Friday, March 27–County Explores Further Budget Cut Options

BERLIN – If the Maryland state Board of Education upholds the Maintenance of Effort school funding level for Worcester County, refusing a waiver sought by the County Commissioners, it is unclear just how local government will find more funding for the school system.

“We have staff working on it now,” said County Commissioners President Louise Gulyas. “We’re not going to raise taxes. We’re just going to have to find it elsewhere.”

Gulyas did not dismiss the chance of taking money away from county departments or programs. Cuts could be targeted to payroll costs rather than operating costs, which have been the focus, she said.

Commissioner Bud Church predicted that the waiver would not be granted, adding that he never thought the county should have asked for the waiver in the first place. He voted against doing so.

“I just personally think this was a poke in the eye of the school board,” said Church. “The downside is it could end up costing the school system $300,000 to $400,000. What are we going to do then? I just think this is a bad decision, one of the worse I’ve seen since I’ve been up here.”

The Worcester County Board of Education, seen by some as dragging its feet and reluctant to cooperate with a county government mandate to reduce the budget by 3 percent for the next fiscal year, last week refused to approve a budget showing that mandatory cut, saying it did not want to violate state school funding regulations.

State Maintenance of Effort rules require schools to spend at least the same amount per pupil in the current fiscal year as it did the year before. The 3-percent cut budget assigns less than that amount per student.

If the county does not meet the Maintenance of Effort level and are not awarded a waiver, the school system would lose some state funding.  

Some say that the county can find the money to make up the difference.

“That’s a good question, what do the commissioners do to find the money?,” said Worcester County Board of Education President Bob Hulburd. “I hope that they will understand that their priority should be that they should find the money and do what they can to juggle things around to show that their priority is education.”

Board of Education Vice President Bob Rothermel thinks the county can make better use of certain funding and specifically pointed to Other Post-Employment Benefits (OPEB), which pays healthcare costs for retired employees. A statewide audit recently directed all jurisdictions to contribute money to this fund, though it did not mandate an amount.

“I think what the County Commissioners have done for OPEB is remarkable and needs to be applauded. Our county chose a very aggressive approach with this. There are some counties who have not funded a nickel to it. Our county, after this current year, is in the $30 million to $50 million range. That’s outstanding, but $17 million a year for 30 years is not funding a $100 million liability. It’s like a $500 million liability,” Rothermel said. “They are being overly aggressive to take care of it, so county employees and teachers will have the pension there when it’s time to be called upon. Outstanding. But you know what? It might be a little too aggressive in an economy that’s calling for other needs. Nobody is looking at this.”

Hulburd also singled out the OPEB contributions, saying the county could contribute $15 million, instead of $17 million, this year.

“It’s a concept that needs to be looked at,” he said.

Gulyas dismissed that suggestion, saying, “That’s not going to happen. It’s something that I would never touch. Seventy-five percent of it is for teacher retirement.”

Church did not rule it out, saying, “That’s a possibility. The problem is you either pay now or pay later. If you don’t fund it now, it gets bigger later.”

If the commissioners are not aggressive in funding OPEB, there will come a time when the county cannot fund it because the amount needed is so big, Church said.    

The $17 million in annual OPEB funding is necessary to cut future healthcare costs, said Phil Thompson, assistant finance officer in the Worcester County Treasurer’s department. “It’s investing money now to cover obligations we’re going to have in the future…it is less expensive in the long run to go that way.”

The $17 million in annual OPEB contributions will also preserve the county’s bond rating. Eventually the fund will generate enough income from interest to pay for future needs, Thompson said.

In 10 years, the pay-as-you-go cost will exceed the current large contribution, he said.

“The commissioners have taken the approach, if we don’t do something now, at some point we won’t be able to continue providing the benefits,” Thompson said.

Contributing less this year would require that amount to be made up.

“It was made very clear to us that we need to do this now,” said Thompson, referring to an actuarial study conducted two years ago. “Ultimately, what’s at risk are the benefits we provide to our employees long term. It gets back to good fiscal management…this isn’t something we can ignore for five years.”

Currently, Worcester County employs 679 people, including part-time positions.

The Board of Education employs 1,192 people, 678 of whom are teachers.

The county has a reserve fund, which, Hulburd said, could be tapped to make up the difference between the 3-percent cut mandated by the commissioners and the Maintenance of Effort budget, though he acknowledged there might be strings attached to using that money.

 The county reserve fund is intended for major, unexpected emergencies like hurricanes, and any reserve funds used must be paid back within two years, county officials say.

“We just can’t go into any kind of reserve,” said Gulyas. “We just don’t know what next year is going to bring. You wouldn’t do it in your own budget at home. You’d do without.”

Hulburd also pointed to funds for Snow Hill High School athletic fields that were appropriated a few years ago, have not been spent and are not likely to be spent in the near future, as an example of capital funds which could be re-purposed for operating costs.

“Everything is on the block right now. Nothing is sacred,” Church said.

Gulyas said she hopes, if the waiver is not approved, that the extra school funding will not have to come out of the budgets of county departments. Some of those departments have already cut their budget for next year by more than the 3-percent mandated reduction.

 “I don’t even know what the options are,” said Church. “We’re in murky water right now.”

“The commissioners have done a great job of funding county schools up to this year,” said Hulburd. “The Maintenance of Effort is a way to keep Worcester County schools from having a crash landing. We’re still cutting back. We’re not gaining ground.”

Church is unclear how the county will come up with the needed funds, but he did say, “We’re going to end up funding the budget.”

The school board must pass its Maintenance of Effort budget next week. The week after, the budget will be presented to the County Commissioners during their April 7 meeting, who will then begin overall budget discussions the next day.

“It’ll be an interesting week or two, I think,” Church said. “I think cooler heads need to prevail. Some common sense needs to come back into play and a better working relationship needs to be developed.”

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