Leopold: County Budget is 'Fiscally Responsible and Practical'

ANNAPOLIS—Just as the federal budget debate continues to dominate work on Capitol Hill, Anne Arundel County Executive John R. Leopold introduced his proposed county budget for the 2012 fiscal year.

The proposed operating budget totals $1.19 billion for fiscal year 2012, and the county executive's proposed capital budget sits at $311 million.

Leopold addressed the Anne Arundel County Council at a meeting in council chambers on Friday and offered a budget that, he says, is fiscally responsible and practical.

“This budget reflects my administration's continuing commitment to maintain income and property tax rates at or below the levels when I took office,” said Leopold. “County government, just like every taxpayer, must live within its means.”

Now that the budget has been unveiled, the county council will deliberate in the coming weeks. 

The operating budget increases spending by $17.9 million from last year, which amounts to a 1.5 percent increase.

While the county executive didn't propose altering the income tax rate, his budget calls for a 3-cent rise in the property tax rate, which would raise roughly $20 million in additional revenue. Leopold contests that even with this increase, Anne Arundel County citizens still pay comparatively low taxes, when looking at the Baltimore-Washington region as a whole.

“The tax burden for county residents will remain the lowest in the Baltimore-Washington region,” said Leopold in an address to the county council.

While Leopold campaigned on not raising property or income taxes, he was quick to point out that a property tax hike isn't the only way the county plans to balance the budget. The county executive's plan would eliminate 49 county positions, which includes laying off 14 workers. Pay reductions are on the table as well.

“We are asking our employees to again take a 4.6 percent reduction in pay and benefits through 12 furlough days and related reductions,” said Leopold. “Throughout my tenure, I have maintained that we must all share the sacrifices necessary to maintain a level of service that citizens expect.”

Perhaps the most controversial portion of the plan concerns funding for the .

State law evokes a “maintenance of effort” (MOE) requirement for localities, meaning that county government must spend at least as much on a per-pupil basis as they did the previous year. County Board of Education officials argue that Leopold's budget falls short of this mandate. If a county doesn't meet maintenance of effort requirements, the state can withhold increases in state funding to the county, which totals $9.5 million for the Anne Arundel County Public Schools (AACPS) system next fiscal year.

The county filed for a maintenance of effort waiver, which would unbind the county from having to meeting the requirement. However, in his remarks, Leopold claims that his budget proposal fully meets the state requirement and that the waiver isn't actually needed.

“This budget again fully funds the requirement in a manner consistent with the opinion of Maryland's attorney general,” said Leopold. “There is absolutely no need to furlough teachers, increase class size or request a maintenance of effort waiver from the state of Maryland.”

But to get to this conclusion, Leopold's budget plan includes debt service costs in the board of education's budget, something that hasn't been done in two years, according to Kevin M. Maxwell, Anne Arundel County Schools Superintendent.

Furthermore, Maxwell said that even when debt service was previously included in a board of education budget, it has never been used as part of a calculation of the maintenance of effort requirement.

“They've moved debt service back to our budget, which hasn't been done for two years, and included it in our maintenance of effort calculation, which has never been done before,” said Maxwell in a meeting with reporters after the budget presentation. “Much of the [BOE funding] increase is in debt service, which we don't really see. It's a cost, sure, but it's not real money we see that can fund teachers, salaries or supplies.”

Maxwell said that due to the inclusion of almost $54 million in debt service, the real budget for county schools actually falls about $12 million short of meeting the maintenance of effort requirement.

The county executive's office is relying on an opinion from Maryland Attorney General Doug Gansler to justify the accounting move. However, school officials cite the same ruling as evidence that the county executive can't use debt service in calculating whether or not the budget meets maintenance of effort requirements.

"It's the same ruling, we just differ on interpretation," said Bob Moiser, a spokesman for the county school system.

The opinion, which came from a 2009 dispute in Montgomery County, states that if debt service wasn't included in the previous year's Board of Education budget, then it cannot be used to meet maintenance of effort requirements for the following fiscal year.

“In our opinion, the inclusion of an appropriation for debt service in [a] budget for a local school system cannot be used to satisfy the MOE target if the same expense—and appropriation—were not a part of the computation of the highest local appropriation for the school operating budget for the prior fiscal year,” wrote Gansler in the 2009 opinion.

Dave Abrams, a spokesman for the county executive's office, said the action taken by the county executive in the budget proposal fully complies with Gansler's opinion.

"That opinion was the basis for our calculation," said Abrams in an e-mail. "The [county] Office of Law determined this action was appropriate."

When asked if the county executive has withdrawn the request for a waiver of maintenance of effort requirements, Abrams said that's something that first needs to be discussed with the county council.

"We need to check with the county council before doing that," said Abrams.

School officials also contest that unexpected rising costs make the school board's requested budget, which was submitted late last year, a moving target of sorts.

“When we filled our budget for next year, we assumed oil at $86 per barrel [for next year], when it was at $63 [per barrel],” said Alex Szachnowicz, chief operating officer for county schools.

But the assumption of a $23 rise in the price of oil looks like it may fall short of reality, given the recent spike in oil prices and ongoing turmoil in the Middle East.

“Yesterday, it closed at $107 [per barrel],” said Szachnowicz. “Quite possibly, we may have under predicted our need for transportation fuel and heating oil.”

Even with these costs, Maxwell is hopeful that the school system can work with the county council in the coming weeks to address his concerns.

“We will work with the county council to increase funding to the extent we are able, but we realize these are difficult decisions,” said Maxwell.

But the budget debate is far from over.

The county council will hold public hearings and deliberate in the coming weeks to try and reach an agreement for next year's spending plans.