It’s Over – For Now

After a torturous few months, the Montgomery County Council finally reached a unanimous budget agreement today. But while the bleary-eyed Council Members are no doubt working their way through their liquor cabinets as we write this, the fiscal hangover will arrive all too soon.

Yesterday’s cliffhanger boiled down to this: three Council Members (Duchy Trachtenberg, Phil Andrews and Roger Berliner) wanted $20 million in “labor savings” gained by a 2-day furlough, while two Council Members (Valerie Ervin and George Leventhal) said they would not violate the public employees’ contracts. Marc Elrich expressed dissatisfaction with the structure of the property tax while Nancy Floreen argued for more cuts not connected to the labor agreements. The final solution announced this morning by Council President Mike Knapp contained elements of every one of these ideas. We present the text of his proposal to our readers:

Statement by Council President Mike Knapp

To enable the Council to reach common ground and complete action on the FY09 operating budget, I propose the following final steps in the budget process:

1. Reduce the amount of property tax proposed by the County Executive by $20 million.

2. Keep property tax rates at the current level and provide a credit to owner-occupied homes of $579.

3. Reduce expenditures and change resources as follows:

$8.0 million from County Government and MCPS, to be achieved by reducing employee/personnel costs and securing productivity improvements and increased efficiencies. Each will report back to the Council about how these reductions will be achieved.

$1 million in fund balance from Montgomery College.

$3.5 million from the Council’s changes on May 15 to PAYGO (cash) in the FY09 capital budget and resources for Park and Planning.

After a long night of yelling, negotiating, coffee-swilling and perhaps coffee-throwing, none of the Council Members had any fight left in them to repeat the political theater of prior days. All praised the placid Mike Knapp and none claimed victory over the others for their priorities. Apparently they have tired of providing fodder for loose-tongued bloggers and I do not blame them.

But everyone on all sides of the debate – the Council Members, their staff, the Executive Branch, the union leaders and all other observers – expect that the approval of this budget is only the first round in a bruising match. That is because FY10’s budget will most likely also have a deficit in the hundreds of millions and similar debates will no doubt erupt. Drink up, Council Members, because here is what the morning after will look like:

1. The public employee unions preserved their contracts this time. But two Council Members (Phil Andrews and Duchy Trachtenberg) openly favored two-point reductions in their cost of living adjustments (COLAs). One more, Roger Berliner, favored a two-day furlough proposed by Mr. Andrews. Another one, incoming Council Member Donald Praisner, suggested a need to “review” union contracts during his special election campaign. That leaves the County Council only one vote away from approving “labor savings” next year. The unions are well aware of this situation and must work out a strategy to respond. They would be well-served to stick together.

2. All sides must watch the real estate market, which drives the county’s volatile recordation and transfer taxes. In an earlier post, I stated:

According to the county’s Department of Finance, residential real estate sales volume averaged over $500 million per month from 2006 through the first eight months of 2007. Since then, residential real estate sales volume has averaged between $200 and $300 million per month. It is this collapse in residential real estate transactions that has caused many of the county’s current budget problems. All policymakers – both inside the government and inside the unions – should watch this figure in the Finance Department’s monthly economic updates. If it rises back up to $400 million per month or more, the county’s real property transfer and recordation taxes will begin to recover. If it falls further, tougher times are ahead.

If the real estate market does not turn up by the end of this year, projected revenue growth for FY10 may be even slower than the anemic rates that constrained the FY09 budget.

3. The county is getting hit badly by rising fuel costs. The agencies’ budget requests did not adequately predict the meteoric recent rise in gas and diesel prices. If the County Executive submits a supplemental budget request to cover higher fuel costs, will the County Council be able to locate the money without offsetting spending cuts?

4. As we documented a month ago, the state budget continues to deteriorate. Rumors are flying that the state will have to cut aid to the counties next spring, perhaps even passing down the burden of paying teacher pension contributions. This would add MANY millions more to any county budget deficit next year.

The County Council, and especially its ever-smiling (but seldom-blogging) President Mike Knapp, performed very well this year under heavy pressure. They will need to rise to the occasion at least one more time before the current economic downtown is over.

Deadlock

The County Council gathered today to pass its budget for next year. Because that budget calls for a property tax hike in excess of the rate of inflation, the county’s charter requires seven votes for it to pass. Instead, the County Council split on a 4-4 vote. Deadlock.

First the preliminaries. The council voted unanimously to divert $25 million from the PAYGO program to the operating budget. As we reported yesterday, PAYGO is a cash contribution made by the county to its capital program, which is otherwise financed by bonds. Council Member Marc Elrich recommended this measure yesterday and the rest of the council agreed. The council also voted to cut its “reconciliation list,” or the new spending it intends to add to the County Executive’s proposal, from $40 million to $25 million. The two measures combined freed up $40 million for the budget, equal to the amount of “labor savings” proposed by Council Members Duchy Trachtenberg and Phil Andrews last week.

And then came the vote on Council President Mike Knapp’s proposed budget. That budget included a property tax hike of $138 million – equal to the amount proposed by the County Executive, but structured differently. The budget also did not alter the county’s labor contracts. Council Members Knapp, Valerie Ervin, George Leventhal and Nancy Floreen voted in favor. Council Members Elrich, Trachtenberg, Andrews and Roger Berliner voted against. Deadlock.

During the campaign season, many of these council members – all Democrats – tend to sound alike. All favor labor rights, helping poor people, fiscal responsibility, “smart” growth policy and high-quality services. The way to truly evaluate the differences between these council members is how they deal with the gritty specifics of governing. Ms. Floreen loves to say, “The devil is in the details.” (Spend a half-hour with her and she will say it twice.) She is absolutely correct and, in this budget season, there is plenty of hell to go around.


Valerie Ervin and George Leventhal stand on a principle: labor agreements must be honored. Ms. Ervin credits her former membership in the United Food and Commercial Workers Union (parent union of MCGEO) with helping her survive her days as a low-income single mother. Mr. Leventhal believes that high-quality services, especially the schools and public safety, are the reason why people move into Montgomery County. While many residents may be angry about taxation, he asserts that they are not angry at the public employees who serve and protect them. For both Ms. Ervin and Mr. Leventhal, any violation of the public employees’ agreements will erode the county’s ability to provide effective services and damage its value to residents over the long run.


