By Adam Pagnucco.
Here is a conversation I have occasionally had with politicians and their minions over the years. There have been different versions so I will paraphrase as an illustration.
Politician X: “We need to raise taxes by $100 million.” (The amount varies but let’s use one with a lot of zeros.)
Me: “Do you really need that much money to meet the needs? Your budget is going up by $200 million.”
Politician X: “If I can’t have $100 million more, then I will have to make $100 million in cuts instead.”
Me: “No, you will just have an increase of $100 million rather than $200 million.”
Politician X: Silence. Followed by, “Cuts are bad!”
And so we get to County Executive Marc Elrich’s recommended FY26 operating budget. Let’s start with two numbers.
$56 million. That’s the amount of revenue Elrich’s property tax increase raises.
$525 million. That’s the amount by which his grand total operating budget increases.
Right away, we see that if Elrich had not proposed a property tax increase, he would still have $469 million more to spend in FY26. That’s equivalent to a 6.6% increase in the operating budget, more than twice the current rate of local price inflation. The largest components of that increase are a $209 million rise in income tax collections and a $117 million rise in property taxes separate from his tax hike and primarily due to rising assessments. (Elrich estimates that assessments are up by 6.1%.)
Isn’t growing the budget by twice the rate of inflation enough?
Let’s dig deeper.
The elephant in the room in this budget – and really, every budget – is MCPS. It’s by far the largest agency funded by county government. Of the $525 million total increase to county agencies, Elrich wants to send $299 million to MCPS. That leaves a $226 million increase for the other agencies combined, or a 5.9% increase. If Elrich had not proposed a $56 million tax increase and had kept all of his funding for MCPS, there would be an extra $170 million left over for all of the other agencies, or a 4.5% increase. If we also subtract his gigantic dedicated $50 million fee increase, that leaves $120 million, a 3.2% increase. The most recent annual change in the Washington-Arlington-Alexandria CPI-U (January 2024 to January 2025) is estimated at 2.7% at this writing.
So let’s put all of this together. The executive’s tax increase comprises just 11% of the new money in his budget. Without the tax hike, the executive would still be able to fund his recommendation for MCPS’s budget (which has been praised by the teachers union) and he would still be able to give all the other agencies combined an increase that exceeds inflation.
Given the revenue assumptions in this budget, the tax hike is absolutely unnecessary.
An aside. Various media sources are reporting about “cuts.” That is not the case. The budget discussion soon to take place will be about how much to increase the budget, and if so, how to do so. If you want to see an actual cut, look at the county’s reduction of $1.3 million for the Montgomery County Economic Development Corporation last year. That’s right, folks, this is a county government that says it wants economic development but cut funding for its lead economic development agency by 21% in one year.
Now all of this comes with two caveats.
First, it does not appear that the state’s shift and shaft maneuvers were included in Elrich’s budget. The governor’s budget included $28 million of these shifts onto MoCo. However, the governor’s restructuring of income tax itemization also created more revenue for the county. The General Assembly adopted a different approach to itemization that should still generate extra revenue for MoCo but I have not yet seen whether it will yield enough to offset the cost shifts.
Second, the Trump administration is targeting MoCo’s economy and the General Assembly just passed an income tax hike that disproportionately targets MoCo. (More on that soon.) That combination does not bode well for us. Elrich has built a cushion into his budget by setting aside an extra $87 million in reserves above the county’s 10 percent target, a wise move. The council will be tempted to grab this money for spending. They shouldn’t. They may need it later in the year. And if the Trump/state double whammy gets bad enough to endanger the county’s bond rating, then the budget may need to be revisited.
But right now, that’s premature. Revenues are still growing and property owners are getting nailed by rising assessments. Furthermore, residents who are connected to the federal government legitimately fear for their livelihoods. Given the road map I have laid out above, any competent county council will be able to adequately fund all county agencies at this moment with no need for a tax increase.