Tag Archives: Montgomery County

Governor Christie’s pared down budget

The Star Ledger reports that Governor Christie, “took an axe” to the state’s budget and “slashed $900 million in a budget he blasted as ‘unconstitutional.'” Cuts were made to state aid to municipalities, college tuition aid, Medicaid and aid to suburban schools leaving $640 million in surplus. He also vetoed bills to tax millionaires for more school funding aid.

In an analysis of New Jersey‘s fiscal problems we found that these areas are some of the primary weaknesses in New Jersey’s budget. The school aid formula, guarded by the court since 1976, effectively prevents the legislature and Governor from making appropriations decisions. This result of the court’s involvement in school funding has been a fiscal and educational disaster for the state. Since the 1970s many changes in tax rates have been to the income tax in order to fund schools and provide aid to municipalities. Over thirty years later and there are few to no improvements in urban school districts. The price for New Jerseyans is one of the most progressive income taxes in the nation and a property tax crisis.

As for Aid to Distressed Cities this program highlights another long-running problem in New Jersey’s fiscal landscape. Several of its cities rely on state aid in lieu of property tax revenues because they have not recovered from long-running economic problems. The problem with state aid is that it masks the cost of spending to local residents,  subsidizing local inefficiencies and the continuance of failed approaches to local economic development.

Inefficiencies and poor performance are rampant in areas that have relied heavily on aid, notably the education system. What is needed is the kind of reform being discussed by some leaders in the state – both Republican and Democrat. Cities like Camden need to be able to try new approaches to schools. A new pragmatism among Democratic city leaders in other parts of the country shows a willingness to confront fiscal reality and ask: how much of our budget is being consumed by unsustainable benefits packages and how much is left over to  run the city? Atlanta, Georgia, Montgomery County, Maryland are two such recent examples.

Reforming disability retirement in Montgomery County, MD

On the heels of Atlanta, Georgia’s sweeping pension reforms, and the cooperation of New Jersey Republicans and Democrats to reform pension and health care benefits, comes the news that City Council President (and former private sector labor leader) Valerie Ervin lead the Montgomory County Council to vote to reform disability retirement for public workers. Unions opposed the measure saying it was an issue for collective bargaining. Ervin’s reply: the council has stayed out of disability retirement for 21 and half years waiting for the unions to budge to no avail.

The political shakeup resulting from public union intransigence is noteworthy as  Robert McCartney writes in The Washington Post. Public unions wield political power. Last year a city council member was voted off the board due to union opposition for backing pension reform. In Montgomery County, “unions have played an out-sized role in politics…partly because they’re open-handed with campaign contributions and campaign workers.” Ironically perhaps union support and “boots on the street” were instrumental to Ervin’s election in 2006.

What has changed in a year? State and local budgets haven’t improved. Revenues are tight and the costs associated with benefits, often negotiated with unrealistic and erroneous accounting assumptions, are beginning to eat up larger portions of the funds used to operate services. Unions’ strategy of refusing to face numerical reality has led to budgetary gridlock and the emergence of a newly pragmatic tenor in labor-government negotiations.

 

Abusing disability pensions in Montgomery County?

The Washington Examiner takes a look at  disability pensions in two counties: Montgomery County, Maryland and Fairfax County, Virginia. Each county has a similar-sized police force. Between 2000 and 2008, no Fairfax County police offers received a disability pension. Between 2004 and 2009, a total of 91 police officers and 49 firefighters and sheriffs deputies received disability pensions. A further 34 Montgomery County firefighters either received disability payments or have an application pending in 2010.

Councilman Phil Andrews (D-Gaithersberg) is investigating the practice, “What is suggests is that disability retirement here is used as an alternate retirement system.”

Why? It’s a good deal, a retiree receives two-thirds of their annual salary in a tax-free pension. Secondly, according to one anonymous police officer, “Do you have any idea how easy it is to claim disability?”

Assorted Links

Diana Furchtgott-Roth: “Cut Tax Expenditures and Taxes”

Seeking a suitor New Jersey Network’s subsidy to continue

Voiding Superintendent contracts in New Jersey

Saving the tourism tax for tourism promotion in Arlington, Virginia

Montgomery County, Maryland ordered to cut budget to fill $300 million gap.

