By Adam Pagnucco.
MCPS has requested a $17 million drawdown from its fund balance to pay for special education. With an operating budget in excess of $3 billion, that should not be a big deal. But with a resulting projected unassigned fund balance of just a half million dollars and growing uncertainties afflicting federal spending, one wonders if the school system – along with the county government itself – is getting close to the edge.
The music above is much more pleasant than the county’s future prospects.
First, let’s review the supplemental appropriation that MCPS is requesting. MCPS would like to spend an extra $17 million on special education in the current fiscal year. A county council staff packet explains:
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Based on financial data of September 30, 2024, MCPS projects a deficit due to higher than anticipated expenditures – primarily for special education services. MCPS reports that the over-expenditures in instructional and special education salaries are primarily the result of absorbing costs associated with hiring staff members who may have been in positions cut from the FY25 budget into prior vacancies. These costs are due to the placement of more experienced staff with higher salaries into positions which had been planned to be filled by new staff. In addition, expenditures are higher due to costs associated with non-public placements, critical staffing needs, and contractual services. The requested appropriation will be used to offset the current shortage in funding for position salaries and the costs associated with providing one-on-one critical staff support and other services to special education students.
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An aside. Superintendent Thomas Taylor is proposing to hire 718 FTEs in the district’s special education category in his FY26 budget. That’s equivalent to five years of hiring in just one year. The experience described above reinforces my skepticism that Taylor, however persuasive he may be, can actually fill all of those positions at his estimated cost all at once.
So where would the extra $17 million in spending come from? MCPS would like to allocate it from its fund balance – essentially its piggy bank. The staff memo shows that if the county council approves its request, the district will have just $537,437 left in its unassigned fund balance. That compares to a $3.3 billion approved operating budget.
The council staff’s math shows a light piggy bank on the final line.
Now here is where it gets complicated: there are multiple kinds of fund balance at MCPS and other governmental entities. Just because the unassigned balance is almost gone does not by itself mean MCPS is out of money. At the end of FY24 (June 30), MCPS had $60 million in spendable fund balances. Subtracting the $17 million from that money, MCPS’s remaining spendable fund balances would total $43 million. That would be the lowest amount since FY18.
MCPS can afford this at this moment. And if Taylor needs this spending to sustain special education this year, I have no evidence to question that policy judgment. But here’s the thing: MCPS could wind up wishing it had that extra $17 million later this year. Why do I say that?
Here is a statement that will be a predominant theme on Montgomery Perspective for the foreseeable future: the state of the economy that sustains county and state budgets is changing. What is true today may not be true six months from now. It’s time to discard any business as usual approach in the face of the orange storm clouds billowing from the Oval Office.
I worked at the county council during part of the Great Recession. That recession – the worst since the 1930s – took years to fully manifest its ugly effects. A potential new localized Greater Recession, caused by federal politics more than markets, could take shape much more rapidly. All policy makers in MCPS and beyond must pay attention.
During and after the Great Recession, County Executive Ike Leggett – fighting the budget battles of a lifetime – proposed many mid-year savings plans. MCPS was not spared. Examples include FY08 (in which MCPS was asked to save $10 million), FY10 ($22 million from MCPS), FY11 ($19 million from MCPS) and FY16 ($10 million from MCPS). Fund balances are useful in such circumstances.
Will MCPS and the rest of county government face a new mid-year savings plan later this year? If President Donald Trump and his co-ruler, Elon Musk, follow through on their threats to decimate federal spending and employment, don’t rule it out.
County leaders, who spent $103 million out of reserves last year, seem unprepared for what’s coming. Well, they had better get prepared. Soon it will be time to stop grabbing money from reserves and fund balances while there is change yet rattling in the piggy bank. We are close to the edge. Let’s not go over it.