Duchy Trachtenberg, Phil Andrews and Roger Berliner also stand on a principle: taxpayers and employees must both share the pain of reaching a budget in tough times. Ms. Trachtenberg believes that there are people in the county who are more vulnerable than public employees, including the poor, the homeless, seniors and the mentally ill. Mr. Andrews believes that it is only fair to ask county workers to accept pay reductions if residents are paying higher taxes. Whereas before he favored a two percent cost of living [COLA] reduction and “labor savings” in the amount of $40 million, he proposed today that public employees be furloughed without pay for two days. He expects that measure to save $20.5 million, which he would use to reduce the property tax hike. Mr. Berliner agreed with Mr. Andrews and declared that his furlough proposal did not “break the contracts.”

Marc Elrich did not vote against the budget because of the labor agreements, but because he disagrees with the structure of the property tax. As originally proposed by County Executive Ike Leggett, the property tax hike would have contained a significant rate increase but also a large increase in the tax credit. This would have been a rather progressive tax. The County Council voted 7-1 to decrease both the rate and the credit, effectively shifting the burden away from business and apartment buildings and onto homeowners. The council’s rationale was to lower the tax burden on renters by limiting its impact on rental buildings. Mr. Elrich would like a return to something resembling the County Executive’s proposal and is trying to leverage his vote accordingly. Since the property tax formula can be changed in multiple ways, perhaps Mr. Elrich can gain some movement in his desired direction.

Nancy Floreen said, “I don’t see the crisis particularly because we just added $20 million to the budget. I am bewildered by what the ‘crisis’ is.” Ms. Floreen has a point: the council added $40 million to the County Executive’s original spending proposal before cutting it back to $25 million today. These are hardly the acts of desperate times. She further advised against a “last minute reduction taken out of the backs of the people who provide the services.”

The council is now debating the disposition of $20 million out of a $4.3 billion budget. In almost any business or labor-management context, this relatively small sum could be worked out. But the issue has been hardened by the fact that both sides have adopted a position based on principle. Mr. Leventhal and Ms. Ervin will not bend on the labor agreements; Ms. Trachtenberg, Mr. Andrews and Mr. Berliner insist that tax increases must be accompanied by “labor savings.” Either side can block the budget because it requires seven of the sitting eight votes to pass.


And what of Council President Mike Knapp? Pity upcounty’s gentle giant. He is the man in the middle. The District of Columbia elects its Council President for a full term. The holder of that office possesses many carrots and sticks to cajole colleagues into line. But under Montgomery County's rotating Presidency, Mr. Knapp holds his office for only one year. He has much responsibility and little commensurate authority. He faces a badly divided County Council and is struggling to get them past their differences. But he must get them to agree. Because for a county government that is required by law to balance its budget, deadlock is not an option.

Council Votes 6-2 to Preserve Labor Agreements (Updated)

Last Friday, Council Members Duchy Trachtenberg and Phil Andrews voted in the council’s Management and Fiscal Policy (MFP) Committee to recommend $40 million in “labor savings” or “employee participation,” alternative terms for under-funding the county’s collective bargaining agreements with its employees. Today, they sought support for their proposal from the full County Council. They found none.

Labor contracts were not the only budget item considered by the Council. They also discussed the nature of the proposed property tax hike. The MFP Committee recommended that the County Executive’s proposed rate and his proposed credit be cut. The effect of that structural change would be to channel the tax burden onto homeowners and away from commercial properties, including apartment buildings occupied by renters. That proposal was approved by the Council by a 7-1 vote, with Council Member Marc Elrich dissenting. Council Members Trachtenberg and Andrews also recommended lowering the amount by which the property tax would exceed the charter limit from $138 million (which was the County Executive’s proposal) to $118 million. Ms. Trachtenberg and Mr. Andrews were joined by Mike Knapp and Roger Berliner, but Valerie Ervin, Marc Elrich, George Leventhal and Nancy Floreen voted against it. And so the property tax reduction failed on a 4-4 vote. Interestingly, Ms. Floreen commented that she voted against the reduction because she wanted to see a larger one.

But the main action of the day concerned “labor savings.” The 300+ people who mobbed the room were not there to lobby for a $20 million reduction in a tax hike. The vast majority were public employees present to defend their livelihoods. And at least from the perspective of political theater, the County Council did not disappoint.


Former union organizer Valerie Ervin hurled the first thunderbolt. “We could fund this budget right now and not go into the COLAs [cost of living adjustments],” she said. “A lot of this other stuff is just subterfuge.”

George Leventhal objected to any hint of “subterfuge,” defending the county government’s record of clean government. But he agreed with Ms. Ervin on the COLAs, saying, “I don’t really appreciate the term ‘employee participation.’ That’s a euphemism for busting contracts.”

Phil Andrews would not back down. He looked the 300+ public employees in the eye and told them, “Employees need to do their part… It would be unfair to expect taxpayers to pay a tax increase to fully fund employee contracts that would be 8% next year.” He praised MFP Chairwoman Trachtenberg, who had joined with him in recommending labor savings, for her “intelligence, diligence and guts.”

Duchy Trachtenberg also stuck to her guns. “I have stood with labor on a number of issues,” she said, citing her support for living wage legislation and the SEIU’s organizing campaign at Montgomery College. “I represent a million residents. Most of them don’t have an opportunity to join a union and benefit from collective bargaining agreements… I don’t disrespect you, but I respect the unrepresented, the seniors, the disabled and the homeless.” She told the crowd, “I have been the object of a lot of vilification. It doesn’t do any good to attack another person on a policy difference.”

But the other Council Members did not seem convinced that reducing the COLAs was the only alternative. Council Member Marc Elrich brought up possible savings from the county’s annual PAYGO expenditure. PAYGO is a cash contribution made by the county towards capital projects, which are mostly financed by bonds. Council staff told Mr. Elrich that next year’s capital budget would be paid for by $330 million in bond issuances and $30 million in a cash PAYGO contribution. If the county did not make its cash contribution this year, it would not necessarily delay any capital projects which would be mostly covered by bonds. In fact, the unions recommended reducing PAYGO by $10 million last week, just one part of their suggested $67 million package of cuts and alternate revenues. Mr. Elrich’s idea received support from several other Council Members, though Ms. Trachtenberg opposed it.


And then Mr. Leventhal pointed out the real role played by the council in labor contract decisions. For non-schools government employees, the council does indeed set funding levels for contracts. But with regard to the public school system, the council only approves its budget as a whole. Contract funding is decided by the school board. Mr. Leventhal called Board of Education President (and former County Council candidate) Nancy Navarro to the witness table. He asked her whether the school system, if handed a budget cut by the council, would respond by cutting employee raises. She replied, “The board feels very strongly that its strategic investment is in the compensation of our employees.” And then she said that while she could not speak for the rest of the board, she personally would not vote to underfund contracts. Mr. Leventhal concluded that if the council cuts contracts for non-school employees but the school board preserved its employees’ pay, significant inequities in pay scales would result.

