By Adam Pagnucco.
As the county council debates changes to County Executive Marc Elrich’s recommended FY27 operating budget to avoid his increased property and income tax rates, a memo from the executive branch has made its job more difficult. Chief Administrative Officer Rich Madaleno has told the council that many proposed budget changes cannot be adopted because they violate county contracts (including ongoing contracts with vendors) or state mandates. Madaleno also warns about “items that are characterized as deferrals but cannot actually be deferred. Several positions identified as new are, in fact, currently filled; defunding them would require a mid-year reduction in force.”
While Madaleno does not explicitly say this, several of my sources claim that his warnings apply to many of the budget changes proposed by Council Member Will Jawando, who released a plan to avoid the executive’s tax increases. If true, that means that if Jawando were to propose the items mentioned by Madaleno, they would be unlikely to gain the votes to pass.
So far, the council has cast a straw vote for a tax increase on homeowners that raises less than half the revenue generated by Elrich’s tax hikes and it has refused to go along with Council President Natali Fani- González’s proposal to reduce raises for county employees. Those two moves have constrained its room to maneuver on the budget. Now with Madaleno’s memo in hand, the biggest remaining target in the council’s search for money is MCPS, which is seeking a $180 million increase in its county appropriation despite losing enrollment.
Looming over all of this is an increasingly problematic number: the council needs 8 of 11 votes to pass this year’s operating budget. I will be writing more about that soon.
Madaleno’s memo, which was sent on May 2 and has been bouncing around the council since then, is reprinted below.
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Dear Councilmembers and Confidential Aides,
As the full Council begins deliberations on the Recommended FY27 budget proposals, the County Executive has asked that I share some observations on the various proposals and committee decisions currently under consideration. The attached spreadsheet provides some more detailed analysis of proposals before the Council, but it should be considered initial and informal.
First, I applaud the careful review you and your staff have put into analyzing his proposals and listening to the concerns of my colleagues and our residents. I know you share his goals of providing outstanding educational opportunities for all students, honoring the commitment of our County workforce by honoring our employee contracts, preserving direct services to our most vulnerable residents, and ensuring public safety across our community. However, some of the budget ideas that have come to the fore have serious implications that should be noted.
Several of the items identified for reduction are not available, at least not without legal exposure, service disruption, or operational consequences that are not apparent from the various lists in the staff’s status update packet. This is precisely why I would urge Councilmembers, as you finalize your deliberations, not to adopt any reduction without first consulting directly with OMB or the department responsible for delivering that service.
A meaningful portion of the proposed reductions involves items the County is legally or contractually required to fund. These include active vendor contracts already in execution, union contract obligations such as Police Trial Boards required under both the Maryland Police Accountability Act and our collective bargaining agreements, state-mandated programs like retail tobacco enforcement delegated to the County by the General Assembly under Chapter 462 of 2024, and legal representation requirements for children and vulnerable adults under CINA and Adult Protective Services proceedings. Reducing funding for these items will increase legal exposure. Cutting funds for retiree health care expenses will not save money but will require either a mid-year supplemental, a change in the recently enacted fiscal policy for funding the OPEB trust, or a much larger contribution rate for all plan participants in calendar year 2027 to make up for the deficit in the health insurance account.
The County Executive remains concerned about the direct impact several proposed reductions would have on the County’s most vulnerable residents. The partial reduction to the Adult Shelter budget gap backfill would result in the loss of approximately six year-round beds and four seasonal beds at a time when our emergency shelters are consistently at or near capacity. The $750,000 reduction to HHS Health Care Access is not tied to a specific program, but if applied to existing services, it would likely affect Montgomery Cares, Care for Kids, school health, or maternal and child health programs, all of which serve residents who have no alternative. I do not believe the Council intends these outcomes, which is why I am asking that any reduction of this nature be accompanied by explicit identification of which services would be cut before a vote is taken.
A third area of concern involves items that are characterized as deferrals but cannot actually be deferred. Several positions identified as new are, in fact, currently filled; defunding them would require a mid-year reduction in force. Several contracts identified as held to FY26 levels have already commenced, and the funding in question represents annualized payments for the same level of service already approved, not new spending.
Another area of concern deals with broad multi-agency reductions that remain unspecified as to the accounts and programs from which savings would be drawn. Unspecified reductions create significant implementation risk. While I stand ready to work with my Executive Branch team and our outside agency leaders to further refine and reduce the budget, you will need to preauthorize the County Executive to reduce appropriations in any category identified across the operating budget. Otherwise, any unspecified reduction is potentially risky deficit spending. In addition, reductions after appropriation to the funding of Montgomery College and the Montgomery County Public Schools could potentially violate State law.
Finally, reductions to non-tax-supported items should be considered only on policy grounds, as they will not accrue to the bottom line of the General Fund. This is especially true in any enterprise fund, such as the Department of Permitting Services.
There are areas where I believe we can work together productively. Discretionary travel reductions, office supply adjustments, vendor contract renegotiations where timelines permit, and the deferral of initiatives that have not yet launched and carry no contractual or service commitments are all reasonable areas for further discussion, and I am committed to that conversation.
I raise these not to be prescriptive about outcomes, but to ensure the Council has the full picture as you make these decisions. The CEX team is available to answer questions on any of these items or others in the attached materials, and we would welcome the opportunity to do so before final budget decisions are made.
Thank you again for your service to our community each and every day.
Rich Madaleno
Chief Administrative Officer
Office of County Executive Marc Elrich
Montgomery County, Maryland