County Executive Marc Elrich Responds to Passage of the FY25 Budget by the County Council

For Immediate Release: Friday, May 24, 2024

County Executive Marc Elrich responded to the passage of the FY25 Operating and Capital Budgets by the County Council. Nearly 100 percent of the County Executive's recommended operating budget was adopted. This $7.1 billion operating budget provided MCPS with its second-highest funding increase in history and made historic investments in providing more affordable housing, improving public safety, tackling climate change and ensuring equity. The FY25 budget does not include any tax increases.

"I want to thank the Montgomery County Council for its work and for approving 99.5 percent of my recommended budget," said County Executive Marc Elrich. "Our budget process was informed by residents and community groups, many of whom participated in our 10 public budget discussions held over the last year. The $7.1 billion operating budget includes additional funding for a variety of important initiatives, including expanding our successful drone program in the police department, sustaining and expanding our mobile crisis teams, workforce training at the correctional facility, supporting the Great Seneca Transit network and support for tenants. However, as we turn the page to next year's budget, we must address our current tax structure. As I have stated before, we have the lowest commercial tax rate in the region. As a result, we have been unable to match our neighbors' level of effort in building new infrastructure. We should work together to modernize our tax system to be more similar and competitive with Northern Virginia. By doing so, we will better target our funding sources and resources. There are ways to make taxing more progressive and fairer without additional taxes for County residents. I look forward to being part of the solution to fix this process moving forward."

HIGHLIGHTS OF FY25 BUDGET:

• Record funding for education:
  • Provides $3.3 billion for MCPS; $157 million above last year
  • Second highest increase in funding for MCPS
  • Funds 99.2 percent of MCPS Board of Education's budget request
  • Fully funds the negotiated compensation agreements for teachers and other MCPS employees to retain and recruit outstanding educators and other essential school staff
  • Fully funds Montgomery College's request
  • Provides $45.7 million in funding for school health services in the Department of Health and Human Services
  • Provides $20 million for the Early Care and Education Initiative (ECEI)

• Enhances public safety:
  • Expands MCPD's successful "Drone as First Responder" program to Germantown/Gaithersburg and Bethesda and extends hours of established programs in Silver Spring and Wheaton
  • Invests in expanding police recruiting and retention efforts
  • Funds two additional Mobile Crisis Teams - for a total of seven teams
  • Funds year-round operation of the Pre-Release Center, which is a national model

• Invests in Transportation:
  • Funds for the launch of the Great Seneca Transit Network that will provide frequent transit service and improve mobility and access to jobs in Rockville, Gaithersburg and Shady Grove areas
  • Provides funding for repairs and accessibility improvements for bus stops and bus shelters
  • Adds funds for residential road resurfacing
  • Provides additional funding to help us achieve our Vision Zero goal, including an increase to the Safe Routes to School program
  • Provides funding to implement Veirs Mill Road Bus Rapid Transit with service to launch in FY27
  • Provides funding to implement MD 355 Bus Rapid Transit Central phase, with service to launch in FY29

• Provides record funding to combat climate change:
  • Provides $364 million in total to fight climate change through transit, increased renewable energy, improved building efficiency, and nature-based solutions
  • Provides $19.1 million for the Montgomery County Green Bank - an increase of almost $500,000 over FY24 budget
  • Adds $8 million in new spending to further the County's efforts to fight climate change
  • Adds funds to support climate change solutions in the transportation sector, clean energy efforts and zero waste efforts
  • Adds $40 million in new capital funding to enhance energy conservation in County-owned facilities and to support the implementation of the new Building Energy Performance Standards

• Allocates record funding to produce, preserve and protect affordable housing supply:
  • Funds $169.4 million to expand the preservation and production of affordable housing to our most economically burdened residents
  • Provides $56.2 million in the Housing Initiative Fund
  • Includes $22.9 million for the Rental Assistance Program (RAP) to continue providing rental assistance and supportive services to help the County's most vulnerable residents
  • Includes $113.2 million in the Capital Improvement Program budget
  • Includes $65 million in new capital funding for the Affordable Housing Acquisition and Preservation project

• Supports growing Montgomery County's economy:
  • Provides $26.2 million to support growing the County's economy, an increase of 13.1 percent from the FY24 Approved Operating Budget
  • Funding for "BioHub Maryland at Montgomery County" to train our workforce at a state-of-the-art multifunctional facility equipped with cutting-edge industrial bioprocessing equipment
  • New capital investments to refresh our existing incubators into innovation centers
  • Includes $2.3 million to WorkSource Montgomery - a 12.9 percent increase over the prior fiscal year that includes support for the Summer RISE youth program and programming at the Montgomery County Correctional Facility to support successful reentry opportunities

