County officials said that greater income tax returns mean there will be a small bump in overall revenue for the current fiscal year — but warn that an upcoming recession could impact the county’s financial outlook in the coming years, possibly delaying projects in the capital budget.
Jennifer Bryant, director of the county’s office of budget and management, and Mike Coveyou, the county’s director of finance, told County Council members Tuesday they were expecting some type of economic slowdown. But it’s difficult to say whether it would occur in fiscal year 2023 (the current one) or fiscal year 2024.
According to council staff reports, the county anticipates it will receive about $85.4 million more in income taxes than originally budgeted. The council passed a $6.3 billion operating budget earlier this year.
County officials said the difference in income tax projections was due to more money coming from state coffers, along with “an assumption that additional distributions will be made to the County as early as January to reflect income taxes associated with pass-through-entity filings,” according to council staff reports.
Officials also predict that they will receive $28.2 million less in property taxes than initially budgeted, and $33.6 million in the recordation tax, which is applied during the transfer of property. Broadly speaking, many factors in the local real estate market led to those changes.
Along with some other revenue calculations, county officials believe they will see $22.6 million more in revenue than initially budgeted, the staff reports state. The reduction in revenue in property taxes could indicate an economic slowdown, but it’s difficult to say when, officials said.
“Although the revenues are robust, we have some pressures on the budget that we should be mindful of moving forward,” Bryant said.
Officials also noted that the upcoming economic recession could have an impact on the county’s capital budget. Council Member Gabe Albornoz (D-At-large) asked specifically how that would impact Montgomery County Public Schools, including on school construction projects.
Bryant said that there is no estimate on how much the capital budget might be impacted, adding that County Executive Marc Elrich (D) and others are aware that inflationary pressures and supply chain issues will have an impact.
County officials are hopeful that a $2 billion surplus reported by state officials will help, Bryant said. But she and Coveyou said that they are also awaiting the Maryland Board of Revenue Estimates’ later this week, to see the broader overall fiscal picture within Maryland.
Council Member Will Jawando (D-At-large) also said that county officials should work with the state delegation to look at a more progressive income tax structure, along with different types of property tax classifications.
“I think we need to have all the tools in the toolbox available to us, especially as we look to [fiscal year] 2024 and 2025 [and] the outlook here,” Jawando said.
The County Council will work on any potential amendments to the six-year-capital improvement program, beginning next month.
According to the county charter, Elrich must introduce an operating budget by March 15. The council then has until June 1 to make any changes and approve the budget. They then have until June 30 to approve any tax levies to finance the operating budget.