Fairfax County Considers Move to 401(k)s

Via the Washington Examiner, yesterday two Fairfax County Supervisors suggested moving employees from a defined benefit pension to a 401(k) retirement plan.

“A dip in the stock market can cause an immediate and unexpected need for an employer — in our case the government — to increase their contribution to the retirement fund,” [Supervisor Pat] Herrity said. “We all know there are only two ways to pay for [retirement funding shortages]: cut something else in the budget or raise taxes.”

Allowing easier forecasting for retirement payments, defined-contribution plans such as 401(k)s have become more popular with employers and governments in recent years. Montgomery County employs such a system.

Dan, Eileen and I have written before on the problems with defined benefit systems, but it looks like some of our neighbors haven’t been paying attention.

“We’re not making the salaries we would be making in comparable private positions,” [Fairfax County Government Employees Union President Karen Conchar] said. “You’d end up with a less motivated staff if you went to a defined-contribution-type plan. It would not be good.”

Ms. Conchar is flatly wrong on all three points. First, nationwide, public employees make significantly more than the private workers who provide for their retirement.

The only possible explanation for Mrs. Conchar’s claim would be specific to Fairfax County, which is one of the largest and wealthiest places in the country, and likely an outlier to national data. Even given that, it’s strange to complain about living in an uber-prosperous area.

Second, can anyone explicate the perverse incentives that would explain her “less motivated” remark? 401(k)s force employees to take a responsible and accountable role in providing for their own retirement, without the risk that unions or legislatures will use pension plan trust funds as political slush funds. When are people more motivated: when they have incentives to act responsibly and care about something, or when they’re given unconditional promises?

Lastly, it would be a good move, saving Fairfax taxpayers money, and providing a more secure retirement for public servants. Everybody wins.

Not Connecting the Dots

Public policy often seems that it should be intuitive. If a state needs more revenue, the easiest way to raise some is to increase taxes (easiest for elected officials, that is). Who has the most money to appropriate? Millionaires, obviously. Connect the dots, and raise taxes on millionaires.

Maryland did just that, but their experiment shows why political common sense and real life common sense are distinctly separate things. From the Wall Street Journal:

We reported in May that after passing a millionaire surtax nearly one-third of Maryland’s millionaires had gone missing, thus contributing to a decline in state revenues. The politicians in Annapolis had said they’d collect $106 million by raising its income tax rate on millionaire households to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on income taxes, the top tax rate with the surcharge now reaches as high as 9.3%—fifth highest in the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn’t fled the state.

Well, the state comptroller’s office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million.

Don’t feel sorry for the poor poor millionaires; that’s not the point I’m trying to make. Taxes are a serious driver of out-migration, be it small states like Maine, or more populous states like New Jersey:

New Jersey out‐migrants tend to move to states that have much lower property values (35% lower), property taxes (41% lower) and overall costs of living (17%lower). Destination states also have notably lower average incomes, substantially higher crime rates, higher infant and child mortality; slightly lower school quality, but somewhat warmer winters. Overall, it appears that net out‐migration is due to the high cost of living (especially the high cost of housing and property tax) in New Jersey.

Policy makers and their hangers-on have often regard taxpayers as little more than fiscal sheep, and periodically shear them. But people, unlike sheep, can vote with their wallets and feet. Usually the powers that be see this as something akin to letting the home team down, or not doing one’s “fair share.” The word “selfishness” is also thrown around.

Policies like the levels of taxes, services, and entitlements that a government prescribes are hardly a form of science. Law makers and interest groups would like to portray them as a serious commitments, and not self-interested social experiments. Again from the Journal:

Thanks in part to its soak-the-rich theology, Maryland still has a $2 billion deficit and Montgomery County is $760 million in the red. Governor Martin O’Malley’s office tells us he wants the higher rates to expire “as scheduled at the end of 2010.” But there are bills in both chambers of the legislature to extend the surcharge. The state’s best hope is that politicians in other states are as self-destructive as those in Annapolis.

