What about those Cecil County tax increases?

What about those tax increases?

The FY2018 budget came with tax increases but that money hasn’t gone to education

Note: The articles on this website are my opinion based on my research and observations. I am not employed by Cecil County Public Schools.

County Executive Alan McCarthy took office in November of 2017 and I was hopeful that education funding in Cecil County would increase to adequate levels.

When he presented his first budget that spring–a budget that was proudly touted to be the first in quite some time that didn’t tap into the county’s savings (it’s called fund balance) to cover expenses–it also included tax increases that we were told were absolutely necessary in order to “set the County’s ship aright.

And I supported those tax increases–because I wanted to see Cecil County Public Schools finally receive appropriate funding.

That budget included a meager 1.34% increase in funding for the Cecil County Public Schools operating budget and hardly anything for the long list of projects on the small capital request.

To use a sports analogy, I considered it a rebuilding year.

Yet, when the county executive announced his proposed budget for FY2019 last spring, funding for CCPS was again meager with just a 0.9% increase. An amount that was just above the maintenance of effort, the minimum amount the state will permit a local government to spend on education. (Note: I just recently learned that state law requires maintenance of effort to increase at a certain rate year over year and that failure to do so could result in the state withholding the county’s revenue to cover it. The bottom line: don’t act like the school system should be grateful to receive that increase—the state is forcing you. Thank heavens for the maintenance of effort laws or there’s no telling where we’d be.)

Turmoil over fund balance

Ah, fund balance, we’re always talking about fund balance. Yes, unfortunately, we are–again.

Last February there was heated debate about the Cecil County Public Schools fund balance. In this case, CCPS was asking permission from the county to spend part of its fund balance on several long-needed projects, including a field house at Perryville High School (they’ve only waited 42 years). The county wasn’t funding those projects so CCPS wanted to use some of its savings to cover the costs.

The Cecil County Council had to approve the appropriation which they eventually did but not before dragging CCPS over the coals…for saving money…and spending it on capital projects (which are the county’s responsibility.)

Most of this became a moot point when CCPS was forced to use $1.4 million of its fund balance to cover the FY2019 operating budget that the county didn’t fully fund and the FY 2018 fiscal year came to a close.

New fiscal year, new drama (again, about fund balance)

In August the county decided to release some of the money they’d had in reserve pending the decision on a state court case. And, lucky day, they wanted to spend $1.0 million of that money to fund school entrance upgrades.

Not so fast…

First, they wanted to torture CCPS over their fund balance again…and add strings to the funding.

The county would appropriate the money but only if CCPS agreed to spend their fund balance on additional school entrances.

For several weeks there was back and forth between the county and the school system. Some members of council explained that they’d been told the county should boost its fund balance so they would rather see CCPS spend its fund balance. (The county is responsible for funding CCPS, including the facilities so the county should be funding these projects. In fact, if the county had funded the school system’s capital budget requests for the last decade many of these entrances would’ve been addressed as buildings were renovated or replaced.)

Despite the drama, the funding was eventually approved in September.

“Thou doth protest too much”

All the talk about fund balances got me thinking–how much money is in the county’s fund balance?

Aside from pointing out that the FY 2018 budget was the first in several years that didn’t dip into the county’s fund balance and ominous reminders that the county needs to maintain enough fund balance to keep its bond ratings, I’d seen little discussion about the county’s fund balance. I went looking and found two clips from articles in the Cecil Whig:

“Cecil County’s budgetary flexibility is strong, in our view, with an available fund balance in fiscal 2017 of 14 percent of operating expenditures, or $25.6 million.”

[Standard and Poor’s Global (S&P), one of the bond rating agencies] Cecil Whig, 11/20/17

“According to the FY 2018 financial reports, there is $43.63 million in the county’s [general fund], although $10 million was deemed non-spendable since it was earmarked for the motor vehicle fund advance and to subsidize the sewer fund. After assigning hundreds of thousands in other funds for other initiatives (including the volunteer fire companies’ allocation) and maintaining 10 percent of the FY 2019 revenue budget for “rainy days,” the county has $9.7 million in the fund balance that is unassigned.”

Cecil Whig, 12/15/18

Then I looked at the county’s annual financial report:

S&P, the bond rating agency, noted that the county’s available fund balance was $25.6 million at the end of FY 2017.

If you compare those same lines at the end of FY 2018, the available fund balance was $33.6 million. That’s an increase of $8.0 million in one year.

Cecil County Annual Report for the year ended June 30, 2018

We could get into a discussion about complicated terms like Assigned Fund Balance vs. Unassigned Fund Balance but I look at it as different pockets in the same pair of pants. S&P pointed to the sum of those two lines so that’s what I’m comparing.

Since fund balance isn’t a term most of us use every day, let’s look at something more familiar…

But what about those tax increases?

Again, from the county’s annual financial report:

“…Property taxes were more than prior year by $7,681,046 primarily due tax rate increase…”
“…Income taxes exceeded prior year by $1,295,428 – primarily due tax rate increase…”
“…Real estate transfer taxes (recordation taxes and deed transfer fees) increased by $4,473,394…”

Cecil County Annual Report FY2018

That adds up to a $13.4 million increase in revenue.

Cecil Count Annual Report for the year ended June 30, 2018

And yet this year’s budget drama has started off just like the others I’ve followed:

  • The county executive’s public input session on the FY 2020 budget earlier this month led off with a “budget preview.” That presentation was much like the ones I’d seen before–the state took highway user funds from local governments to the tune of $5-6 million a year, expenses are up, the local economy hasn’t rebounded as projected, etc. I don’t recall any mention of increased revenue but maybe I missed it.
  • The FY 2020 budget currently proposed by CCPS is once again bare bones. Even though it comes with a price tag that is $6.4 million over last year’s budget, $4.1 million of that amount is cost of living and step increases for employees.
  • The state informed Cecil County that its constant yield rate increased slightly which could mean a slight decrease in property tax rates. County officials were quoted in the Cecil Whig as citing the proposed CCPS budget increase as one reason that rate shouldn’t be reduced. Throwing CCPS under the bus in the press again? So early in the budget season?

The actors may have changed but the plot remains the same.

That leaves me to ask–what is being done with that additional revenue?

I supported a tax increase because I evidently foolishly believed the funds would lead to an increase in education funding but I’ve neither seen nor heard anything that demonstrates that to be the reality.

This increased revenue isn’t an anomaly. According to the monthly financials posted on the county website, as of 11/30/18, the county continues to see that revenue.

The perennial question has been “Where does the casino money go?” (and we can talk about that later) Maybe we also need to ask where the tax revenue goes and we need to ask that question of the people who are responsible for it instead of just asking each other in passing.

Advocate for the FY 2020 budget now

The county executive will present his proposed budget for FY 2020 on March 29. Once the county council receives the budget, nothing can be added (the council can increase the budget for education but that increase has to come from some other place in the budget).

I encourage you to email the county executive and his administration during this crucial period of budget preparation and tell them you expect that budget to include adequate funding for CCPS. To share your support of the budget or to advocate for specific parts of the budget, email County Executive Alan McCarthy at [email protected] and Director of Administration Mr. Al Wein at [email protected].

Note: the agenda for the March 5, 2019 Cecil County Council legislative session includes the introduction of a new bill regarding the county’s fund balance. Here’s link to the bill and the appendix.