After Ms. Ervin recognized several exceptional county employees in the room – including one fire fighter who had heroically raced into a burning building to rescue victims inside – the County Council took its vote on the contracts. Ms. Trachtenberg and Mr. Andrews were the only Council Members on the short end of a 6-2 vote. While some of their colleagues defended their good faith, none were willing to break the county’s commitment to its employees.

But the issue is far from decided. In order to fund the contracts, the council must approve a property tax hike that exceeds the rate of inflation tomorrow. The county’s charter states that seven votes are necessary to do that. Both Mr. Andrews and Ms. Trachtenberg have publicly opposed breaking the limit, which would be sufficient to block it. One of them must budge. If they do not, there is no obvious alternative and catastrophe would result.

And so the lights will be on in the County Council building very, very late tonight.

Update: The Gazette and the Post have also covered the story.

The Limits of Labor

Ann Marimow is a good reporter and I respect her work. But in her Sunday Post article, “Union Influence Sways Montgomery Budget Talks,” I believe she overstates her case. Montgomery County labor has power, but that power has its limits.

This may seem a curious statement coming from me. After all, my now-notorious 2006 guest post in which I christened the Montgomery County Education Association (MCEA) the county’s 800-pound gorilla has contributed to the image of labor power in Montgomery. The story behind that long-ago essay is that I was running a petition drive at my precinct and witnessed the extraordinary attention given by voters to MCEA’s Apple Ballot. I then calculated the 90% win percentage earned by Apple Ballot candidates in the Democratic primary and concluded that MCEA had played an important role in the election. That essay was originally intended only for my own union people and a few friends but found its way onto the Internet through third parties as a guest blog. And so began my descent into online infamy, an unhappy event lamented by many who have been spoofed here. While the point of that original post may be true, it presents only one side of the story.

Consider the following facts in assessing the limits of public union power:

1. Public employees in Montgomery County are not uniformly better paid than in other jurisdictions. I compared wages and benefits across jurisdictions in a post last month and found no systemic advantage for workers in Montgomery. In fact, firefighters and teachers lagged many other nearby counties, many Montgomery workers are not eligible for a defined benefit pension and even teachers with Masters degrees cannot afford to buy the average county townhouse. Is this a result you would expect from “Big Labor?”

2. In my 800-pound gorilla post, I wrote:

With property tax growth slowing down, the next county council will face tough budgetary decisions. Public schools account for half of the county’s budget and would be an obvious location for cuts. But don’t expect any action there: the county’s politicians have learned that those who cross the Teachers Union once are unlikely to be given a second opportunity.

How wrong can a man be and still be allowed to blog? The fact is that County Executive Leggett has not recommended full funding for the public schools’ budget request in either of his first two years in office. Last year, the County Executive proposed $19.7 million less for the school budget than requested by the Superintendent. The County Council ultimately approved $6 million less than the school request. This year, the County Executive recommended $51 million less than the Superintendent’s request, of which $26 million has so far been restored by the County Council. The school unions have performed well in defending their budget but they are hardly untouchable.

3. SEIU Local 500 has so far been unsuccessful in persuading Montgomery College to terminate its “union avoidance” attorney. If the unions were truly all-powerful, the college’s actions would have been unthinkable.

4. Union-backed candidates do not automatically win. Many have noted the losses of school board candidate Alies Muskin and County Council candidate Nancy Navarro. But look back on 2006. Progressive Maryland President Elbridge James and teacher Melodye Berry were badly outraised and finished next-to-last in their delegate races despite being Apple-approved. MCEA could not save Ida Ruben from Jamie Raskin in the District 20 Senate race. And Apple Republican incumbents Howard Denis (County Council) and Jean Cryor (State Delegate) fell to Democratic challengers. Apparently George W. Bush had more sway with MoCo voters than did MCEA!

Pure union-only candidates struggle. Labor tends to do best when it backs candidates in concert with others. For example, a combination of union and civic support helped to elect County Council Members Duchy Trachtenberg and Marc Elrich and resulted in the eviction of Mike Subin. The real genius of the county’s labor strategists has been to pick candidates who are strong on their own merits and (hopefully) agree on union priorities. But even union-supported candidates sometimes stray, as has Council Member Trachtenberg – further evidence of the limits of labor power.

I will bet that most of our readers are not union members. “Why should I care about this?” you ask. Montgomery has always been a “you-get-what-you-pay-for” county. Our citizens have been willing to pay higher taxes than in other jurisdictions in a belief that higher service quality would result. Many Montgomery residents are employees or contractors of the federal government and easily see the relationship between funding and performance. Sometimes residents make common cause with unions in seeking county funding, as PTA members occasionally do with MCEA. By pressing for good compensation and adequate budgets, the unions help the county maintain its service level and recruit superior talent. Without strong unions, Montgomery’s politics might resemble those of infighting, school-challenged, crony-infested Prince George’s, or perhaps developer-, business- and tax-activist-dominated Northern Virginia.


Look into the eyes of this woman and read her sign. Labor is at its best when it presents her message to both the politicians and the public at large. Labor has power. Labor has limits. But labor, and the rest of the county, can only succeed if our citizens agree with the woman above.

Disclosure: The author is the Assistant to the General President of the United Brotherhood of Carpenters, which does not represent government employees in Maryland.

REVOLT!

In a moment that defined their political careers, Montgomery County Council Members Duchy Trachtenberg, Phil Andrews and Valerie Ervin put the fate of the public employees’ cost of living adjustments on the table last Friday. Present to greet them were over 300 chanting, stomping, clapping and occasionally yelling union members.


Council Members Trachtenberg, Andrews and Ervin are members of the council’s Management and Fiscal Policy (MFP) Committee. The committee’s charge on Friday was to discuss the extent to which savings on the county’s labor costs should be applied to fix its $297 million budget deficit. “Labor savings” ultimately means funding less for personnel costs than is called for in the county’s collective bargaining agreements: a practice derisively labeled by the unions as “contract busting.”

A word about the union members in the pictures. Assembled by pugnacious MCGEO President Gino Renne in the nearby County Executive Office Building, they were in no mood for “contract busting” and marched across a rain-soaked street to confront their council overseers. Their radioactive yellow battle color is not intended to please the eye and it certainly does not. It is designed to attract attention. They certainly received plenty of it on Friday.

