ability to raise revenues: the income tax cap and the Ficker Amendment. Both were cited by the county as reasons it could not raise more money and was thus compelled to seek an MOE waiver.

State law limits income tax rates charged by the counties to 3.2%. Montgomery is already at that limit. The Board said, “We give great weight to the fact that the county is prohibited by State law from increasing the income tax rate.”

The Ficker Amendment, passed by Montgomery voters last November, requires a unanimous vote by nine County Council Members to raise property taxes by an amount exceeding the rate of inflation. The Board dismissed that as a reason for the MOE waiver, saying, “We give little weight to the need for a unanimous vote to raise property taxes.”

Why?

The Board said this about local tax caps:

In some counties in Maryland there are locally imposed caps on taxes and/or other significant locally imposed impediments to increasing taxes. We do not opine on the propriety of those locally imposed prohibitions or impediments. We do opine, however, that based on our understanding of the State/local share requirements contained in Maryland’s education funding formula, when we consider a county’s ability to raise revenue we will give locally imposed prohibitions little weight in the balance.

We adopt this position because each county and its voters are free to restrict tax increases, but in our view, each is not free to abdicate its responsibility to fund its minimum local share of education costs. If we gave locally imposed prohibitions great weight in our analysis, we envision legal and public policy consequences that could destroy the cornerstone of the education funding formula because any county in Maryland can, by referendum or otherwise, cap its property or other tax bases at a level that would ultimately preclude the county from raising sufficient taxes to fund MOE in full. That is not an outcome this Board could sanction by interpretation of our regulation.

Translation: you may pass the Ficker Amendment or any other tax caps, but you may not escape your responsibility to educate your kids. Prince George’s and Wicomico Counties were also denied waivers because the Board gave “little weight” to their own local tax caps.

Our spies were dead wrong about Blair Ewing. He offered this dissent from the Montgomery decision:

The Montgomery County case is a unique one. The initial problem was that there was adequate money to fund the schools, but not adequate money to fund both the schools and the county government operations. The local school board, the county executive and the county council have now all agreed on adequate funding for both the schools and the county government operations, but need the waiver they have requested to make the agreement effective. This is an example of good government at work. It ought to be encouraged and supported. The waiver should be granted.

State Board Member Donna Hill Staton also dissented.

So now Montgomery is obligated to divert $79 million of county money from non-school programs to the schools to maintain its per-pupil education spending. That is money the schools do not need because they are receiving federal stimulus funding. Police service, fire service, health and human services programs, transportation – all are at risk because of the Ficker Amendment.

And this is just the beginning.