Cliff diving: Federal budget strife could hit municipalities -- Gazette.Net


Municipalities fear the trickle down of cuts from the county or state.

“I can see them [state or county] not wanting to give required payments at the time they’re supposed to be done,” said Suzanne Ludlow, acting city manager for Takoma Park.

She said the state made cuts to Takoma Park’s highway user revenue and tax duplication payments during the recession, which forced the city to make “significant cuts” in its budget and some layoffs.

“We’ve been trying to build stability since then,” she added.

As President Barack Obama and House Speaker John Boehner, an Ohio Republican, work toward a resolution in the next two weeks, nervousness about the future lingers.

“When I hear numbers like 8 percent outside of defense as possible cuts, it’s very startling and very, very worrisome,” Council President Nancy Navarro (D-Dist. 4) of Silver Spring said.

Montgomery made significant cuts during the recession, closing more than $2.6 billion in local budget gaps.

Those cuts cost about 1,000 county employees their jobs, and some county agencies lost as much as nearly 30 percent of their operating dollars.

In the current fiscal year, the council and County Executive Isiah Leggett (D) were able to begin restoring some of the funding lost to recession.

The fiscal cliff threatens to turn that backward, Navarro said.

Councilwoman Nancy Floreen (D-At large) of Garrett Park noted that the federal government’s budget problems could decrease jobs and increase building vacancies in the county, therefore reducing taxpayer wealth and taxable base, directly impacting county revenue.

About 46,000 federal jobs and 19 federal agencies are based in Montgomery. Of about 970,000 residents in the county, about 72,000 work federal jobs, according to government figures.

The county’s bottom line is not the only one that would be affected if the country falls off the cliff.

Montgomery’s public schools could lose $6 million in federal aid next budget year if an agreement is not reached, said Larry Bowers, chief operating officer for Montgomery County Public Schools. The school system receives about $60 million in federal aid annually.

If Congress does not reach an agreement, Title I, the program that serves Montgomery’s low-income students as well as the Individuals with Disabilities Education Act (IDEA) program would be hardest hit. But other programs, including Head Start — which provides subsidized early childhood services to those who qualify — would also feel the impact.

Montgomery schools received $20.37 million in Title I funds and $39,500 in IDEA funds in fiscal 2012, according to school system documents.

Providing services to children who qualify for IDEA and Head Start funds is federally required, Bowers said. So if that federal funding is cut, the school system would have to find local dollars to make up for those cuts, he said. The school system would not be required to make up for the Title I cuts, he said.

Bowers said the largest effect would be on the county government, which, regardless of federal cuts, will need to fund the school system at the same level of per-pupil funding next budget year under the state’s maintenance of effort law.

Recent analysis shows Montgomery already $135 million short for fiscal 2014, and both county government and the Maryland-National Capital Park and Planning Commission facing 5 percent operating budget shortage.

Even the threat of the fiscal cliff is being felt among Montgomery County’s businesses, said Bruce Lee, president of the Silver Spring-based Lee Development Group.

“We’re seeing small businesses that are government contractors giving back space, downsizing or closing a shop because they’ve been told by the government that contracts will not be renewed or they’re going to be reduced substantially,” he said. “Regardless of how the fiscal cliff is resolved, … we’re already in deep trouble.”

Staff writers Jessica Ablamsky, Jen Bondeson, Sylvia Carignan, Terri Hogan, Lindsay Powers, Kara Rose and Elizabeth Waibel contributed to this report.