Council Member Trachtenberg, chairwoman of the MFP Committee, opened the meeting with new transfer and recordation tax receipt numbers for April. Transfer and recordation taxes depend on property sales and they have been devastated by the recent collapse in the county’s real estate and construction market. According to Ms. Trachtenberg, the county received $13 million in transfer and recordation taxes in April 2008, down from $18 million in April 2007. For the year to date, transfer and recordation taxes totaled $138 million, down from $180 million the year prior. “Taxpayers are reaching a breaking point,” declared Ms. Trachtenberg and that justified a 2% reduction in the unions’ negotiated COLAs.


Council Member Andrews agreed. Citing the fact that personnel costs accounted for 80% of the county’s budget, he told the ornery union members, “What’s fair is to ask everyone to help.” As he has for months, he criticized the unions’ agreements as “unaffordable” and stated flatly, “I would not have negotiated the contracts that came over to us.” Supporting Ms. Trachtenberg, he said, “I believe that the 2% COLA reduction is a fair way to go.”

Pictures cannot do justice to the unholy din created by the roaring public employees. Hundreds of police officers, bus drivers, librarians, deputy sheriffs, correctional officers and park and planning workers rose to their feet to challenge Council Members Trachtenberg and Andrews. “What are you giving back?” one cried. “We are the taxpayers!” another yelled. “You’re hitting us twice!” pointed out one employee who was also a county resident. Worker after worker decried simultaneous increases in fuel and food costs, cuts in county services and proposed cuts in COLAs as a squeeze on their standard of living from multiple sides.

And then Ms. Ervin took the mike. She is a 25-year veteran organizer and trainer in the labor movement and everyone knew what she would say. “I was a proud member of the UFCW union,” she announced to the crowd. “We do not have to balance this budget on the backs of working people.” She recounted a bookful of statistics on poverty and income inequality to the groans of the audience (some of which we will examine on this blog) and concluded with, “Montgomery County is affluent for only some people.” “I believe that cutting salaries will hurt our local economy,” she said, “and I will not support a 2% COLA reduction.” We present the crowd’s reaction below.


In the end, the MFP Committee did not recommend a 2% COLA reduction. Instead, Ms. Trachtenberg introduced a motion calling for $40 million in “labor savings” with the exact mechanism to be decided later by the rest of the County Council. Mr. Andrews concurred and Ms. Ervin ferociously dissented. Neither the council members nor the staff justified this particular number against a lesser or greater amount. No mention was made by anyone of the unions’ identification of $67 million in additional revenues and savings as reported on this blog. The Post and the Gazette also omitted that fact from their coverage.

So what will become of the committee’s proposal for “labor savings,” a euphemism for underfunding the contracts? There do not appear to be any other votes on the council for the MFP Committee’s proposal, especially considering the fact that the union contracts are affordable in the next fiscal year. Instead, a rough consensus is forming in favor of a slightly lower property tax increase than that proposed by the County Executive along with a carbon tax proposed by Council Member Nancy Floreen.


But even that plan involves breaking the county’s charter limit on property tax increases, which generally holds tax receipt gains to a level equaling the increase in the consumer price index. Seven of the eight County Council Members must vote to exceed that limit. Both Council Members Trachtenberg and Andrews oppose breaking the charter limit, enough to kill any property tax hike. Will either of them budge on that position, thus enabling the union contracts to be preserved? That is the big question. We will have an answer by Thursday.

Labor Between the Hammer and the Anvil

As Montgomery County's budget battle draws to a clamorous climax, a new bomb has been dropped.

Yesterday, Council Member Trachtenberg sent the following letter calling for a 2 percent cost of living reduction to each of the county's public sector unions:



The unions countered in two ways.

1. In a letter to Ms. Trachtenberg sent today, MCEA, SEIU Local 500 and the school supervisors listed $67 million in new revenues available to the council next year. Those revenues include:

$14 Million
Adjustments in OPEB [contributions to future retiree healthcare liabilities]; would allow for 8 year payout, but does not assume the same level of increase; $11 million in savings from MCPS and $3 million from other agencies.

$9 Million
Net gain from increases in energy tax [as proposed by Council Member Floreen].

$10 Million
Could be taken from PAYGO.

$19 Million
Reduction of .5% into the reserve [maintained by the county to protect its AAA credit rating].

$15 Million
Potential carry-over carry over funds that were set aside in the FY 08 budget for emergencies, such as snow removal that were not needed.

2. In their letter to Ms. Trachtenberg, the unions state, "An additional source of revenue is to take into account any revenues in excess of projections in the current budget. We have no knowledge of what that figure is since it has not been shared by the County Executive’s office." Indeed, rumors are flying that the county's income tax receipts may be higher than first thought. The unions have sent a Freedom of Information (FOIA) request to the County Executive's office seeking a monthly tabulation of new income tax revenues received from the state. They hope to discover evidence that income tax receipts are higher than projected, thus relieving the pressure on their contracts.

One of the sad aspects of this showdown is that it may not be necessary. A week ago, we demonstrated to our readers that the County Executive's budget projects $301 million in new revenues for FY09 against $154 million in added union labor costs. At least for next year, labor's cost of living adjustment is easily affordable. Nevertheless, the hammer is falling.

In the private sector, an employer could not do what the county is considering. If a private company attempted to unilaterally change a labor agreement, the union could strike, file unfair labor practice charges, get enforcement orders from the National Labor Relations Board and the courts and file suit to collect benefit contributions. Only employers under bankruptcy protection could unilaterally alter wage levels. Montgomery County may be in a recession, but it is not under the supervision of a bankruptcy judge!

The fate of the unions' COLAs is far from certain. Council Members Trachtenberg and Phil Andrews can block the County Executive's proposed property tax increase, which requires seven of the eight sitting council members to pass. But altering the union contracts would require five votes. It may be difficult for Ms. Trachtenberg and Mr. Andrews to find three more council members willing to cut the COLAs when there are less electorally-threatening alternatives available.

And if the council simultaneously rejects the property tax hike and rejects COLA reductions, what then? No one knows. But the choice must be made in less than a week.

Challenge to the Unions, Part Two

In Part One, we reported on County Council Member and Management and Fiscal Policy Chairwoman Duchy Trachtenberg’s letter to public employee union MCGEO offering a choice between layoffs and COLA reductions. Today we examine whether those measures are justified by the county’s dire budget situation.

