Report Concludes State Law Will 'Straitjacket' County Spending

Changes to Maryland’s “Maintenance of Effort” school-funding law will force county governments onto even more cautious fiscal footing when they craft long-term budget plans, compelling them to be more tight-fisted toward schools, an analysis of the proposed revisions shows.

The assessment comes in the first investigation into the impact of the MOE revisions, discussed Tuesday by the Montgomery County Council.

County officials have for years blasted the state’s MOE law, which dictates how much funding counties must put into their respective school systems’ budgets. The sticking point has been that a county’s contribution cannot decrease from one year to the next. The changes to the MOE law are two-fold. They:

• Require county governments to take on the cost of their teachers’ pensions.
• Bolster enforcement of violations. When a county contributes below its MOE level, the state comptroller can “intercept” the amount of the decrease directly from the county’s income tax revenues

A briefing Tuesday by the county’s Office of Legislative Oversight explained the impact of the MOE changes.

Slight variations in state school aid, county tax revenues and student enrollment will now loom larger and reach further across the county’s budget than ever before, said Aron Trombka, a senior OLO analyst.

Because MCPS is now guaranteed to see no drop in funding, those fluctuations will have to be compensated for via a tax increase or cuts elsewhere in the county budget.

MCPS projects student enrollment to grow an average of 1.1 percent each of the next six years. County revenue projections for the next six years anticipate an average of 2.4 percent annual growth. When those projections vary even by mere fractions from the actuals, it will skew budget bottom lines by millions of dollars, Trombka said, forcing either cuts elsewhere or tax increases to cover the difference.

The MOE law amounts to a fiscal “straightjacket,” said Councilman Hans Riemer.

“What wounds me or offends me about what the state did, is it takes away our ability to budget to the need,” Riemer said.

The County Council funded MCPS above the MOE level from fiscal 2003 through fiscal 2009. Even after three years of decreased spending, Montgomery still has among the highest per-pupil spending in the country, said Council President Roger Berliner. But now, the MOE law puts a chilling effect on the council's willingness to exceed spending mandates, despite reforms intended to make counties better able to get a waiver, he said.

“Those are waiver provisions that are outside of our control,” Berliner said. “So now we have an inherent dynamic … [that] forces us to be more conservative than we otherwise might want to be.”

Councilmembers will delve further into the MOE law on Monday, including data on MCPS’s actual enrollment last year and details on the new waiver rules.

Tuesday’s briefing ended on a somber note from Councilwoman Valerie Ervin. The MOE squeeze will be even more foreboding, she said, after the onset of federal budget “sequestration”—the $1.2 trillion in cuts set to take effect in January and last until 2021.

“We’re in for a wild ride,” Ervin said. “… This is just the beginning of the pain.”