By Adam Pagnucco.
Last week, Council President Natali Fani-González sent the memo reprinted below outlining how the council will consider County Executive Marc Elrich’s recommended FY27 operating budget. The council president, a position that rotates annually, sets the full council’s agenda and traditionally leads the process that results in the council’s approval of operating and capital budgets. This year, those budgets have major components including a huge capital request by MCPS, three different tax proposals by the executive and numerous large fee increases.
Here are a few things that stand out for me from the council president’s memo.
First, she is deferring consideration of Elrich’s special taxing districts until after the budget is decided. That doesn’t mean they’re dead, but she did say that analyzing them “requires an in-depth, time intensive process that can take several months – time that we do not have during the operating budget review and approval process.”
Second, Elrich has proposed closing the incinerator and has included $44 million in funding for a six-month long haul contract to move waste to a location outside the county. Fani-González prefers “that the Council support a funding framework that maintains current operations, with long-term planning beginning in the Fall. This keeps the Council’s focus on the key FY27 budget decisions while ensuring that the future of solid waste in Montgomery County gets the appropriate time and attention it deserves outside of the annual budget process.”
Third, she writes: “As a reminder, the County Executive’s proposed 6.3 cent property tax increase is dedicated entirely to MCPS.” Well, yes and no. The county has a charter limit on property tax increases that requires a unanimous council vote to raise the county’s weighted tax rate on real property. However, state law allows counties to bypass such limits to fund public school budgets, so dedicated funding increases for them only require majority council votes. Since money is fungible, a majority vote to raise new property tax money for schools allows existing property tax money to flow to the rest of the government. The council used this loophole to raise property taxes by 4.7 percent three years ago and might do it again.
The council president’s memo is printed below.
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To: Councilmembers
From: Natali Fani-González, Council President
Date: March 19, 2026
Subject: FY27 Operating Budget Approach
Each year the Council President proposes an approach for reviewing the County Executive’s recommended operating budget. This memorandum presents the process I believe will serve the Council and our residents well as we go through the FY27 budget.
Now that we have the County Executive’s recommendations, it is our job to determine how to best maintain – and enhance where we can – critical services to residents and to ensure long-term fiscal discipline and responsibility, while acknowledging that residents are already struggling to make ends meet due to inflation and anemic wage growth. All of this is layered on top of a slowing economy and localized job losses due to the actions of the Trump administration. In that context, prioritizing what matters most and investing our limited dollars in programs that work best is our charge. Key components of the Executive’s budget are listed below along with my recommendation on how the Council should address each as part of this budget process.
Property and income tax increases. The Executive recommends a 6.3 cent increase in the property tax rate and a 0.1% increase in the income tax rate to fund his proposed budget. I believe it is important for the Council to review this budget within a framework that allows us to make an informed decision on tax rates after receiving public input and understanding important trade-offs. The bar for raising taxes is appropriately high. My suggested FY27 budget review process, beginning on the next page, will provide that framework.
Special taxing districts. The Executive recommends creating two special taxing districts that add new taxes on residents and businesses, above and beyond the property and income tax increases mentioned above. Creating special taxing districts requires an in-depth, time intensive process that can take several months – time that we do not have during the operating budget review and approval process. Additionally, the Council created the Infrastructure Funding Workgroup to review and provide options to the Council. The Workgroup’s final report is due in June 2026. As a result, I plan to defer introduction of the County Executive’s proposed legislation to create special taxing districts until these concepts can be reviewed in conjunction with the Workgroup report.
Solid Waste Disposal. Last year the Council made it clear that we would not consider a once-in-a-generation decision to fundamentally change how we handle the County’s solid waste absent a complete, rigorous, and balanced analysis of all options that included a comprehensive and equitable community engagement process. From my perspective, the Executive’s proposal for the FY27 budget does not meet that standard. As a result, while the proposed solid waste budget will still undergo an in-depth review in Committee and in full Council as always, I am proposing that the Council support a funding framework that maintains current operations, with long-term planning beginning in the Fall. This keeps the Council’s focus on the key FY27 budget decisions while ensuring that the future of solid waste in Montgomery County gets the appropriate time and attention it deserves outside of the annual budget process.
Suggested FY27 Budget Review Process. To ensure that the Council has all options available when making tax rate decisions, we will need to identify significant potential reductions to the Executive’s proposed budget. While this will not be easy, I believe we owe it to all taxpayers and residents to be open and deliberate in this process. With this in mind, I am recommending the following approach for the Council’s review of the FY27 budget.
1) Early review of the implications of different tax rate decisions and reserve amounts. I have asked Council staff, as part of the Operating Budget Overview on April 7, to prepare budget information that exemplify the types of changes the Council would be required to make in order to approve a budget: a) without a tax increase; b) with a lower tax increase; and/or c) with larger undesignated reserves in order to provide greater flexibility due to economic and federal uncertainty.
