CurrentEvents

Subject: Re: A look at the future of the Taxpayers League

Dear Members and Friends, As I look back at my five years as President of the Taxpayers League I take pride in the
League as having been the primary civic organization focusing on fiscal matters and the future impact of the actions
of our elected officials on the quality of life for the citizens of the county. As I look back however I am disappointed
by the limited accomplishment that have occurred as a result of our efforts.
There will be some newly elected county officials this year but the change we really need is a change of attitude and
a revised process that allows for open government with public education to allow for real public participation, your
participation, in the governing process. The current Council would not even allow for a discussion after we submitted
a 1,800 signature petition requesting reduction of the allowable maximum taxable property tax assessment. This is
the Council that failed to approve a much needed revised Annual Growth Policy (AGP) opting for a retention of a
business as usual flawed AGP to be retained as the guideline for growth in the county. This is the Council that that
approved a pay raise in eight days without any public input that resulted in the firefighters receiving a six year
average salary increase of 69.69%, which equates to an average 11.62% per year. We have high regard for the
outstanding job done by the majority of the county employees but there are limits on the ability of the taxpayers to
support a county budget in providing raises of this magnitude. There was no lack of firefighter applicants when the
call went out for recruitment for a needed new class. There were over 2,000 applications received.

The major issue for the up coming year is negotiations with almost 28,000 county employees. Labor costs
represents 80% of the tax supported budget. We need to insist on public hearings and availability of the Human
Resources analysis data that justifies the Executive Branch and Board of Education rationale for any labor
agreements agreed to. Initial review of the published FY 2007 Approved Budget documented a record 9.8%
increase in the Tax Supported Budget. Why the huge increase this year? The answer is that it is an election year
and revenues were much higher than identified in the previous years approved revenue projections, providing the
opportunity to reward supporters instead of using the surplus for one time cost items such as under funded facility
maintenance or increasing the reserve for use in a difficult forecasted FY 2008 process.
Analysis of the Executive Branch recommended Six Year Fiscal Plan by Council staff indicates in order to provide
adequate revenue to support future projected spending the Council will be required to over ride the Charter Limit for
the next five years. A mere average 8.5% increase in for the remaining five years of the six year fiscal plan will result
in an over 2 billion Tax Supported Budget increase that the citizens of the county will have to come up with. The
major identified FY 2008 spending increases relate to labor contracts and spending required for newly imposed
accounting guidelines. It is decision time to determine if we should continue the effort with the frustration of dealing
with the Council. We can only be successful with greater support. FY 2008 will be one of the most critical years to be
faced by county residents.

Tasks to be accomplished in the next month are identified below:

Council liaison
Review approved Executive's and Montgomery County Public Schools (MCPS) FY 2007 budgets
Newsletter generation
Continue efforts on MCPS Special Education Study
Post primary meetings with candidates
Organize Annual Meeting, last week of September.

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Sometimes looking at specific issues gives better insight on the scope of the
problem that face the Montgomery County taxpayer. Here are a few:

How Montgomery County Compares With Other Counties - An April 2003 report from the Maryland Association
of Counties (MACO) indicated Montgomery County per capita tax burden is 51.83% higher than the average of the
seven other Maryland jurisdictions in the study. Are we addicted to spending?

Eight Year Per Capita Tax Burden Increase - The FY 2000 to FY 2007 total local taxes are up by $1.12 billion
(74.2%.) For the four years of this Council the projected increase is $71.1 million up 37.16% with a population
increase of only 5.0%

FY99-FY07 Local Tax Six Year Revenue Impact Study - The six year financial plan underestimated the cost for
FY 04 - FY 07 by an average of $435 million per year or 23%. At a continued 23% rate per year increase the cost
increase average for the next five years would be $702 million per year. We need to improve long term planning
projections.

Highlights of the FY 07 Tax Supported Budget and Reserve Status - Unanticipated revenue for FY 06
exceeded the approved budget by $147.4 million. When combined with the FY 04 unanticipated revenue of $99
million and the FY 05 unanticipated revenue of $139.5 million the tax on the public exceeded the approved budget for
the three years by $386 million. Were all the high taxes over the three years necessary? Where did the money go?
For FY 07 Total Local Taxes are up 9.5% and the Total Revenue is up 9.6%. Increases like this are unsustainable.

Effect of Six Year Operating Budget Compounding - The budget for FY 07 exceeded the FY 06 approved
budget by 8.5%. When compounded over the six year financial plan the total budget increase would be $1.966 billion,
a 63.18% increase. There is a need to stop looking at one year budgets and do some realistic long term budget
planning.

