Two news stories this week about public employee pay increases underscores Montgomery County Executive Ike Leggett’s obliviousness to current economic conditions, as well as the political choices that determine blue state budgets.
First the County Executive announced a tentative agreement with the Municipal and County Government Employees Organization, or MCGEO under which Montgomery County employees are slated to receive a 13.5% pay raise under the terms of a new two-year contact.
This same week, the U.S. House of Representatives voted to extend a pay freeze for Federal employees first enacted in 2011. The legislation is intended to override an Obama executive order raising federal salaries by 0.5% in March. Maryland State employees have fared slightly better than Federal employees. They received no pay increases last year, followed by a 2% raise this past January 1, 2013, and an expected 3% raise effective next January.
At the same time thousands of Washington area employees of government contractors are holding their collective breathes regarding the possible impact that sequestration could have on their jobs in March. But even those keeping their jobs have not seen pay increases for several years.
Not surprisingly, the Montgomery County teachers union was audibly licking their chops at the prospect that this deal with the county’s employees union would give them even more leverage for their own negotiations. The Washington Examiner quoted Tom Israel, executive director of the Montgomery County Education Association which represents more than 12,000 public school teachers and employees, as saying that the proposed contract ‘could mean a better deal for teachers as the MCEA negotiates with the school board over employee compensation for next fiscal year.’. Indeed, in recent years the Montgomery County Board of Education has extended more generous wage and benefit increases than received by other county employees.
Montgomery County’s current 2013 operating budget of $4.6 billion reflected a 5.6% increase over the prior year. Consistent with the economy at large, county revenues from existing taxes have been growing only modestly. Consequently the added spending was only possible because of a 4.5% increase in the real estate tax rate and an extension in the energy tax. Going forward, inevitably more county tax increases will be necessary to pay for these latest added public employee costs.
Prior to this week’s labor agreement, Montgomery County had been anticipating a $134 million shortfall for in fiscal 2014, even assuming no employee pay increases. Already county departments were considering budget cuts of 5%. Personnel costs comprise 80% of the county budget, or $3.6 billion. In effect, Leggett is adding an extra 10% of total spending, increasing the budget at a rate which well beyond that rate tax revenues are growing.
So what on earth is County Executive Leggett thinking, especially since he is planning to run for reelection next year? In effect, it can be argued that his is a cynical political calculus that he benefits more from outsized public employee contract increases than the inevitable tax increases to pay for him will cost him. Even to the extent that some pay increases are offset not by tax increases but by reduced service levels, Leggett understands the considerable value of active public employee union support. Since 2009, library funding has been cut 30%, transportation 26% and recreation 23.5%.
Montgomery County Republican Chairman