Montgomery County officials publicly acknowledged Monday that the county’s budget shortfall had doubled in size, ballooning from a previously estimated gap of $250 million to at least $500 million.
The Examiner reported last week that Councilwoman Duchy Trachtenberg, who chairs the county’s Management and Fiscal Policy Committee, said the budget shortfall was in the $400 million to $500 million range. At the time, Chief Administrative Officer Tim Firestine said a $500 million budget shortfall seemed “a bit high,” but on Monday, Finance Director Jennifer Barrett told council members to prepare for an “at least doubling of the budget gap.”
Barrett and other members of County Executive Ike Leggett’s finance team had predicted a $251 million gap in September and October memos, but issued an “early alert” Monday detailing a “major write-down of revenue estimates.”
Last week, county leaders learned they would receive $31 million less than expected in income tax revenue from late filers, who had until Oct. 15 to complete their taxes.
County officials said they aren’t sure yet what caused the $31 million discrepancy. Late filers tend to be wealthy individuals who have more complex tax documents, typically involving investments. The returns are from 2007, however, when the stock market closed the year slightly up from the year before, compared to the 40 percent drop so far this year.
Barrett’s memo said an 11 percent decline in average home sale prices between July and September, plus a drop-off in the number of homes being sold were also contributing to Montgomery’s budget woes. The county collects transfer and recordation taxes from housing sales, and a sagging housing market means less revenue.
“There are across-the-board problems,” Barrett said.
The shortfall could become even worse this winter, after the state makes another round of anticipated cuts to county aid.
Council members are wrestling with roughly $50 million in cuts recommended by Leggett.
“I think there is a perception among some people that after next week it will all be over,” Councilman Don Praisner said during a meeting on budget issues. “We do not have the money to spend. You might not like it, but that’s a fact of life right now.”
