Late last month, the Congress approved, and President Obama signed into law, the American Recovery and Reinvestment Act of 2009, better known on newscasts and in office chatter as the "stimulus package." The stimulus package injects $789 billion into a sagging economy with the hopes of reviving our nation's fiscal health and creating or protecting 3.5 million American jobs. The number staggers the imagination: $789 billion. Almost a trillion dollars. Surely, our problems are solved, right? Let's do the math.
Of the $789 billion provided by the stimulus package, $3.8 billion worth will make it to the state of Maryland. Thatís only a little more than ten percent of Marylandís total state budget for last year. To put it another way, thatís less money than we spend in Montgomery County alone each year. And that $3.8 billion doesn't arrive here in one tidy sum. Instead, itís spread out over the next three years, arriving in installments of about $1.8 billion in FY 2009, $1.85 billion in FY 2010, and $156 million in FY 2011. Of the $1.8 billion the State will receive this year, $560 million: about 30% -- will be allocated to paying the State's share of Medicaid.
Another $360 million -- goes toward education, and the Governor almost immediately announced that for FY2009-2011, the legislature will fully fund all ìmajorî State K-12 education formulas, including Thornton funding and Geographic Cost of Education Index (GCEI), which is critical to jurisdictions like Montgomery County, with a generally higher cost of living. The State will also provide dedicated funding of $180 million to Title I and $208 million for special education.
If you're still doing the math, you'll see that of that initial $1.8 billion Maryland will receive for the current year, we're left with about $800 million statewide -- for projects like highway repair and maintenance, homelessness prevention, workforce development initiatives, and energy assistance programs. While the $1.8 billion the state will receive this year in stimulus funding will definitely help, it's really only a paper cup trying to bail out a swamped ocean liner. These can all be worthwhile expenditures, but it adds up quicker than you might think. It's also important to remember that even before the financial downturn, the State of Maryland was staring at its own brand of economic crisis, with an estimated budget shortfall of close to a billion dollars. Now, with real estate markets sagging or flat, and every form of tax revenue down, Maryland is looking a projected FY 2010 deficit of nearly $2 billion.
So, while the $1.8 billion the state will receive this year in stimulus funding will definitely help, it's really only a paper cup trying to bail out a swamped ocean liner -- and at the end of two years, once stimulus funds run out, Maryland will still be a billion dollars short. Even though it would have appeared from press accounts that stimulus funds would somehow provide the state with the hefty check it needed to fill its coffers and balance the budget, it really only addresses the issues that everyone is facing as a result of the recession. The underlying problems still remain. The reality check is in the mail.
We're starting to get an idea for what the stimulus money means here in Montgomery County ñ and while thereís some good news, we're also filling a pretty deep hole here in the county. True, the county will receive $21.4 million in education funding -- from which MCPS Superintendent Weast has targeted $15.3 million to special education and $6.1 million to Title I schools. However, despite critical needs and plenty of so-called "shovel ready" transportation projects, Montgomery County will receive no funding at all from the $365 million Maryland has earmarked for Transit and Highway projects. Instead, the county will have to settle for a share of the $146 million set aside for road resurfacing projects across the state.
Still, it's not all gloom and doom. Any funding provided by the stimulus package is appreciated and will be helpful. The real trick is to manage our expectations of what stimulus funds will and won't do. It will give us the opportunity to keep some of our most critical services and programs at current levels or better. Itíll also give us an opportunity to compete for a sliver of discretionary funds that we can use for workforce development and other initiatives that invest in our residents and our workforce. But it won't balance our budget. Weíve got some work to do.
Make that a lot of work. Like every other jurisdiction across the country, our county is seeing revenues fall. And as we are seeing in our daily lives, we're just hoping to keep our jobs,our salaries, and what remains of our retirement accounts, but as a result, Montgomery County finds some of our sources of revenue income tax, particularly capital gains, recordation, and transfer taxes have all but dried up. Consequently, Montgomery County is looking at a projected budget shortfall of nearly $520 million. Thatís more than half a billion dollars.
Now, I know that when you hear that our county budget is somewhere in the vicinity of $4 billion a year, it seems like a $520 million gap should be easy to close after all, that's only about an eighth of our total budget. And after all, $4 billion is a lot of money -- so surely, reducing the budget by an eighth should be relatively painless, right? We can freeze the pay and eliminate mandatory service-related increases for every county government employee... but that still leaves us a gap of $345 million to overcome.
There are lots of things we can do to close the gap. We could, for example, reduce services, lay off employees, or freeze salaries and hirings. That makes it difficult to maintain, even at current levels, a lot of the things that make our county such a great place to live. But again, letís do the math, using some real examples. One proposal that I was working on with our employee organizations, and has been adopted by Montgomery County Public Schools, is to freeze the pay for every county government employeeóevery teacher, firefighter, librarian, policeman, and so on. If we provide our employees with no cost of living adjustmentsóand even were to take it a step further (something that was not done during the recession in the 1990's) and also provide no mandatory service-related increases as well -- we'll save $155 million.
That still leaves us a gap of $345 million to overcome. To put his in perspective, thatís about the amount of money the county spends each year for police and the Department of Corrections combined. Or it's also equivalent to what we spend annually for fire and rescue services and the 60,000 students and teachers at Montgomery College. These are four of our largest county expenditures ñ but theyíre also programs youíve indicated are among the most critical. This year, it's likely we'll be able to do everythingwe would like in these areas. This year, these really are the options before us.
What else? We've already vowed not to increase taxes, and the Councilís commitment to staying within the confines of the charter limit is a matter of record. That means that if we want to continue to maintain the services that you've indicated are the most important to you ñ education, public safety, transportation, and caring for vulnerable populations -- then weíve got to look hard at both our revenues and our expenditures and determine where we can make your money work better for you.
That's going to involve some tough questions. Are there places where we can spend less and still maintain a high quality of services? Are there things we can do better to get more bang for the buck? Are there some things we're doing that we frankly shouldn't be doing? Are there things weíre not doing that we should be doing, regardless? I donít know all the answers yet -- but I know we can navigate through this successfully and I'm willing to have the discussion with my colleagues and all of you. Iím hoping the Council shares my commitment to having such a frank conversation. SOURCE: Mike Knapp