Concerned over the county’s long-run finances, Council Member Trachtenberg asked council staff for an estimate of the future obligations to the county imposed by its public employee union contracts. Two weeks later, the County Council’s merit staff director responded with a 129-page memo outlining those costs. Page 2 of the memo contained this statement:

Councilmember Trachtenberg has requested information on agency compensation costs over time. One measure of these costs is the cumulative fiscal impact of the current or pending three-year negotiated agreements with the six County and MCPS unions, starting with the base year. See the fiscal impact statements on pages 37-39 and 111-113. The cumulative fiscal impacts are $117.9 million for MCGEO [government employees], $45.4 million for the FOP [police], $37.2 million for the IAFF [fire fighters], $61.9 million for non-represented employees in County Government, and $577.7 million for MCPS.

The total of these amounts, $840.1 million, does not include higher ongoing costs for health benefits for active and retired employees, nor does it include the $1.2 billion cost of the proposed eight-year pre-funding schedule for future retiree health benefits.

Are these marginal costs really accurate? We looked up the supporting data on pages 37-39 and 111-113, which correspond to pages 53-55 and 127-129 in the pdf document. Following is our tabulation of all marginal costs reported.

The marginal costs for each of the employee categories amount to $134 million in FY08, $176 million in FY09, $225 million in FY10 and $21 million in FY11 for a total of $557 million over the four years. (The estimate is low for FY11 because only the fire fighters’ agreements cover that year.) This total is much lower than the $840 million reported on the second page of the staff report, even though that summary refers to the pages tabulated above. There is simply no data in those pages to justify the $840 million estimate.

Furthermore, marginal cost data for FY08 should not be construed as a future obligation faced by the county. FY08, the current fiscal year, expires on 6/30/08. Those costs have mostly been paid already.

Finally, the analysis includes marginal costs due to fire and rescue management and non-represented employees. Why should the unions be held responsible for additional spending on employees they do not represent?

Subtracting out costs for the almost-expired FY08, the fire and rescue management and the non-represented employees, the remaining future obligations faced by the county total $154 million in FY09, $193 million in FY10 and $20 million in FY11, or a combined $368 million. This is a far cry from the $840 million cited at the beginning of the staff report.


Are added salary costs of $150-200 million per year sustainable? The answer depends on the county’s economic performance and the county government’s revenue collections. According to revenue statistics released by the County Executive, revenues collected by the county are projected to rise by $109 million in the current fiscal year (between 7/1/07 and 6/30/08). That overall rise in receipts occurred despite the facts that a) county receipts from the real property transfer tax dropped from $107 million to $80 million (down 25%), b) receipts from the recordation tax dropped from $73 million to $53 million (down 27%) and c) the county may have entered a recession. The above means that even in a really bad year, the county’s revenues continued to rise.

The County Executive’s proposal projects a further rise in receipts in FY09 of $301 million, partially due to his property tax increase. This would be more than enough to pay the $154 million in extra costs associated with the union contracts. At least for next year, the county should be able to meet its labor obligations if it adopts a budget similar to the County Executive’s recommendation.

As for the future, the most volatile components of the county’s revenues are the two tied to real estate sales: the real property transfer tax and the recordation tax. According to the county’s Department of Finance, residential real estate sales volume averaged over $500 million per month from 2006 through the first eight months of 2007. Since then, residential real estate sales volume has averaged between $200 and $300 million per month. It is this collapse in residential real estate transactions that has caused many of the county’s current budget problems. All policymakers – both inside the government and inside the unions – should watch this figure in the Finance Department’s monthly economic updates. If it rises back up to $400 million per month or more, the county’s real property transfer and recordation taxes will begin to recover. If it falls further, tougher times are ahead.

Challenge to the Unions, Part One

In a story first reported by the Washington Post’s Ann Marimow, Montgomery County Council Member and Management and Fiscal Policy Committee Chairwoman Duchy Trachtenberg has written to UFCW Local 1994 (MCGEO), one of the county’s public employee unions, offering a choice between layoffs or smaller pay increases. We reproduce the letter and discuss its importance below.

April 29, 2008

Gino Renne, President
UFCW Local 1994 MCGEO
600 S. Frederick Ave., Ste. 200
Gaithersburg, MD 20877

Dear Mr. Renne:

In light of the difficult decisions County Council faces for the upcoming budget, I am turning to elected union leadership for counsel during this process.

The strong advantage of having union represented county employees is that the union structure, through its elected leadership, is an excellent conduit to reach out to the rank and file. It is important to each councilmember to hear and respect what options county and school employees would prefer as the Council balances the interests of residents across Montgomery County while making our final budget decisions. Without unions in place, this process would be much more difficult.

With the uncertainty of the County Council’s willingness to break the charter limits and concerns over jeopardizing our AAA credit rating, we may well not have the revenue needed to execute the current CBAs [collective bargaining agreements] without invoking their provisions for Reductions in Force. In an abundance of caution, I want to begin a conversation about all available options that might come forward to avoid force reductions as we face the budget deficit.

I am reaching out for an honest and open discussion of options to address our budget deficit. This invitation is extended to MCGEO, SEIU 500, FOP [police], IAFF [fire fighters] and MCEA [teachers]. To facilitate our discussion, below is a list of ideas that have come to my attention that warrant a response from organized labor. You are all invited to submit a memo outlining your concerns and options you feel will be acceptable to the county and school system employees you all represent.

1. If your members were given a choice between a reduction in COLA [cost of living adjustment] or involuntary layoffs through each contract’s provisions for Reduction in Force, which option do you think your rank and file would find most acceptable?

2. The County Executive projects only 58 employees will take an early retirement buyout option. Do you concur with this position, or do you believe there is more demand for this option? What are the best ways to structure these offers to make them more appealing to your members?

3. Would you have members interested and able to participate in a voluntary layoff program that would protect their seniority and health insurance while they drew unemployment for six months? Would there be more interest if this option could be used as a way to bridge a member to retirement?

4. During the District 4 Special Democratic Primary, Don Praisner proposed an extensive labor management cooperation program to help identify savings, much in the same manner as MCGEO’s letter to council. Would your members be interested in such a program?

These questions by no means limit our conversation. For further clarification of this request and any other questions you may have, please contact Eric Hensal through my office. Eric is a former union organizer with a depth of experience in labor issues and a Masters of Public Administration earned through the National Labor College. I am sure you will find Eric an excellent resource as we all chart a course through the current budget crisis.

Cordially,

Duchy Trachtenberg
Chair, Management and Fiscal Policy Committee

cc: Honorable Ike Leggett, County Executive
Honorable Mike Knapp, Council President
Honorable Phil Andrews, Council Vice-President
Steve Farber, Council Staff Director

The letter is a dramatic development in the county’s budget crisis for several reasons.

1. There are only about two weeks to go before the County Council begins voting on the FY09 budget. This letter to the unions comes late in the game. As recently as April 9, the Gazette reported that Council Member Trachtenberg “said the contracts with county employees should be honored.”

