Introduction

Creation of an annual budget is one of the key responsibilities of the county commissioners and is a long and involved process. It can be daunting to look at the budget for the entire county, so my goal in this post is to break down the budget process, sources of funding, components, and key principles so that anyone can understand St. Mary’s County’s budget and where their tax dollars go. This post has the potential to be very long but will still only be a high level overview—in an attempt to make it easier to digest I plan to break it down into sections that are easy to follow.

Bottom line up front: This FY2023 budget reduces your income tax and provides new and important services to all of the residents of St. Mary’s County.

KEY PRINCIPLE: Revenues vs Expenditures

At its most basic level, a budget is the plan for the county. You will hear elected officials, department heads, county employees and others talk about priorities, but if you want to see what the true priorities of any organization are, look at the budget and where the money is being spent. All budgets have two parts—the Revenues (money coming in) and the Expenditures (money going out). In creating the county budget, the majority of our time is spent on determining how the money will be spent. Forecasting and predicting the incoming revenues for the next year is the hardest part of the budget, but takes up significantly less time.

Budget Process

The process for building the budget technically begins in September when we approve the budget calendar. This calendar lays out the entire process and steps for every participant in the budget process and it includes the legal requirements that are part of the process. For example, state law requires that a public hearing be held “not less than 20 and not more than 40 days after the date of filing the proposed budget.” Also, state law requires that the final budget be adopted by June 1^st. The county Fiscal Year goes from July 1 through June 30^th, so the new budget for Fiscal Year 2023 will take effect July 1, 2022.

In November the Commissioners provide direction on budget parameters. This is when we give guidance on what we would like to see in the budget, specifically to our County Department Directors. We also have a work session where we discuss Capital Improvement Program (“CIP”-more description of this later). In December the County Finance Department (they manage the budget process throughout its entire creation) provides training to the departments and to non-profits. We begin examining revenue estimates and looking at various components of the budget. In January both the CIP requests and Operating Budget submissions are due to the Finance Department.

In February and March we start with regular Budget Work Sessions on Tuesday afternoons after our morning meetings. We review all of the budget submissions from the Board of Education, County departments, other elected officials and state agencies. This is the meat of our budget building—we determine how our revenues will be allocated and which requests we can fund and which requests will have to wait. By the end of March we approve a “Recommended Budget for Public Hearing”. 

In April we hold a Public Hearing. The public hearing has traditionally been held at one of the public high schools and rotated throughout the county. This year the Public Hearing will be at Chopticon High School on April 26^th at 6:30 pm—all residents are welcome to attend and provide comments. Comments can also be mailed to the commissioners or emailed to the commissioners.

In May we will have budget work sessions to review any updates to the CIP budget and consider any budget appeals for the Operating Budget. The calendar calls for approval of the final tax rates, Operating and CIP Budget, and MetCom Capital Budget and Plan on May 24^th. We’ll approve the Board of Education final budget in early June and the new budgets will take effect on July 1, 2022.

Components of the Budget

The St. Mary’s County Budget is actually two different budget—the Operating Budget and the Capital Budget. The Operating Budget includes all of the recurring services and activities, including the Enterprise and Special Revenue Funds. The Capital Budget is for Capital Projects—these include Land Conservation, Highways, Marine, Public Facilities, Schools and Parks—basically buildings and land.

KEY PRINCIPLE: Recurring Expenses require Recurring Revenues.

One of the most important principles when developing any budget is that any expenses that will repeat year to year need a funding source that also repeats year to year. For instance, employee salaries will need to be paid every year, so we need the appropriate amount of tax revenue to cover this expense every year. This concept will be repeated throughout the process.

Our operating budget funds a wide range of services and entities in St. Mary’s County. It funds all of the county departments, the Board of Education, the Sheriff’s Office, other elected officials like the State’s Attorney and County Treasurer, and various state boards and agencies, like the Health Department, Library system, and Board of Elections. There is flexibility in the amount we can fund some agencies, but some agencies we are legally required to fund to certain levels.

The majority of the work in building this budget is focused on FY23, but we do forecast revenues and expenses out for five years as part of the county’s planning for the future.