• Improves government services by investing in employees and programs while maintaining over 10 percent in reserves:
  • Preserves vital services for County residents without any tax increases
  • Includes reserve balance of 10.8 percent or $707.1 million in FY25
  • Recognizes work of nonprofit partners with a three percent inflationary adjustment to these organizations who receive funds from the County
  • Funds to modernize and foster transparency and equity in our classification and compensation structures
  • Eliminates 60 positions and repurposes 40 positions, the vast majority of which have been vacant for longer than one year

• Ensures equity, resources and services for all:
  • All decisions in the FY25 recommended budget were reviewed and analyzed by the Office of Racial Equity and Social Justice
  • Over $17 million to address food insecurity - including $3 million in HHS and $14.2 million in the Office of Food Systems Resilience
  • Funds expansion of Excel Beyond the Bell to two new sites: Eastern and Benjamin Banneker Middle Schools
  • Includes $2.9 million to increase homeless shelter capacity and provide overflow sheltering in the winter months

ADDITIONAL COMMENTS FROM COUNTY EXECUTIVE MARC ELRICH ON PROCESS, TRANSPARENCY AND MOVING FORWARD:

"I want to thank everyone who participated in this budget process. I received numerous letters and emails and held meetings with community members regarding service needs. The feedback from these conversations has been invaluable and informed my funding recommendations for FY25. I also want to acknowledge the incredible work of our community partners.

County government alone cannot reach everyone who needs assistance. Through our partnerships with nonprofit organizations and faith communities, we can connect more deeply with our residents and deliver much-needed services.

As County Executive and as a former at-large Councilmember, I am very mindful of the difficult nature of budget decisions. We will always have more worthy programs and practices than we can fund.

Last year, the Council directed the school system to use $33 million in one-time federal dollars for ongoing needs instead of increasing the tax designated for education. This decision has made it even more challenging to balance the budget without raising taxes.

During this budget season, the school system faced an unexpected increase in health care costs. My staff and I recommended a solution that would not have cut services, raised taxes, or touched the reserves. The solution was to reduce the amount of funds going into the Combined Retiree Health Benefits Trust (CRHBT) and instead use them to pay the current health care costs of current retirees. (This trust fund is often referred to as the OPEB fund; OPEB stands for Other Post Employment Benefits.). Each year the budget includes contributions to the trust fund, which is designated for paying future medical bills for future retirees. Currently, the CRHBT is extremely well funded with $800 billion, and its balance is growing due to our prudent investment practices. This is not the fund that pays current retiree health care costs; the CRHBT funds may sit for 15-20 years, accruing value. I would rather use the funds to meet the current serious needs in our schools rather than set aside those dollars in a fund that is sufficiently funded. Meeting our school needs now is an investment in the future. Furthermore, this action does not affect the County's ability to pay the future health care costs of future retirees.

Additionally, transferring a portion of the CRHBT contribution to pay current retiree costs has been an ongoing practice supported by this and previous Councils. In fact, on May 10, the Council approved transferring the amount of funding by $10 million for FY24 CRHBT contributions to pay current retirees' health care costs; similarly, a transfer of the FY25 contribution could also be approved.

I did not include this transfer in my recommended budget because I did not learn of the schools' shortfall in time do so. However, my staff and I immediately began conversations with Councilmembers and staff to suggest redirecting those funds, which were available in the budget that I sent over.

I am hoping that as the next budget cycle begins, Council leadership will collaborate with my administration on tax structure reform to increase revenues, boost our economy and create jobs.

Montgomery County has the lowest commercial tax rate in the region. If we modernize our tax system and adopt a differentiated property tax method similar to Northern Virginia's approach, we can raise more revenue from the commercial sector while still maintaining a competitive rate. This approach would fund critical transportation projects and meet other needs without increasing the burden on our residents. It would also remove transportation projects from our capital budget, freeing up funds for school construction and renovation and other community needs.

Earlier this year, we had the opportunity to work with the state legislature to achieve progressivity in our income tax rate and better target our property tax rates. Unfortunately, the Council declined to collaborate on these goals. Moving forward, we must work together to create a fairer and more progressive tax system.

I believe a transparent process leads to better outcomes because we work with the public as we make difficult choices. I look forward to working with the Council and the public to improve our budget process, ensuring that critically important needs are funded in a timely manner. Together, we can make our tax system more equitable and improve public confidence in our decision-making.

The budget process is incredibly important to the residents and businesses of Montgomery County. It shapes how we provide essential services, support our schools and build a thriving economy. I want to express my deep appreciation to all the County employees and County Council staff who worked tirelessly on the FY25 budget. Their dedication and hard work ensure that we continue to serve our community effectively.

Montgomery County is a remarkable place, home to one of the most diverse populations in the world. We have an outstanding education system, great economic opportunities and a community culture rooted in compassion, inclusion and support for those most in need. As we move forward, let's continue to work together to make our County even stronger, ensuring that everyone has the opportunity to succeed and thrive."

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Release ID: 24-249
Media Contact: Scott Peterson 240-255-9462
Categories: Budget, Executive Office

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