2. When Ms. Trachtenberg refers to “the uncertainty of the County Council’s willingness to break the [property tax] charter limits,” she is referring to a situation over which she has some control. After all, Ms. Trachtenberg told the Gazette, “I do not support going over the charter limit.” Added to Council Member Phil Andrews’ opposition to the property tax increase, the tax hike is in real danger of not passing because it requires seven of the current eight council votes. Ms. Trachtenberg’s opposition to the property tax hike may in fact be creating a need for the sort of choices she is now offering the unions.

3. The reference to Eric Hensal is noteworthy. Hensal lost a special election in Takoma Park to fill Marc Elrich’s vacant city council seat and went on to manage Don Praisner’s District 4 County Council campaign. During the District 4 campaign, the Post reported that Hensal was seen entering the County Council building for lunch appointments with staffers for Marilyn Praisner and Ms. Trachtenberg. Has he now been hired as council staff or as a consultant by Ms. Trachtenberg? If he is a consultant, a reference to him in the letter is very unusual. Why would a sitting council member allow a third-party consultant to speak for her on such a vital matter as employee layoffs or COLA reductions?

But there is more. The public sector unions have not forgotten Don Praisner’s frequent criticism of their contracts during the special election. Nor have they forgotten how the Praisner campaign branded union-backed Nancy Navarro as a “special interest” candidate. Are any of the unions likely to view Mr. Praisner’s campaign manager as a desirable interlocutor for labor relations issues?

4. Ms. Trachtenberg gained a famous fan through her letter: none other than Robin Ficker. On Maryland Moment, Ficker squealed with delight:

Trachtenberg is just the kind of person I like---one tough cookie when she wants to be. Continue asking the tough questions Duchy. Social security recipients get a 2.3% increase in 2008 with NO step increases. I loved Charles Barkley. I would ask him, “Charles I know you want to run for Governor of Alabama, but before I vote for you I want to know your views on the economy, NAFTA and healthcare.” He would reply, “Well, I do have a view on the death penalty----they should use it on you!” Trachtenberg reminds me of Barkley.

All of the above is subject to one awful truth: the county is facing a $297 million budget deficit and the County Council has two weeks to go before the tough votes come. Ms. Trachtenberg did not create this deficit and the problems are real. In Part Two, we will examine whether the county can meet its contractual obligations to the unions in the current budget environment.

Valerie Ervin Issues "Call to Action" on Economic Justice

Montgomery County Council Member Valerie Ervin, who represents Silver Spring, Takoma Park, Wheaton and Kensington, wrote the following op-ed in the Gazette today. We reproduce it here for our readers.

The Gazette
Wednesday, April 23, 2008
Economic justice: A call to action
by Valerie Ervin

This month marks the 40th anniversary of the death of Dr. Martin Luther King Jr. He was assassinated while in Memphis supporting sanitation workers who were on strike to improve working conditions and low wages. For Dr. King economic inequality was an important tenet of the civil rights movement. This new focus was the convergence of racial and economic concerns and had the potential to change the course of the movement.

Forty years later many things have changed in Montgomery County, but much remains the same. In 1975, the county’s minority population was 8 percent. In 2005, census data shows the minority population had grown to 41 percent countywide and was 79 percent in some areas. However, a comprehensive discourse about race and poverty is absent.

In Montgomery County, one of the most affluent counties in Maryland, policy makers often ignore the plight of those who are struggling to make ends meet. I believe that a new conversation about poverty and race must take place.

County government officials explain that growth in the county was less than 1 percent last year. However, what does this mean for an average working family? Without a growing tax base, our roads will continue to experience gridlock and our schools will remain overcrowded. More than 5,000 public school employees must travel from as far away as West Virginia each day to teach our children.

Police officers and firefighters go to great lengths to serve our communities, yet many call other jurisdictions home. Commute times are getting longer because, for so many, the cost of living in Montgomery County is a dream that is out of reach. Montgomery County has the second highest foreclosure rate in Maryland, and we have yet to see the worst of this trend.

Each year our public school system must teach more children who arrive at our doors unable to speak English. Poverty is also an issue for our county’s children with nearly 25 percent of school children eligible for free and reduced meals.

So where do we go from here? I have traveled throughout the county and visited the homes of people who dream of simple achievements that many of us take for granted. Their voices are silent in our most critical public policy debates. What I have found is that there is a disconnect between what preoccupies policy makers and what truly troubles the majority of working people who are struggling to care for children, pay for housing and cover the ever increasing costs of utilities, fuel and groceries. The current economic downturn impacts working families disproportionately, but they are too busy trying to make a living to spend time lobbying lawmakers.

As a call to action, I propose a summit for state and local policymakers to begin a new debate — a conversation about how to achieve economic justice for all of our residents. We must focus on opportunities for the future, not artificial limitations imposed by the past.

Valerie Ervin, a Democrat from Silver Spring, represents District 5 on the Montgomery County Council.

A note from Adam Pagnucco.

Council Member Ervin is touching on a theme that was explored in the recent County Council District 4 special election. In the candidate debates in that short campaign, Nancy Navarro repeatedly mentioned the plight of the people "not in the room." In contrast, my blog-brother Kevin Gillogly offered this characterization of the election in a blog post comment: "That is this race in a nutshell: Growth and Land Use Policy. Everything else is smoke screen." The debate on growth policy, poverty, jobs and pay is heating up as this county teeters on the edge of a recession and Valerie Ervin is calling that question.

If another elected leader has a different view, we will carry it for our readers in the interest of encouraging open debate.

More Wobbling on the Property Tax

While the great debate between David Lublin and myself over the property tax is now over, the great tumult over the issue on the County Council is just getting started.

The Gazette reveals that Council President Mike Knapp is now uncertain about his vote on the County Executive's property tax proposal. This follows votes against the tax in the Management and Fiscal Policy Committee by Council Members Duchy Trachtenberg and Phil Andrews and an abstention by Valerie Ervin. Council Member Nancy Floreen has also expressed doubts about the tax.

Because the District 4 council seat will not be filled until after the budget is decided, seven of the remaining eight Council Members must vote to break the charter limit to pass the property tax hike. So far, we count two votes against, two votes not committed and four votes with no expressed position. That's a bad sign for passage of the tax hike.

Do any of our readers know if it's possible for the County Council to turn down the property tax hike and not re-open the public employee contracts?

On Progressive Taxation and Property Taxes

David Lublin raised a number of good points on the property tax increase that deserve a response. Let’s take them in order.

