February 16, 2010

Prince George’s fights $18 million cut in aid

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By Erich Wagner
Erich@MarylandReporter.com

Prince George’s County is poised to lose $18 million in state aid next year, but members of the General Assembly don’t agree about why that is or how to fix it.

Some officials argue that it is the result of an anomaly in a state spending formula that redistributes state income tax dollars. But Prince George’s County lawmakers are moving forward with a bill that would fix a discrepancy between state and federal law that they claim is causing problems. CORRECTION: Budget analysts are recommending formula changes for fiscal 2011 to aid newly eligible jurisdictions, but they are not recommending elimination of the program as they did last year.

The state’s “disparity grant” program uses state money to help counties with smaller tax bases, so they can provide services that are roughly equivalent to those in richer counties. Some officials see the reduction in aid to Prince George’s County as a naturally-occurring result of the recession. But Prince George’s County officials insist that the problem lies in an outdated formula that does not accurately measure counties’ wealth.

The issue may affect other jurisdictions receiving disparity grants as well. Since it is primarily more affluent people who file their tax returns in line with the extension deadline, Ross said, the wealth formula no longer accurately measure wealth.

“The richest people are not getting their income counted in the wealth formula,” Ross said. “Every year we look at Sept. 1, but in some counties, where there are a lot of wealthy people, for tax purposes they don’t report until Oct. 15, so it’s never counted.”

In the three wealthiest counties, Montgomery, Anne Arundel and Howard, the wealthiest people earned significantly less than previous years, although they are still “very comfortable,” Madaleno said.

Also, Prince George’s County’s population has declined in recent years, while Montgomery’s has increased. This drove up the per capita income calculation for Prince George’s, while lowering it for Montgomery, Madaleno said.

Ross said the Prince George’s County delegation is finalizing a bill that would change the date in the state formula to Nov. 1, two weeks after the tax deadline.

Disparity grants were created in 1991 to give poorer county governments what they would receive if their income tax base was two-thirds as rich as Maryland is overall. This level was raised to 75 percent of their income tax base in 1998.

The program has been a contentious issue at times, as Republicans often see it as a redistribution of wealth. Last year, the General Assembly capped the disparity grants for each county at 2008 levels.

In the past, when the poorer jurisdictions took issue with their allotment, the fix has been relatively simple, Madaleno said.

“The standard practice over the years has been to simply change the percentage” of statewide income, he said. “From 70 percent to 75 or 80 percent on a per capita basis, we’ve just moved that number up or down.”

John Erzen, a spokesman for Prince George’s County Executive Jack Johnson, said the Department of Legislative Services (DLS) has historically been quick to recommend cuts to the disparity grant program.

Their recommendation “is kind of ludicrous, it’s basically saying, ‘Counties, you should pay yourselves,’” Erzen said. “Disparity grants were set up to recognize that there are ways to make up deficiencies among jurisdictions to create greater parity across the state.”