2) For County Government Departments and NDAs, place all new or additional tax supported spending increases on the reconciliation list.
a. These items would generally include those categorized by the Office of Management and Budget (OMB) as “Add” or “Enhance”. Items OMB categorized as “Increase Cost” would be placed on the reconciliation list unless they fall under one of the exceptions listed in (b) below. Formerly grant-funded items that are being switched to the General Fund would be placed on the reconciliation list, as would all increases recommended by the Council that were not included in the Executive’s recommendation.
b. Items that would not be automatically placed on the reconciliation list include technical adjustments, cost-neutral shifts between departments or program areas, changes due to internal service fund chargebacks (i.e., motor pool, printing and mail, etc.), annualization of personnel costs, required contractual increases, legally required increases, or compensation/benefit increases.
c. Any supplemental or special appropriations that were approved in FY26 using General Fund Undesignated Reserves and are annualized in the FY27 budget should be reviewed to determine whether the Council still supports ongoing funding for these items.
d. While all increases will go on the reconciliation list as described above, the Committee or Council can instead recommend that the item be reduced from the budget. In that case, the item will be tracked as a formal reduction as opposed to a reconciliation list item that is still subject to a final decision. While making reductions will require difficult choices, I encourage Committee’s to keep in mind that doing so is the only way to potentially reduce or eliminate the proposed tax increases.
e. FY27 compensation and benefit enhancements will be reviewed separately by the Government Operations & Fiscal Policy Committee and then the full Council. Options to reduce compensation costs may also be placed on the reconciliation list if requested by the Committee or the Council.
f. Proposed inflationary adjustments for non-profit providers will be reviewed by the full Council, similar to the process the Council followed that past two years. This ensures that the inflationary adjustment is treated consistently across all departments and non-departmental accounts. As a reminder, as part of the Council staff report for the non-profit inflationary adjustment, staff will share information about the incremental portions to either increase or decrease the total appropriation for the inflationary adjustment (and will share this information with Councilmember’s in advance as soon as they have the full data disaggregated from the individual department budgets).
g. Committees are also encouraged to consider reductions to a Department’s base budget to create additional budget room.
3) For County agencies, funding increases should be reviewed and placed on the Reconciliation List as follows:
a. As part of the budget review process, the Committee and Council should discuss with the agencies the potential implications of various funding levels. However, the ultimate funding decisions are at the discretion of each agency’s governing board based on the overall funding level approved by the Council.
b. For MCPS and Montgomery College, which are subject to State Maintenance of Effort laws, any local funding above the MOE minimum or last year’s local funding level (whichever is higher), would be placed on the reconciliation list – broken down into equal tranches of 10% of the recommended increase. As a reminder, the County Executive’s proposed 6.3 cent property tax increase is dedicated entirely to MCPS.
c. For MNCPPC, which is not subject to MOE laws, the Committee and Council should review funding increases, place items on the reconciliation list, and consider funding reductions in the same manner as outlined for County government departments.
d. Any Council recommended additions to an agency budget above the Executive’s recommended funding level would also go on the reconciliation list.
e. Like County Government, the Committee or Council can recommend that any items or tranches be reduced from an agency budget. In that case, the item or tranche will be tracked as a formal reduction as opposed to a reconciliation list item that is still subject to a final decision. While making reductions will require difficult choices, I encourage Committee’s to keep in mind that doing so is the only way to potentially reduce or eliminate the proposed tax increases.
4) To assist Committees in this work, Council analysts should include the following information in their staff reports:
a. In-depth review of all funding increases that will go on the reconciliation list, including information such as the purpose of the program/position, expected outcomes, an explanation of why funds are needed for the program/position in FY27, timeframe for actual implementation if approved, impacts if the program/position is not funded, and if the funding can be broken down into tranches.
b. Any potential reductions to a department’s base budget that the Committee may want to consider (e.g., a program that is not achieving desired outcomes). While staff are encouraged to provide these types of reductions, it will not be consistent across departments due to the varying nature of programs and services.
c. Identify any FY27 funding that annualizes FY26 supplemental or special appropriations approved using General Fund Undesignated Reserves.
d. A review of the Operating Budget Equity Tool score and narrative prepared for each department by the Office of Racial Equity and Social Justice.
e. A review of fund balance policies and projected FY27 fund balance for each department with a separate tax supported fund (e.g. Urban Districts) or non-tax supported fund (e.g., Permitting Services, Alcohol Beverage Services, etc.).
While the process will not be easy and will require difficult decisions, I know that we as a Council are up to the challenge and I look forward to working with each of you as we craft our FY27 budget decisions.