Should the United States fall off the federal fiscal cliff, Montgomery County could be one of the hardest hit areas by the mandatory cuts and tax hikes.
Home to federal agencies, thousands of federal workers and many of the region’s highest income residents, the cliff’s impending across-the-board expiration of Bush-era tax cuts and $1.2 trillion in automatic spending cuts only make matters worse for Montgomery, U.S. Sen. Benjamin L. Cardin (D-Maryland) of Pikesville told the Montgomery County Council.
“We can’t let this happen, and I don’t believe it’s going to happen,” he said Monday. “I believe there will be some way of resolving the fiscal cliff.”
Cardin said Congress has until Dec. 31 to reach a deal or automatically trigger many of the cuts.
More state or county cuts, or another recession, would be extremely difficult to absorb, said Michael Acierno, president of the Brookeville Town Commission.
Many of Brookeville’s residents are in business for themselves, and only very recently have they begun to see improvements economically, Acierno said.
“The immediate impact will be felt by our residents who, like other Montgomery County residents, are still struggling from the devastation of the Great Recession,” he said.
The town of Brookeville worked hard to keep its local tax rates constant, but to do so, it curtailed many services. As it prepares for 2014, the town is facing a temporary increase in expenses.
Even if Congress fails to reach an agreement, the likely effects to Laytonsville would be neither immediate nor severe, Mayor Dan Prats said. A predominately residential community that does not rely on federal grants or programs, Laytonsville wouldn’t be affected except for residents who either directly or indirectly work for the federal government.
“These families could be facing a tough road ahead,” Prats said. “With the fiscal cliff looming, my hope is that a reasonable deal will be cut before sequestration.”
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 County 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 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. 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 — also would 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.
In the current school year, the 27 schools whch have the most low-income students in the county are receiving Title I resources and support. A Title I cut could come at a time when the percentage of low-income students in the county is growing. In the 2011 budget year, 9.1 percent of Montgomery County children ages 5 to 17 and their families lived in poverty, a 2 percent increase over the prior year, according to U.S. census data.
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.
Without calculating in the uncertainty, recent analysis shows Montgomery already $135 million short for fiscal 2014, and both the county government and the Maryland-National Capital Park and Planning Commission facing 5 percent operating budget shortages.
But the tax hikes and budget cuts would threaten the local real estate market, which is showing signs of recovery, said Jane Fairweather of Coldwell Banker.
A residential real estate agent in Montgomery County, she said her sales this year are up 40 percent over 2009. Although prices are not where they were at the top of the market, she said if this level of demand continues, it will eventually translate to higher prices.
Fairweather said nobody knows what will happen if the federal government would lay off large numbers of people because it has never happened, but the worst case scenario could cause hundreds of thousands of people to lose their jobs, which could flood the local market with homes and cause prices to drop.
“It’s a frightening thing,” she said. “Let’s just hope that Congress gets to work and this doesn’t happen.”
Staff writers Jessica Ablamsky, Jen Bondeson, Sylvia Carignan, Terri Hogan, Lindsay Powers, Kara Rose and Elizabeth Waibel contributed to this report.