By Adam Pagnucco.
On Monday, I broke the story that a new six-year fiscal plan revealed that the county government’s revenue projections had crashed, causing an $854 million writedown over the next six years. County leaders immediately blamed President Donald Trump, as Council Member Kate Stewart (chair of the council’s Government Operations Committee) told the Banner, “This is exactly what we’ve been talking about for the past 10 months, since last January when this federal administration — the Trump administration — took over.” The crash is now raising the prospect of more tax hikes.
So is she right? Is Trump to blame? And if there is a tax hike, would it be fair to call it “a Trump tax?”
Yes and no.
Let’s remember the biggest single driver of county agency spending. It’s compensation, which accounts for 72% of the combined spending of county government, MCPS, Montgomery College and Park and Planning. In the county government, collective bargaining agreements are negotiated by the county executive and their cost elements are approved by the county council. Additionally, the council legislates directly on county government employee benefits. In the other three agencies, top leaders negotiate with their unions and the resulting compensation is embedded in their budgets. The council does not have line authority over compensation in their budgets, but when it approves those budgets, compensation is included.
Compensation is a compounding cost. Every year, increases in salaries and benefits roll up into the county’s cost base and carry over to future years. It’s rare that they are taken back. More than a decade ago, the county froze pay for three years, implemented furloughs for one year and increased the percentage of health insurance premiums paid by its employees in 2011. These events happened because of the Great Recession, the worst downturn in nearly 80 years that caused county leaders to fear losing their AAA bond rating. Since then, compensation increases have resumed and since 2022, the county council has passed ten different bills increasing employee benefits.
Over the last three fiscal years, county leaders have gone on a compensation binge. The chart below from a council staff memo produced last April shows projected annual revenue growth (red line) and annual compensation growth (blue bars) from FY16 through FY26.
Look at the period from FY16 through FY23. In those years, compensation increases were not that different from revenue growth and sometimes trailed it. That’s a sustainable path.
But now look at the last three fiscal years. County government compensation increased by 7.5% in FY24, 9.6% in FY25 and 7.1% in FY26. That’s more than double the rate of projected revenue growth. It’s also FAR above the rate of inflation. According to the U.S. Bureau of Labor Statistics, the Washington-Arlington-Alexandria CPI-U grew by an annual average of 2.8% in the three years ending in September 2025.
So what happens when the largest single driver of a government’s costs soars at more than twice the rate of its revenue growth? The council staff wrote this in April:
The compensation spending pattern recommended by the Executive produces a budget sustainability challenge. The unavoidable outcome of a recurring trend of this sort is to constrain the County’s ability to meet future spending priorities (including future year pay adjustments) and/or to necessitate raising new revenue.
“Necessitate raising new revenue.” Translation: tax hikes.
How did the council react to this information from their own staff? Once again, they unanimously approved the compensation recommendations of County Executive Marc Elrich. At the time, Trump was in office and federal employee and contractor layoffs were already underway.
Let’s return to the quote by Council Member Kate Stewart on the revenue crash from above: “This is exactly what we’ve been talking about for the past 10 months, since last January when this federal administration — the Trump administration — took over.”
She’s right – the county’s entire leadership knew revenue was going to crash. So why did they approve another large compensation increase anyway? This is the equivalent of closing your eyes while driving your car over a cliff – a cliff you have been watching approach for months.
So is Trump to blame for our problems? Yes and no. Trump’s hostility to the federal government and his horrific economic mismanagement (especially with regards to tariffs) was bound to create problems for both the national and local economies. Presidents often take credit as well as blame for economic conditions they do not create. In Trump’s case, he is directly creating a downturn that did not have to happen. MoCo’s leaders are right about that.
However, recessions are inevitable. They hit us before Trump and they will hit us after he is gone. The county’s mismatch of compensation growth and revenue growth was going to catch up with us at some point. County leaders added hundreds of millions of dollars of nearly locked-in compensation spending without long-term revenue to cover it even before Trump returned. Now that he is back, the bill is coming due quicker than expected. And you’re going to pay it.
We knew Trump was going to screw us.
Did we really have to screw ourselves as well?