The Washington County Commissioners gave final approval Tuesday to the county's operating and capital budgets with no changes from the draft presented last week, and no tax increases.
Th budgets are for Fiscal Year 2024, which begins July 1.
But the vote was 3-2, with Commissioner Wayne Keefer and Commissioners President John Barr dissenting, as the board — all Republicans — disagreed on whether changes should be made and whether incoming revenue should be projected differently.
Approved were the $333.4 million operating budget and the $56 million capital budget. The operating budget is largely paid for through the county's General Fund, which is where most tax revenues go. Those revenues are projected at $281 million for FY 2024, according to Chief Financial Officer Michelle Gordon.
But early in Tuesday's meeting, Commissioner Derek Harvey repeated his concern that the county is losing millions every year because of a combined 0.25% decrease in the county's income tax rate over the past two years.
Related:In the last two years, Washington County cut its income tax rate. Was that a mistake?
That cut equates to about $8 million in income tax revenue the county would otherwise have collected, according to Gordon. The county loses a further $4 million to $5 million in state aid through its "disparity grant" because it no longer charges the full allowable income tax rate. These grants are given to jurisdictions whose per-capita tax revenues are less than 75% of the statewide average.
"We always have to make decisions about priorities," Harvey said. "But I think it's particularly tough and unfortunate that we didn't have an additional $13 million this year to incorporate into our budget process.
"Any tax increase would not really impact people that are poor, as some allege. Families making $60,000 a year or less wouldn't pay anything because of Maryland progressive tax system," he said.
"But the tax cut does disproportionately hit poor people, because it impacts our ability to provide the services needed, whether it's for our county commuter, or for schools where we fund behavioral specialists or English as a second language or other interventions that are required in today's society."
'Never before have I realized the need in this community'
Barr agreed, and added that "never before have I realized … the need in this community."
Washington County Public Schools' budget request, for example, is $7 million higher than the amount allocated in the new budget.
"I wholeheartedly believe that their request is forthright," Barr said. "And the need is incredible. Coming out of the pandemic, the social issues, the mental health issues, the security issues in our schools, I for one would like to see additional funds to the school board."
He also noted the impact on senior citizens, "the mainstay of our community, the folks that have lived their life here, that support this community," who need more support, and "many other programs in our community that have tremendous needs.
"And yet we've squandered away our disparity grant from the state of Maryland to the tune of between $10 million and $13 million a year," he said. "That's year after year … we need to be a little brave and step out, and put the tax rate back where it should be.
"The impact is minimal. For someone making $100,000 a year, it's 150 bucks," Barr said. "And I don't know of anybody in this community that wouldn't, for 150 bucks, want to see better and safer schools. A better senior center well-taken care of, an increased Meals on Wheels.
"So I reach out to my fellow Commissioners," he said. "We need to quickly, sooner than later, address our potential for both taxes, and as we move forward here today, possibly next week at the latest, approve a budget."
Barr's comments drew a pointed reaction from Vice President Jeff Cline.
"With all due respect, this is the first time I've heard you mention any of this," Cline said. "Now you wait until after our budget has gone to public hearing and now want to bring it to our attention. We all care. We all know this. But you're supposed to be the leader behind this; you should have been working with us months ago. This is the first direct conversation I've had with this, and no disrespect, but to bring this up at this late a moment, with our budget already at public hearing, now wanting us to come back and make changes when our CFO has made strong recommendations on where we're at financially — I don't know what your plan is to find this money in this budget cycle."
Cline, a former commissioners president, acknowledge he and Wagner served on the boards that both raised income taxes and later cut the rates.
"And I was one of the ones with Mr. Wagner that raised those taxes and we mitigated with our team last year … we all worked together and we did lower taxes, trying to adjust the tax rate and still help people and at the same time and return money back to people's pockets when it was desperate," Cline said. "But in summary, this conversation should have happened months ago with us, not a week after the budget was presented."
'We're in uncharted territory'
During a brief interview with Herald-Mail Media after last week's budget hearing, Barr had indicated he was prepared to consider changes to the budget.
But citing potential economic downturns, Commissioner Randy Wagner made a motion to adopt the budget without further changes.
"We're in uncharted territory," Wagner said. "I'm trying to be cautious; with the (federal) debt ceiling being reached" and a deal at the federal level uncertain, suggesting that a failure to reach a deal could have a trickle-down impact on Washington County.
"I'm gonna have to follow the advice of the staff and the CFO," Wagner said. "I'm not an accountant; I don't have a (master's degree). I've got to follow somebody's advice."
Keefer noted some 31 people had spoken at last week's budget hearing.
"Everyone has something that they're passionate about, that they care about," he said, "commissioners included. I think we've run a campaign based on us telling our citizens what we think is important. We do have many important needs. And I think we'll always have important needs, with finite resources. And that's the role of a commissioner — is to advocate for why citizens put us in the seat."
Keefer defended his previous votes for income tax decreases, and noted that in the third quarter of the current fiscal year, revenues had exceeded projections in several areas by millions.
He also was concerned that when revenues are higher than spending, "we don't have the same degree of conversation about how that money is spent."
Without federal stimulus, 'we'd be having a different conversation'
Gordon noted, however, that in normal years, the county's excess over expenses is $5 million to $10 million and that surplus numbers are trending downward. As part of its financial policy, the county government is required to keep that amount in reserves, she said.
Federal stimulus money had fueled the surpluses posted last year, she said, and "if we had not had that influx of federal funding into the local economy, we probably would be having a very different discussion right now because revenues probably would have been very much under what we had estimated."
Despite its revenues, Harvey reminded the other commissioners that the county still is carrying debt and has an underfunded pension program.
"There's either two things you do when you try to provide for the schools or other things: You make cuts in one area, and I don't hear where those cuts should come from because the things that are being funded … (you) don't want to cut roads, don't want to cut bridges, you don't want to cut Humane Society, you don't want to cut this, you don't want to cut that," he said.
The other option, he said, is to generate more revenue. A small increase in the tax rate could result in an additional $39 million over three years — the bulk of it coming from state aid.
"I'm a fiscal conservative; we've got to make it work," he said. "I've done it my whole life. But we're not doing it here with cuts, cuts, recommendations for cuts. We're not doing revenue enhancements, so we have to make this fit."
At that point he called for a vote, but Keefer wanted to discuss whether Gordon could adjust revenue projections, to account for staff turnover savings, for example, so that money could be allocated to departments seeking more funding. But Cline pressed for the vote.
Keefer joined Barr in voting against the budget.
Cline says undelivered 'campaign promises' behind split vote
After the meeting, Barr told Herald-Mail Media he wanted to see a few departments get more money, and insisted that contrary to what Cline had said, he "did not hold back till today" in discussing possible budget changes, noting he had met with Gordon and county Administrator John Martirano about the matter.
"I take offense to the accusations made to me," he said. "What was the purpose of having a hearing if we weren't allowed to make changes?"
But Cline told Herald-Mail Media he thinks the budget's "fine. I think a couple commissioners got caught up in campaign promises and they couldn't deliver."
Wagner repeated his concerns about the economy, but said he definitely supports more school security.
While they said "to be cautious is better" regarding the budget, Cline and Wagner weren't opposed to watching revenue trends to see how the commissioners could collaborate with school officials to improve security.