By Adam Pagnucco.
In a new memo to the county council, Chief Administrative Officer Rich Madaleno describes a number of budgetary pressures including declining revenue growth, expenditures (both total and ongoing) exceeding revenues and future challenges such as state mandates, inflation and compensation increases. The situation is not dire as the county’s reserves are still on track to exceed its target of 10% of revenues this fiscal year. But there is a bit of belt-tightening, such as this: “Departments with tax-supported budgets are required to submit target reductions for FY26.”
The county implemented three different tax hikes less than a year and a half ago.
There has been a steady muttering coming from Rockville about another tax hike in next spring’s budget. This memo is sure to feed it.
Madaleno’s memo is reprinted below.
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MEMORANDUM
September 26, 2024
TO: Council President Andrew Friedson
Council Vice President Kate Stewart
Members of the Montgomery County Council
FROM: Richard S. Madaleno, Chief Administrative Officer
SUBJECT: FY26 Operating Budget Development
As we begin the FY26 Operating Budget development process, I want to provide some details about the framework for initial departmental budget submissions. The framework will likely change as we refine our forecasts for the current and next fiscal years.
FY26 Preliminary Outlook:
- County tax revenue growth is moderating projected at 2.9% for FY26, compared to 5.9% for FY25.
- As discussed during budget deliberations, FY25 budgeted expenditures exceed revenues by $274.0 million.
- Ongoing expenditures for FY25 exceed projected revenues by over $130 million.
- FY25 ending reserves are estimated at $707.1 million (10.8% of adjusted governmental revenue) due to their use during the fiscal year.
Significant Budget Pressures for FY26:
- Ongoing programmatic cost increases due to inflation or legal requirements.
- The State’s maintenance of effort requirement for Montgomery County Public Schools.
- Continued implementation of Blueprint for Maryland’s Future requirements.
- Compensation adjustments in existing and future bargaining agreements.
- Employee and retiree health cost increases.
- Implementation of the State’s Time to Care Act.
- Additional cash required for CIP requests.
- Increases in debt service costs.
FY26 Budget Development Guidance:
- Departments with tax-supported budgets are required to submit target reductions for FY26.
- Departments should focus on reducing non-core services, eliminating duplications, and improving efficiency.
- Enhancement requests may be submitted but must be offset by additional reductions.
- Departments should avoid reductions to front-facing services where possible.
- All reduction proposals must consider racial equity and social justice impacts.
We are committed to developing a responsible and balanced budget for FY26. I look forward to working with the Council throughout this process. Please contact me if you have any questions or concerns.
RSM:jh
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