Second FY25 Budget Work Session

Originally Published: December 29, 2023

Revenue, Tax Rates, More Discussed

The second Budget Work Session was held on December 12th. Topics discussed were Operating Budget Revenues, Debt Service, and Compensation. Four decisions were needed from the Commissioners:

1. Funding the Other Post Employment Benefits (OPEB) Account.

2. Income tax growth rate.

3. Homestead Tax Credit rate.

4. HR recommendations for disbursements from the health insurance account.

CFO Jeanette Cudmore said revenues are up a combined 3.9%, with the majority from a $3.6M reimbursement from the OPEB Trust account. Without that, property and income tax revenue is only up 1.8%. The OPEB account has been well-funded by past Commissioner decisions, leading to the ability of the account to pay benefits from itself without the need for additional funding. The $3.6M could be reinvested in the account, or used toward General Expense items in the overall budget. Leaving the money would fund the OPEB account at 95%. Commissioner Hewitt noted the OPEB account is able to fund itself at 80%, so the decision was made not to reinvest the $3.6M. Projections for revenue and expense for FY25 show expenses exceeding revenue by $3.1M. By not investing the $3.6M Commissioners are covering the revenue shortfall.

Income tax has grown 0.69% year-over-year, with an average growth across 6 years of 5.56%. The County uses estimated growth percentages to estimate funding available for expenses. The current Income Tax rate is 3.0%, with a projected growth rate of 5.25%. Raising the projected growth rate to 5.5% could net the County an additional $770K to use in the FY25 budget. Because of limited revenue growth, the Commissioners left the 5.25% growth rate as is, pending the receipt of additional information over the next few months. Meanwhile, property tax revenues for FY24 were estimated at $130M, but through 11/2023 the County has only received $126M, with payments still to come. Cudmore recommends using an estimated property tax revenue of $132M, 1.27% over approved FY24 amounts.

The Homestead Tax Credit is currently at 3%. This tax credit limits the increase in taxable assessments each year to a certain percent, preventing a large tax increase as home values rise. For comparison, Charles County has a 7% rate while the state has a 10% rate. At 3%, the homestead tax accounts for $3.4M in annual revenue. Raising or lowering the rate increases or decreases the revenue amount, so the decision was made to maintain the current rate.

Finally, the Commissioners approved HR Director Catherine Pratson’s recommended disbursements from the health insurance refund account. A total of $2.21M is split 85/15 between the Employer and Employee Portions paid, with the Commissioners approving the use of $1.43M. This will cover the following items: Health Waiver Credits, Estimated Health Premium increase, and the start up and operating expenses in FY24 and 25 for Everside Health. The Commissioners approved an agreement with Everside to operate a facility on Moakley Street which will serve County Government and Board of Education employees. The BOE is adding an additional $480K in funding for the build out of the office. A survey found 90% of employees across both organizations felt a health clinic would be beneficial. Beginning in FY26, program cost would be split as any other eligible medical expense. The BOE is esimated to save $28.5M while County Government may save $14.7M, or $43.2M in gross savings across five years.

There are seven BWS remaining: February 13 and 27; March 5, 12, and 19; May 7 and 14.