(1) Lots of people have lived in homes for a long time that have appreciated substantially. Particularly for retirees on a fixed income, an increase of over $1000 (very easy to hit in SoMoCo) can be tough even if they live in a high-value home. Even if economic theory says they can borrow against their homes, people really hate that idea for understandable reasons. In any case, this market isn't the best one for realizing the profit.

David rightly points out that some people on fixed income could potentially receive a $1,000 property tax increase under County Executive Ike Leggett’s proposal. Under the formula in my previous post, a home receiving a county property tax increase of $1,000 would have a net assessment of $891,789 (and a much higher gross assessment and market value if the homestead credit applied). But the county provides residential property owners of at least 70 years in age a “senior property tax credit” of 25% of their combined state and county homestead credits. So a senior would be allowed to own an even more valuable home than a non-senior before being subject to a $1,000 property tax increase – perhaps even a home approaching $1 million in market value.

But no one will want to pay that amount of property tax increase. So suppose we relieve the tax increase on seniors with homes approaching a million dollars in market value. If there is to be a property tax increase at all, someone will have to pay more as a result – perhaps seniors occupying homes worth $300,000. But suppose we relieve them too from the extra taxes. Then the burden will fall on young families – a group with substantially less wealth than seniors and significantly less retirement security. Where should the burden fall?

Progressive taxation, a bedrock principle of progressive economic philosophy, holds that tax burdens should advance with income levels. Recent events suggest that principle may be out of fashion in Montgomery County.

(2) Focusing just on the millionaires tax is a mistake. Don't forget all those sales and income taxes raised during the special session. Also don't forget all those fees which were jacked up under Gov. Ehrlich. The voters won't. All things being equal, Americans like having more disposable income. If this is done to maintain services, it will need to be convincingly explained--not necessarily an easy sell though it can be done.

I am not about to forget the tax package from the special session. Because it relied primarily on sales taxes, it was regressive. To quote once again the analysis by the Maryland Budget and Policy Institute:

The poorest 1/5 of taxpayers will pay nearly 0.8% more of their income in taxes. The middle 1/5 will pay half that percentage: just over 0.4%. The wealthiest 1/5 will pay between 0.3% and 0.5% of their incomes in increased taxes. This overall regressive distribution occurs because the regressive nature of the sales tax increase overwhelms the progressive features of the income tax changes.

The County Executive’s property tax proposal is progressive and may, in conjunction with the new state millionaire tax, flatten the tax burden. These two progressive tax proposals, which together total $238 million, have attracted immense opposition from a substantial portion of Montgomery’s political leadership. But the $700+ million regressive state sales tax hike passed without a whimper. That is a chilling but instructive development in this county’s political environment.

In any case, I agree that any tax hike, no matter its character, must be explained to voters. The public employee unions are not in the best position to do this since most people will perceive their defense of public services as a defense of their memberships, which is of course their role. It is the responsibility of the politicians to explain why county services are worthy of a tax increase if that is what they believe. That is especially true of politicians who were eager to accept the support and aid of labor during the last election campaign. For the most part, that defense has yet to begin.

(3) The debate has been cast as an either/or debate with no middle ground. Either taxes go up a great deal or services are cut substantially. Like all money issues, this one can be negotiated to all sorts of points inbetween. Both sides know this but are posturing right now is my guess.

I suspect the County Council will have to settle somewhere in the middle. Such is the way of legislative bodies. But the decision to surpass the charter limit truly is an either/or decision. If the council rejects the County Executive’s tax proposal, they will have to cut the budget by a further $128 million.

There is another option. As Delegate Al Carr pointed out in a comment on an earlier post, the County Council is considering increasing taxes on electricity and natural gas. This is a far more regressive option than the County Executive’s property tax hike and it does not need a super-majority to pass. The shade of Annapolis may be descending on Rockville.

(4) The recession may just be starting with next year's budget looking even more grim. As at the state level, the chances of getting both budget cuts and tax increases over the course of several years are starting to look pretty good.

A recession is a distinct possibility as we recently reported. People on the lowest rung of the income ladder, not those earning one million dollars a year, are on the leading edge of the downturn. The residents at the bottom will be sure to bear the brunt of any spending cuts. They should not also bear the brunt of the tax increases. Under the County Executive’s property tax proposal, many working-class people are indeed spared further tax hikes after their setbacks in the last special session. They will not be spared the lash of a home fuel tax hike.

I completely agree with David's judgement that the tax and budgetary choices are going to get tougher at both the state and county levels, not easier, in coming years.

None of this has any bearing on some key questions other have raised: (1) does labor deserve the pay increases, (2) does MoCo need to pay them to maintain quality services, and (3) can MoCo afford the pay increases. The first is a morality, not a market, question. The second is largely market driven. The third is driven by the tax base, economic needs, and taxpayer willingness to pay. I haven't thought much about any of these questions so I won't weigh in just yet.

On point (1):

Speaking as someone who has been involved in several union organizing campaigns, the notion of what a worker “deserves” is a very explosive question. Many public employees are starting to believe that their leaders think they are paid too much. This argument has been stated, or at least hinted at, by more than one of the Democratic candidates in the District 4 County Council race. Economic arguments can be conducted rationally but the question of what a worker “deserves” is a question for the heart. Right now, hearts are pounding inside the public sector workforce.

On point (2):

In a recent survey of county employee compensation, we learned that Montgomery faces potential problems competing for labor in the region. Fair-to-middling (at best) pay levels, a lack of defined benefit pensions and high housing costs may deter top talent from coming here in the future. The existing workforce, originally recruited in times when the county’s housing stock was more affordable, is still known for its excellence. But the entry level talent will gradually erode unless the county keeps up with its neighbors.

On point (3):

In 2006, Montgomery County reported the 8th-highest median household income of all 3,077 counties in the United States. The County Executive’s proposal taxes the median assessed household an extra 38 cents per day. Readers can form their own opinions on whether we can afford that.

But there is a much larger argument here: where does the county’s economic competitiveness come from? Montgomery is perceived to be one of the higher-cost jurisdictions for residents and businesses in the region. So why are people willing to pay those costs? One reason is the excellent reputation of the schools and public services. As a former resident of the District of Columbia and a rural area in upstate New York, I have a meaningful standard of comparison for the county’s service quality.

But Montgomery’s true competitors are jurisdictions like Fairfax – counties that also have good schools and abundant resources. We are never going to compete with Virginia by matching them on tax rates. Instead, we will have to equal or surpass them in our quality of education, planning, parks, police and other public services. Those services comprise a valuable, productive asset that preserves our standard of living, maintains our property values and protects our economic edge. The money we spend on the public sector is an investment, not money thrown down a black hole. Any investment has to be evaluated not merely on its cost but also on the return it generates for its holders. Why are we hearing so much about the cost but so little about the return?

