Kent County officials formally asked the Maryland State Board of Education last week to waive $860,000 of the $16.9 million Maintenance of Effort funding mandate for Kent County schools next year–citing greater declines in the county’s tax revenues than the state average.
“Kent County’s income tax and property tax bases have declined significantly,” wrote Patricia Merritt, the county’s chief financial officer, in a letter to the State Board of Education on April 16. “Because of the unique size, employment base, and socio-economic structure of the County, declining revenues have impacted Kent County much more severely than the state as a whole.”
The waiver request said the county can only fund next year’s school budget at last year’s level of $16.1 million–due to falling tax revenues attributed to the Great Recession. Average decline in property values for Maryland’s 23 other counties through 2014 is estimated at just 0.2%. However, Kent will continue to slide at 5% annually through 2014, Merritt wrote.
The unemployment rate in Kent County is also 2 percent higher than the state average and the top 15 employers in Kent cut their workforces by more than 11 percent combined between 2008 and 2011, which accounted for a drop in local income tax revenues, according to Merritt.
The MOE funding mandates prior to 2011 required counties to fund schools at the same amount per student as the prior year or the state can penalize school systems by withholding state aid.
But state education cuts in 2011 forced the counties to lower school budgets—without fear of a penalty.
“There was no new funding to lose last year and that was always the penalty if the county couldn’t meet Maintenance of Effort,” Merritt told the Spy.
Maryland State Education Association, the state’s largest teachers’ union, lobbied hard during this year’s legislative session to prohibit the counties from resetting funding levels based on last year’s reductions, also known as “rebasing.”
Last year’s MOE requirement for Kent County was $16.9 million but the county was forced to make cuts of $820,000–in the absence of state funding and a decline in local revenues—bringing total funding last year to $16.1 million.
Under provisions in the new MOE law, Kent County cannot use the $16.1 million budgeted last year as the new baseline level for 2013. The county must start at the $16.9 million that was originally required last year—before the cuts went into effect.
Raising local income and property taxes may not help local recovery
The Maryland State Education Association won another provision in the new MOE law that allows county governments to lift caps on property tax rates for the sole purpose of meeting MOE requirements, but Kent County has no legal cap on property taxes and currently has the sixth highest property tax rate in the state, according to Merritt.
Raising the property tax rate further would move Kent County to the fourth highest in the state, according to the April 16 letter.
Local income taxes are capped by law at 3.2% and Kent is currently at 2.85%. County officials say raising the income tax to 3.2% this year could net $1.2 million in additional revenue, but the county could only collect $480,000 this year because tax increases generally take about three years to fully implement, the letter said.
The letter also noted the number of income tax returns filed last year were 469 fewer than in 2007. There has been a 24% drop in income tax revenue over the last five years, a decline four times greater than the average of Maryland’s 23 other counties.
County tax revenues are expected to slide another $1.1 million next year. To close the MOE gap of $800,000 and fund all other county services at current levels, the income tax rate would need to increase from the current 2.85% to 3.2%, the highest rate allowed by law, and real estate taxes would need to be raised from $1.022 to $1.073, the letter said.
Merritt said the tax increases would probably stall the recovery more if implemented.
“Our unemployment is still high and all the statistics show that Kent County’s economy is just not recovering at the same rate as the state,” Merritt told the Spy on Tuesday. “Tax increase would probably stall [the local] recovery further.”
KC School Superintendent wants $320,000 on top of Maintenance of Effort for next year
KCPS Superintendent Barbara Wheeler wrote the Maryland Department of Education on April 23 and said the county was not moving to max the income tax rate in the county and was not doing enough to promote economic development.
“Current local income tax rate of 2.85% has been in place since 2005…the Kent County Government has failed to take any additional action to increase revenues that have been identified…” Wheeler wrote. “Kent County does not do enough to attract businesses to the county. After graduation, there are very few opportunities for meaningful employment in Kent County, which explains why 21.8% of the population is over the age of 65.”
The Kent County Board of Education, which Wheeler is a member, has asked for a total of $1.2 million in additional funding over last year. This comes to $320,000 over the MOE requirement of $16.9 million. The request consists of almost $700,000 related to teacher compensation, according to Merritt.
