Posted on 12/12/2017 4:55:44 PM PST by 11th_VA
Projected revenue decline attributed to wealthy individuals paying significantly less in income taxes; future job cuts not ruled out
Montgomery County is revising its six-year revenue forecasts down by more than $400 million as income tax revenue lags behind previous projections.
The lower long-term forecast comes after County Executive Ike Leggett called for 2 percent cuts at county departments to address a projected $120 million shortfall in the $5.4 billion fiscal 2018 operating budget.
Leggett said he doesn’t believe county employees should worry about their job security “immediately,” however he did say potential job cuts may need to be considered in a year or two.
In addition to cuts in this year’s budget, the county’s chief administrative officer, Tim Firestine, is asking most departments to identify 3 percent cuts for the upcoming fiscal 2019 budget. Leggett is beginning to formulate the 2019 budget before sending it to the County Council to review in the spring.
Fiscal 2019 covers July 1, 2018 to June 30, 2019.
Firestine has asked public safety agencies, such as the police and fire department, to trim their budgets next year by 1.5 percent instead of 3 percent.
Further reductions might be needed as well, according to Jennifer Hughes, the county’s budget director. She said that about $208 million less will be available for county departments in the county’s fiscal 2019 budget, compared to the current fiscal 2018 budget—a 4.8 percent reduction.
The revised budget numbers and requested cuts were detailed in a council staff memo in advance of the council’s Tuesday meeting.
County leaders have said the projected shortfall was unexpected given a surging national economy in which unemployment in the county is down to 3.1 percent.
At the meeting Tuesday, finance and budget officials attributed the decline in revenue primarily to wealthy individuals who make more than $500,000 per year reporting significantly less in capital gains. They suggested that the wealthy taxpayers might be withholding capital gains, such as by not selling stock, in anticipation of the Republican federal tax-cut bill passing, which could lower their overall tax payments.
Jacob Sesker, a legislative analyst for the council, said Tuesday that the county’s top 50 taxpayers reported 50 percent less in capital gains in 2016 than in 2015—$1.2 billion in 2015 compared to $600 million in 2016. That drop contributed to $21 million less in county income tax revenue.
“That decline reflects the fiscal situation,” Sesker told the council.
Leggett is expected to transfer a savings plan to the council in the next week or so to address the shortfall in this year’s operating budget. The council plans to review it when they return from their winter recess in mid-January.
Leggett said in an interview Tuesday that the county might be feeling initial effects of the proposed tax-cut package Republicans are pushing through Congress.
“What people fail to realize is that people decided not to obtain capital gains—selling their business or selling their stock—because they’re taking a look at this and saying, ‘I want to do so when the time is much more favorable to me,’” Leggett said.
Hughes wrote in a memo to the council that the state comptroller’s office has determined that other jurisdictions in the state are seeing similar declines in income-tax revenue and the state office is concerned that the proposed changes in the federal tax code could exacerbate the revenue decline.
“The Department of Finance has been actively engaged with the State Comptroller’s Office to better understand the reason for this unexpected decline,” Hughes wrote. “However, all discussions with state revenue officials to date suggest that the estimates are accurate, and that the current income tax forecasts for [fiscal years 2019 to 2024] may be further affected by federal tax code changes and general economic conditions.”
Hughes said Tuesday that due to the large number of unknowns in the tax-cut package, county officials have to assume that the financial forecasts they are seeing now “is what we’re going to be dealing with.”
The state is scheduled to release its December financial forecasts Wednesday. Council members said those projections could provide more insight into what’s happening statewide with income tax revenues. The state disburses income tax revenue to counties.
In total, county finance officials are projecting about $212 million less over the next six years in income tax revenue.
Alex Espinosa, the county’s finance director, described the income tax revenue as “highly volatile.” He said the county’s revenues forecasts likely will remain uncertain for at least next the year and a half as it waits to see what version of the tax bill is approved and how it affects tax revenue in the county.
The county is also forecasting $100 million less in energy tax revenue during the next six years—possibly due to warmer weather and buildings being improved to be more energy efficient. The property tax revenue forecast was reduced by $35 million over the next six years, due to stagnant inflation, which has kept property values flat, according to county officials.
Last I read more than 90% of the Montgomery County budget goes directly to labor costs.
Wait until Trump ships Departments in Federal government out of DC to drain the swamp. Suggest they grab their ankles.
Boo hoo.
Maryland “Freak State” PING!
Way back in the seventies, it had a reputation as the best place on the east coast for immigrant services. Now, it has 39.8 percent of households with a language other than English spoken in the home.
Well, it looks like SALT will be capped at $10K and Mortgage interest for homes up to $750K. That’s gonna hurt everyone living in North Potomac, all the way south to DC.
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