Montgomery County Budget Plan Delays the Pain

$370M deficit projected for following year

ROCKVILLE, Md. -- Montgomery County officials have put together a budget that depends on one-time fixes and accounting moves to delay the pain from a deficit of more than $550 million.

But some officials believe the budget could make it more difficult for the county to get out of $370 million deficit projected for the following fiscal year.

The County Council is expected to approve a more-than-$4 billion budget Thursday that restores cuts to bus routes, avoids layoffs of government employees and does not raise property tax revenue above the local limit.

But to close the current deficit, County Executive Isiah Leggett has recommended temporary measures that could come back to haunt them.

He warns that council members, who control the money, will have fewer options when putting together a budget next year.

"Even if the number turns out to be smaller, it could be an even bigger problem because we don't have as many places to go," said Timothy Firestine, who is Leggett's chief administrative officer.

Firestine acknowledged that plans to tap into Montgomery's rainy day fund and to postpone most of the county's annual contribution to future retiree health care costs will lead rating agencies to ask, "How do you get back on track with what was good fiscal practice?"

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Council President Phil Andrews said county officials are making a decision to relax budgeting practices to protect government services and taxpayers who are "squeezed and can't afford to pay more."

He said Leggett and the council have in the past three years taken steps to slow spending increases and to deal with the imbalance between spending and revenue.

For fiscal 2010, the council is ready to approve an operating budget that cuts year-to-year spending by 1.1 percent, the first decrease in almost two decades.

With real estate and income tax revenue falling, officials had few attractive options for dealing with a shortfall that represented about 13 percent of projected spending. The blueprint for fiscal 2010 frees up $40 million by reducing the county's reserve from 6 percent to 5 percent.

For the second year, the county intends to cut its down payment on retiree health care costs, slashing the scheduled contribution from $66 million to $12 million. The budget proposal also skimps on the contribution to a cash fund for construction projects.

Instead of setting aside $31 million, as county policy recommends, the plan includes $1.3 million.

Robin Prunty is a senior director at Standard & Poor's who has tracked Montgomery's finances. She called the county's underlying economic base "extremely strong." But she said any government that relies on one-time resources inevitably makes the structural problem "more substantial."

Copyright AP - Associated Press
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