She said the funding request from Wheeler mostly goes towards “additional compensation for administrators, teachers, support services, and contractors,” Merritt wrote in her letter the Maryland Board of Education.
Merritt said that all areas of county government have taken a hit during the recession and that the impact to citizens and other county services must be considered when deciding next year’s budget.
“I understand they want to provide the best quality education possible. Unfortunately, the commissioners have to consider the financial ramifications to the citizens and balancing all the basic services the county has to provide,” Merritt told the Spy on Tuesday.
If Kent does not receive a waiver from the State Board of Education, across-the-board cuts of 9% would be needed in all other areas of county government.
“If the pie is getting smaller and you hold one-piece constant, then you have to take away from the other pieces,” Merritt told the Spy on Tuesday. “In the county, the other pieces are roads and public safety.”
Decision on waiver request expected in May
The state school superintendent is expected to make a recommendation based on Kent’s waiver request. The outcome of a subsequent hearing will determine if the waiver is granted, Merritt said. She said the county will know the decision by May 23.
Read Dr. Wheeler’s letter here
Read Kent County’s waiver request here
Gren Whitman says
Excellent reporting by the Spy! A true public service!
Including both documents (school administration and county government) lays it all out, as clear as a bell.
Thank you!
What have here is a failure to communicate, resulting in an $860,000 misunderstanding.
Certainly the Superintendent and the School Board will now recognize the contradictions inherent in their request for raises for school personnel while other county employees face real possibilities of no raises, or cutbacks in benefits, or layoffs and terminations.
We are waiting for the School Board to do the right thing!
Keith Thompson says
I don’t know that is a failure to communicate or a misunderstanding, but simply a case of two different parties that have two different agendas. The county and the commissioners have the job of balancing their budget and doing what’s best for the county. Dr. Wheeler’s agenda is to maintain the budget for the school system she oversees. The problem here is that the process is flawed because the county must fund the school system but has no control over how that money is spent. As long as the school system isn’t charged with the responsibility of raising their own funding, there is very little incentive for them to cooperate. I think (cynically speaking) that Dr. Wheeler is doing her job here but her job doesn’t require her to face up to economic and political reality.
Billie Beck says
I think it’s past time for the State to stop handing out “Grants” for things that are nice but not really necassary. There may come a time again when the State can afford it but the time is not now. Has anyone given any thought to all the property the College has bought up that will be coming off the tax rolls? Frankly, I thought it was soooo much better when the College was the College and the Town was the Town though I know those years are long gone. I can’t imagine why the Town can’t get interest from any business to come here. Yeah, Right !!! The Towns, Counties and State need to open there eyes and work together to support the most important things first, then the things that are “nice to have”. Wouldn’t hurt those in charge in Washinton to do the same sort of thinking!!!
Those that are fighting for our young people’s education, hang in there!!! You are doing a great job!!!
S Pennington says
That Mrs Wheeler is no shrinking violet, is she? Hand over your money. She wants the county to raise your income tax over 10%. Any chance any working stiff like me got a 10% raise this year? Not so much. I got 2% after 3 years of no increase. I consider myself lucky. Over Christmas a friend asked me if I got a Christmas bonus, and I said, “Yes, I get to keep my job.” Times have changed.
Mrs Wheeler and her underworked overpaid staff need to learn the same thing the rest of us already know… these days, doing more with less is the responsible thing to do.
matthew weir says
To Billie Beck’s point, I would like to state two things:
1. As a landowner in town, there exists no compelling reason for anyone to invest in Chestertown or the County.
2. Read the letter written asking for the waiver request at the bottom of the article. Unless you work at Waterman’s Crab House, the only place that increased its employment in the County was Washington College. You should be thrilled to have the College! Your suggestion that the land the college has purchased is off the tax rolls is a fallacy perpetuated by people who do not understand that the College is only exempt from taxes on land it uses for instructional purposes. A significant amount of land it uses is NOT used for instructional purposes. If my memory serves me correctly, somewhere around $50,000 was paid in real estate taxes in fy 2010.