The “Soak the Rich” phenomenon is a common-sense argument for redistributive policies, but it has significant flaws beyond the simple fact that it doesn’t work. Take a look at this chart of how tax burdens are distributed in Federal taxation. (here, either insert or link to this: http://www.mint.com/blog/wp-content/uploads/2009/11/MINT-TAXES-R4.png)

Libertarians and liberals can mostly agree that there is too much money and influence in politics, but the policy prescriptions each group suggests are dramatically different. Advocates of punishing the rich ignore the simple fact that when a certain group bears so much of the tax burden, they have massive incentives to care about and influence politics. It’s that or leave the country, or just stop making money (by, for instance, not hiring new employees.)

See this graphic (or click below) for a good visual explanation:

Report from Snowmageddon

The levels of damages from the recent Washington snowfalls were nothing like the widespread destruction of property and loss of lives from Hurricane Katrina. Still, the governments in the Washington area, while not facing a natural disaster of the same magnitude, showed a Katrina-like ineptitude.

Heavy snow fell in my Maryland neighborhood from mid-afternoon on Friday, February 5, until late Saturday, February 6, leaving about 20 to 25 inches of snow. This was admittedly an extreme event that has happened only about 4 or 5 times in the past 30 years. It required state and local governments to show some real flexibility and an ability to devise new strategic responses on the fly. They failed!

A Montgomery County snowplow did finally come through my neighborhood on the evening of February 7, actually sooner than I had feared. The real problem was the arterials. Even on Monday the 15th, while my neighborhood roads were showing bare pavement, nearby East-West Highway — a main thoroughfare for Montgomery County — was covered with layers of ice and snow. Only one lane was functioning in each direction.

Continue reading

Tolls, Yes; Speed Bumps, No

speedbumpHow about letting local neighborhoods charge tolls on outside drivers for the use of their immediate streets?

It is now technologically fully feasible with EZ passes or other devices. This idea occurred to me as I was thinking about a recent controversy in Montgomery County, Maryland over neighborhood speed bumps (or “speed humps” as they are sometimes called).

Speed bumps in Montgomery County, like much of the rest of the country, have proliferated — now totaling 1,200, amounting to one bump per 2.2 miles of road. While many neighborhoods like them, they infuriate others. They also pose problems for fire and other emergency vehicles. In 1998, responding to rising complaints, Montgomery County initiated a new policy to make it more difficult to use speed bumps. Since then, 388 out of 653 proposed speed bumps have been approved.

In this case, a request for bumps was made by the Springfield Civic Association and involves a section of Cromwell Drive in Bethesda that has become popular with harried commuters. A vote of the 38 households directly involved would be required, and approval would require an affirmative 80 percent supermajority.

Other neighbors who live close by — but not directly on Cromwell Drive — are protesting.  They find speed bumps annoying and time consuming. Under Montgomery County policy, such adjoining neighbors can have a say only if they are “landlocked,” having no other way to reach their homes other than using Cromwell Drive.  Technically, 50 percent of landlocked neighbors must also approve but Montgomery County in practice almost always ignores this requirement. Continue reading

The Speed Camera Wars

The Washington Examiner reports that D.C. police are frustrated by new technology that allows drivers to pinpoint and avoid speed and red-light cameras. The technology, called PhatomAlert, streams to iPhones and GPS devices, sounding an alarm as drivers get close to cameras. Radar detection devices are illegal in D.C. and Virginia, but outlawing these devices may prove impossible.

D.C. police say their 290 cameras, first installed in 1999, have saved lives. Studies of the effectiveness of cameras on road safety offer conflicting data. The Governors Highway Safety Association says they’ve reduced violations and crashes.  The Virginia Transportation Research Council says they increase rear-end crashes.

Others argue cameras are more of a revenue trap for government, and they are used in bad faith; for example, citizens in Denver contend yellow lights were shortened to increase fines.

Photo radar tickets generated $1 billion in revenue between 2005 and 2008 for the District. In Maryland, Montgomery County’s cameras are expected to generate $29 million this fiscal year.

Anti-camera sentiment has led to lawsuits — motorists in Washington state are suing for being fined excessively for violations caught on traffic camera. And worse: a man in Glendale, Arizona took a pick axe to a speeding camera. He was fined $3,500.