Are MoCo Public Employees Overpaid?

Yesterday, the Post reported on growing disagreements between Montgomery County leaders over compensation paid to county employees. Labor costs account for 80% of the county’s $4.3 billion budget and the county is facing a $297 million deficit. As a result, some county officials are scrutinizing employee contracts.

Council Member Phil Andrews told the Post that the county’s collective bargaining agreements were “unsustainable, unnecessary and unrelated to real-world economic conditions,” and said they should be rejected. Council Member Duchy Trachtenberg wants to know exactly what the county’s future obligations are under the contracts so the council can figure out how to pay for them. And the Post reported this tense exchange between Council President Mike Knapp and County Executive Ike Leggett:

Council President Michael Knapp (D-Upcounty) said Leggett's approval of the contracts appears to run counter to his message about the need to slow down spending.

“One would have thought that a more conservative approach would have been taken,” Knapp said. “It looks like we're trying to play both sides. Do we have bad economic times, or do we need to have generous increases in our contracts?”

In a prepared statement, Leggett called the contracts “consistent with agreements throughout the region” and said Knapp does not fully understand collective bargaining. Leggett said he has limited flexibility because of past decisions by the council and the school system and because of the possibility of binding arbitration in the event of an impasse. He cited the council's approval in 2006 of a $13 million enhancement to pensions for school system employees.

“I believe the Council President voted in favor of additional pension enhancements and every collective bargaining agreement that has ever been placed before him, thereby establishing less than favorable conditions in which future executives must negotiate,” he said in the statement.

So are Montgomery County’s public employees overpaid? Let’s examine a range of issues connected to their compensation.

Wages
The Post points out that many wage increases in the county’s contracts are actually intended to catch up to higher pay levels in other jurisdictions. As an example, the Post looks at fire fighters:

John Sparks, president of the Montgomery County Career Fire Fighters Association, said the county is playing catch-up for its 1,050 firefighters and paramedics. Rookie firefighters are paid $39,997, compared with $44,301 in the District, $40,784 in Prince George's County and $47,472 in Fairfax County. Among jurisdictions such as Montgomery with more than 500,000 people, the average salary nationally is $44,275 for starting firefighters.

Consider the county’s teachers. The Washington Area Boards of Education (WABE) estimates the total compensation cost of a teacher paid $60,000 in salary in nine of the metro area’s jurisdictions. Montgomery compensates such a teacher $81,792, above only Prince George’s County ($78,720). Montgomery trails Arlington County, the leader, by 7.1%.

WABE also reports the starting salary of a step 1 teacher with a bachelors degree in Montgomery as $44,200. The average sale price of an existing townhouse in the county was $364,000 a year ago. A simple analysis with a mortgage calculator and a spreadsheet generates some interesting revelations. If this starting teacher put down 10% of the townhouse’s value, took out a 30-year mortgage at a 6% fixed rate and paid $2,500 per year in property taxes, he or she would owe 59% of pre-tax salary per month to make the payments. A step 9 teacher with a masters degree makes $64,498 and would owe 40% of his or her pretax monthly salary for the mortgage and property tax payments on the same townhouse.

How can this be considered excessive pay?

You can view a breakdown of county salary schedules here.

Pensions
Government jobs used to be known for having modest salaries but great retirement benefits. This is not the case in Montgomery County. Since 1994, the county’s Employees’ Retirement System, its defined benefit plan, has been closed to new employees other than public safety workers. Currently only 5,294 of the county’s workers have county-funded defined benefit pensions. The county’s 11,486 teachers are covered by Maryland’s State Retirement and Pension System. This means that half of the county’s total workforce of 38,000 must rely only on a defined contribution pension plan for retirement. Most of Montgomery’s neighbors continue to grant their employees defined benefits.

Health Care
The county is projecting payments of $80.7 million for group health insurance premiums for its workforce next year (and that does not include school employees). It also projects $2.6 billion in future liabilities for retiree health benefits and is phasing in annual contributions towards those liabilities which will rise to $259 million after the next five years. Montgomery is not the only county facing a large liability for retiree health care: Howard reports a $477 million liability, Anne Arundel reports a $1.3 billion liability and Prince George’s reports a $2.7 billion liability. None of them approach Los Angeles County, California, which will have to deal with a $20 billion liability. This is clearly a lot of money so why not cut health coverage for county employees?

There are two problems with that. First, county employees already pay 20% of their health costs. Raising that percentage would be effectively a wage cut. Second, cutting health benefits will not decrease illness among public employees. They will continue to seek care in local hospitals. And in Maryland, state law provides that hospitals are reimbursed for their cost of uncompensated care (which totaled $734 million in 2006). Where does this money come from? About 90% is covered by allowing hospitals to charge higher rates that are determined partially by their uncompensated care experience. The remaining 10% comes from an assessment imposed on hospitals equaling 0.75% of their net patient revenues. Virtually all of this money comes back to taxpayers because government entities (like Medicare and Medicaid), premium-charging insurance companies and patients wind up ultimately paying the higher rates charged by the hospitals. In the end, if county employees get less health coverage, we will all pay for their health costs anyway. The only difference is that, with less coverage, county employees would be less likely to seek preventative care and more likely to use emergency rooms, thus driving up health care costs for everyone.

Recruitment and Retention
Consider the view of a talented prospective job applicant pondering whether to accept employment with the Montgomery County government. Unless that applicant is seeking a public safety or teacher job, he or she will not get a defined benefit pension. Unless the person is qualified for a top management job, he or she will be unlikely to afford a home in the county without assistance. He or she will be able to make more money in the District, Arlington County, Fairfax County or perhaps even Prince George’s County. For this applicant to commit to Montgomery, he or she will have to believe that Montgomery will one day pay at least as much as its neighbors and the applicant will someday be able to afford in-county housing. Otherwise, it makes little financial sense to work for Montgomery County and the best applicants will go elsewhere.

Competitiveness
Finally, an important part of the economic bedrock of Montgomery County is its superior level of government services – especially its public schools. When the county invests in its schools, it provides a powerful reason for businesses and residents to want to live here and create jobs here. Without top-grade public services, we will increasingly be seen as merely a high-cost jurisdiction in the metropolitan Washington area – and what happens to our economic competitiveness then?

It’s in the best interest of county taxpayers to attract and retain the best public employees to work for them. We do have to figure out how to pay for them. But spreading the mythology that county employees are overpaid will not get us there.