By Adam Pagnucco.
In a recent post on the real estate industry, I wrote the following:
One of the principal flaws of policy making in MoCo government is that individual policies are considered in isolation from each other. Fiscal and economic impact statements are applied to single bills by themselves. There is no framework for analyzing the cumulative impact of many bills – and taxes – all passing at the same time.
That inspired one of my sources (you know who you are!) to make a suggestion: the county should calculate this in an annual report that tallies up the cost of everything they have done that year.
Imagine what that number would be.
Let’s explore this. Every bill has a fiscal impact statement and an economic impact statement. Some bills (like renaming a commission) have no fiscal or economic impact. Other bills have big impacts on one or both of those things. Let’s start by adding up all of those statements for every bill passed that year.
Then let’s move on to any regulations that are approved. They should all be costed out and tallied.
Every tax and fee increase must be added in.
Every supplemental and special appropriation approved outside the budget process must be added in.
Every program increase for a department or agency must be added in.
And every compensation increase – the big money in county government – must be added in.
Finally, the interaction of all of these factors must be estimated. Rent control and increases in property taxes, impact taxes and recordation taxes all have economic impacts as individual measures. But when they are combined in one package, what is their cumulative impact on the real estate sector? I bet it’s greater than just the sum of their individual impacts. An owner might be able to swallow any one or two of them, but all four together might push them to exit the county.
A lot of the fiscal impacts feed into published budgets but they are often not explicit and are incomplete (especially for supplemental and special appropriations). Nothing is done to aggregate economic impacts. This work should be performed and appear in print.
As an analyst, I would not want to be the one to have to calculate all of this. In any given year, there are dozens of bills, several fee increases and multiple sets of regulations that get approved. Adding up their individual costs is a head start but assessing their cumulative impact is tough. I’m not sure I could put a number on it, but if I were assigned to do it, I would do my best. If I could not come up with a specific number, I might be able to estimate a range. Would it be tens of millions? Hundreds of millions? In any particular year – especially this year – the fiscal and economic impacts could approach that level in cumulative terms.
Could the publication of those estimates change the conversation in Rockville?
If any council member wants to steal this idea, feel free!
Because I would write about any such analysis in a New York minute.
Update: One of my readers pointed out that the state already does an annual fiscal impact statement accumulating the combined impact of legislation passed in each year. The current Effect of the 2023 Legislative Program on the Financial Condition of the State is a real eye-opener. Among other facts, it reveals that the actions of the General Assembly this year reduced FY24 general fund revenues by $170 million and increased FY24 general fund spending by $273 million, resulting in a net hit of $443 million. To be fair, the state was running a surplus so it could afford to spend some extra money. However, those actions have now contributed to large structural deficits in the future that must be confronted at some point.
In any event, this is a useful exercise by the state. There is no reason why the county cannot do this as well.