Montgomery County Public Schools (MCPS) Staffing Summary - Over a four year period, FY 04 through FY 07
is a projected increase of 1,045 students and an increase of 1,632 employees. That's 1.56 employees for each
additional student. There were 1,047 new employees projected for just FY 06 and 07. Where is the justification for
such a large number of new positions?

Staff Chart on School Construction Cost Issues - A Council staff report for nine schools indicates a $48,144,000
a 47.8% cost increase in two years. It appears increases of this magnitude are accepted without any consequences.
Where is the accountability? We keep slipping the out years development because of the lack of funding. $48 million
would have funded 85% of the funding requirements for FY 09. There is a Capital Improvement Plan management
crisis and no critical management oversight

Taxpayers League Analysis of Construction Cost Impacts - The Taxpayers League did an analysis of 24 schools
with appropriations initiated in FY 03 or FY 05 for the purpose of supporting a management review. The average
additional appropriation required is about 40%. How can we manage a multi year phasing as we continue to accept
40% increases as the norm.

FY 07 Tax Supported Salaries and Benefits - The latest data for FY 07 continues to indicate that total
compensation is almost 80% of the budget. If the percentage remains the same the dollar cost will continue to
increase as the budget continues to increase at 9.5%. A major problem will occur next April when over 27,000
employees will negotiate salary increases. The 9.6% increase over future multi year contracts effecting 80% of the
budget is unsustainable. All Council candidates should take a position on this matter prior to the upcoming election.

Montgomery County Employment Summary - Source documents such as the Personnel Management Review from
FY 02 through FY 06 has data anomalies for Para Educators and Part Time College Employees. Payroll figures could
be used to verify total employee population on a given payroll date. What is the current level of confidence that we
have an accurate employee population count?

Public Safety Staffing - Are all of the additional 171 full-time and 7 part time public safety personnel positions
necessary? These positions will have compounded salaries and benefits that we will be committing to for the next 20
years or more. Will the taxpayers be able to afford the bill in 2017? The Council needs to provide a critical revue to
insure each position is absolutely necessary.

Goals for Labor Negotiations - Are our elected officials meeting their contract negotiation and appropriation
responsibilities? What role should the public have in the process?

Firefighters Salary Increase and Cost Update - A 69.69% % salary increase was projected over 6 years. Page
42-7 of the FY 07 budget, indicates the salary and compensation costs for the estimated 1160 full time employees is
$22,123,830, $4,747,010 was for 25.6 new positions. The projected fiscal impact presented to the Council for FY 07
when they approved the new contract last year was $10,950,124. With the adjustment for the new positions the
comparable cost for FY 07 is $17,643,320, a one year increase of 61% Unbelievable, unsustainable!

MCPS January 2, 2004 Ten Jurisdiction Salary Study - Data were not available to the public when public school
salary negotiations were approved as part of the FY 2005 budget. An ongoing problem is the unavailability to key
information that prevents the public from participating in many critical decisions that affect our lives. In the review of
the Seven Locks School matter the MCPS staff indicated they didn't provide Council with all relevant data. The
Council got a commitment to at least identify the material available. We ask the Council to make a list of the data
provided to the Council available for public review.

Employee Retirement System Pension Fund Status - The report indicates the unfunded portions of the fund
have increased significantly over the past five years. The funded ratio has gone from 98.9% to 75.7%. We are not
private industry where companies go bankrupt to solve their excessive pension plan issues. Montgomery County will
not go bankrupt and the general public will be paying unreasonable taxes to pay unsustainable benefits that are
prevalent in the public government sector. What action is appropriate at this time to avoid the future problem?

Critical Shortfalls in Infrastructure Maintenance - The county has a $65.7 million shortfall in infrastructure
maintenance. Obviously the Montgomery County government has neglected this necessary task. $16.8 million has
been proposed for funding in FY 07 leaving a shortfall of $48.9 million. Yet we propose a grant of $200,000 to a multi
million dollar private philanthropic organization for parking lot renovations. Unbelievable! What about funding our
public facilities first.

American Film Institutes (AFI) and Other New Arts Venues Costs - How much does it cost to see a movie? The
initial county project capital improvement cost proposed to get a state grant was $4, 1 million. One year later the
project cost funding increased to $16.69 million, a record 255% one year increase for a Montgomery County project.
Additionally the Montgomery County taxpayer contributes $2,572,340 for five years to pay for the AFI operating
expense shortfall. There is also a proposal for another $525,430 in the FY 07 budget.

Why do we propose to fund additional Silver Spring arts venues such as Birchmere and the Old Blair Auditorium,
which will be coming back to the county for a lifetime of revenue appropriations? These would be in addition to the
newly proposed theater at the Montgomery College Takoma Park Campus.