Board of Education Approves $2.32 Billion Operating Budget

June 16, 2015

Reduces staff, technology, other areas to close shortfall

The Montgomery County Board of Education on Tuesday (June 16) unanimously approved a final $2.32 billion Operating Budget for Fiscal Year (FY) 2016 that required difficult cuts to close a $53 million shortfall.

In order to meet the budget passed by the Montgomery County Council in May, the Board approved the elimination of more than 380 positions and reductions to the budgets for the district’s technology initiative, professional development, textbooks, and many other areas.

“This is not the budget we wanted, but it is the budget we have,” said Board President Patricia B. O’Neill. “Lagging revenue in the county and lower-than-expected funding from the state required us to make some difficult choices. While we tried to minimize the impact these reductions will have in the classroom, there is no doubt that the cuts will impact every school in our district.”

Mrs. O’Neill said the decision by Governor Larry Hogan, Jr., not to fully fund public education this year made a difficult budget year even harder. For FY 2016, Governor Hogan did not fully fund the Geographic Cost of Education Index (GCEI), which provides additional funds to districts, like Montgomery County, where it is more expensive to provide an education. The legislature had identified funds that the Governor could have used to restore cuts to GCEI, but he declined to do so, costing MCPS $17 million in state aid.

“The governor’s decision to cut funding will have a direct impact on our schools next year,” Mrs. O’Neill said. “His decision was penny wise and pound foolish, because an investment in education is an investment in the future of Montgomery County and the state of Maryland. It is my hope the governor will make different choices in the future.”

The FY 2016 Operating Budget for MCPS is funded at the minimum level required by state law, called Maintenance of Effort (MOE), which requires that counties provide the same local funding per student from year to year. With enrollment expected to increase by more than 2,500 students next school year, the MCPS budget will increase by about 1.6 percent in FY 2016. However, MOE does not take into account the increased costs of doing business, inflation, employee salary increases, or the fact that more students are coming to MCPS needing services and support in order to ensure success.

“The county executive and the Montgomery County Council had to make some difficult decisions this year due to fiscal uncertainties and stagnant local revenue,” said Larry A. Bowers, interim superintendent of schools. “But it is important to recognize that a Maintenance of Effort budget is not a same services budget. For FY 2016, a MOE budget really means a $50 million cut.”

While the budget is lower than expected, Mr. Bowers and the Board expressed confidence in the staff of MCPS.

“MCPS has an outstanding staff that has an unwavering commitment to its mission,” Mr. Bowers said. “While our budget situation may present some challenges, we know our employees will continue to be focused on providing our students with the instruction, services, and support they need to be successful.”

Anticipating Reductions

In December, then-Superintendent of Schools Joshua P. Starr recommended a $2.4 billion budget for FY 2016—a 4.6 percent increase over the FY 2015 budget. In February, concerned about cuts to state funding, the Board of Education reduced the superintendent’s recommendation by $10 million, including the elimination of 40 central services and support positions.

The Board indicated at the time that additional cuts may be necessary. In March, Mr. Bowers announced further reductions, including the elimination of more than 40 additional central services positions. He also announced he was holding back allocation of more than 370 school-based positions, including many teachers and support staff.

In May, the Montgomery County Council approved a $2.32 billion budget—an increase of 1.6 percent, but $53 million lower than requested by the Board. Mr. Bowers and the Board hoped that Governor Hogan would restore the $17 million cut to GCEI, helping to close the budget gap slightly, but that did not occur.

Difficult Reductions

Mr. Bowers worked with representatives from the three MCPS employee associations to develop recommendations for closing the budget shortfall. Those recommendations were approved by the Board on Tuesday.

Staff reductions: Nearly all of the position reductions recommended by Mr. Bowers in March will occur. These reductions will cause some class sizes to increase across the district, but will have a lesser impact on schools that serve a higher percentage of economically disadvantaged students. Some money in the budget will be realigned to restore more than 30 school-based positions that serve students who receive special education or English for Speakers of Other Languages (ESOL) services. The elimination of the central office and school-based positions will save about $25.5 million, not quite half of what is needed to close the budget shortfall.

Technology initiative: In FY 2015, MCPS launched a very ambitious and successful technology initiative that placed devices—mainly Chromebook laptops—in all Grade 3, 5, and 6 classrooms, as well as high school social studies classes. The plan for the 2015-2016 school year was to purchase more devices for Grades 2, 4, and 7 and one other high school subject. However, given the budget concerns, the district will not purchase any additional Chromebooks with operating budget funds in FY 2016, saving $3 million. Some devices may be purchased out of capital budget funds, but it will not be enough to support full implementation of the initiative.

Compensation increases: MCPS employees will receive compensation increases that were agreed to in their contracts. However, implementation of these increases will be delayed by one pay period, from October 3, 2015, to October 17, 2015, saving more than $3 million. The members of the employee associations have ratified these changes. Under the three-year contracts approved in March 2014, MCPS employees are scheduled to receive a 2 percent cost- of-living increase next school year, and eligible employees will move up a step on the salary scale. These modest increases come as the district is requiring employees to pay a greater share of their health insurance premiums.

Other reductions: The superintendent’s original Operating Budget recommendation included more than $8.2 million in strategic investments aimed at enhancing efforts to narrow the achievement gap and prepare students for the 21st century. The Board’s initial budget request eliminated $5.7 million of that amount, and its final budget cuts it by another $1.2 million. This will leave only $1.3 million in enhancements. The Board also cut $2 million each from the budgets for professional development and textbooks, and made several other reductions to important programs and initiatives.

Retirement contribution: The Board also is reducing its contribution to employee pension plans by $10.5 million. While the Board will still contribute enough to keep funding at the level required by the annual actuarial valuation, the Board was hoping to make a larger contribution in order to improve the funded ratio of the pension plan.

A Difficult Year Ahead

Board members expressed concerns about the budget for FY 2017, given continued uncertainty about the economy in Montgomery County and throughout Maryland. Deepening those concerns is the fact that the FY 2016 budget is partially funded with one-time revenue sources that may not be available next year, including more than $30 million in MCPS fund balance generated by hiring and expenditure restrictions put in place this year.

“The fiscal outlook for FY 2017 is not very bright,” Mrs. O’Neill said. “We expect our student enrollment to again grow by more than 2,000 students, but are concerned about the revenue picture in our county and our state.”

“I look forward to working with the county executive, the County Council, and our citizens to identify the funding needed to provide our children with the education they deserve,” she said.

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