Sources of Funding

The majority of the funding for our budget comes from Income Taxes and Property Taxes. These are recurring sources of funding that we use for the Operating Budget. Property tax is fairly easy to estimate. The State of Maryland is responsible for updating assessments for all of the property in St. Mary’s County, and they work in three-year phases (1/3 of the county is reassessed every year). The Commissioners have held the property tax rate steady at .8478 per $100 of assessed value. While the property tax rate has remained the same, property tax amount increases every year due to property values rising. If the Commissioners were to lower the property tax rate to .8270 per $100 of assessed value, then the revenues from property taxes would remain flat—this is called Constant Yield. For FY2023, we are anticipating $123,367,776 in Property Taxes.

KEY PRICIPLE: Constant Yield is changing the property tax rate to keep revenues exactly the same as the previous year. The property tax rate remains the same in this budget, so property taxes will increase due to increased property values based on the state’s assessments.

Income tax is a more challenging revenue to estimate. It fluctuates based on the economy, people working, and Federal and State tax policies. We look at a variety of factors, including recommendations from the state on anticipated growth. St. Mary’s County is fortunate to have a strong and stable work force, due especially to the Navy base being our primary employer, which helps to shelter us from economic downturns. Our county is one of the top performing counties when it comes to employment. Over the past several years the commissioners have taken a very conservative approach to estimating Income Tax revenues—when we under-estimate our revenues and end up with more money than we budget/spend, the excess money goes into a “Fund Balance”.  This is one of the more frustrating parts of building the budget for me. County government is not a bank, we should not be taking more tax dollars than we need and all of the revenues we collect should be utilized for our residents.

KEY PRINCIPLE: Excess funding that is collected and not spent in the budget becomes a Fund Balance.

This budget the commissioners have lowered the income tax rate from 3.1% to 3.0% of net taxable income. The budget anticipates $125,810,020 in Income Tax for FY2023. Since our county Fiscal Year goes from July through June and does not match the calendar year, our income tax revenues are split between two calendar years. Half of your 2022 taxes and half of your 2023 taxes will go to pay for our Local Income Tax. Income taxes are collected by the state and provided to the county throughout the year. There is a schedule of those payments—they are not a regular/equal amount, it flexes as the state provides the revenues.

Another important source of funding is Grants. We receive both State and Federal grants for a wide variety of areas. For example, we receive grant funding to operate the St. Mary’s Transit System (STS) buses. We receive grants for childcare services, Sheriff’s Office programs, and programs for senior citizens. Throughout the year we will approve the grant applications and then accept the grant funds for both county programs and for other organizations like the Sheriff’s Office and Board of Education. We anticipate $13,682,393 in grants in FY23, in addition to the $11,023,993 in American Rescue Act Grant money provided by Congress for FY23.

There is a variety of other smaller taxes that are included in our Operating Budget Revenues. These include the Cable TV Franchise Fee for $1,000,000, the Energy Tax for $1,040,000, the Public Accommodations Tax for $900,000 and Recordation Taxes for $9,000,000.

Highway User Revenues, anticipated at $1,889,924, are funds that come down from the state and are used for maintaining our county highways. These funds used to be significantly higher in the early 2000s, but the state General Assembly “robbed” the highway user revenues from the counties in Maryland to balance their budget and pushed the costs back on to the counties. This topic came up this year in the General Assembly and there was a strong push to restore a portion of the Highway User Revenues back to the counties, so hopefully in the years to come we will get more of this funding back in St. Mary’s County.

Fees (identified in the budget as “Charges for Services”) are anticipated to total just over $4 million. These range from fees to rent county facilities, make use of airport facilities, enter waterfront parks, pay for library fines, or pay for a building permit. Certain fees go back into the area they support, such as childcare programs go into the Enterprise Fund to pay for salaries and materials for those programs.

Fire and Rescue Tax funds are collected based on the Election District that you live in and are provided back to the appropriate Fire Department and Rescue Squad to help them provide life saving services.

Bonds are one source of funding used for our Capital Projects. As a non-recurring source of funding, bonds are never used in our Operating Budget. The county has very strict limits on the amount of bond funding we are allowed to use. Every time bonds are sold for revenue; the bond debt service is added to our Operating Budget. The policy is that our debt service can never be more than 10% of our Total Revenues, so it is critical that this is forecast five years into the future. Our budgeted Debt Service for FY23 is $13,122,798, which is under 5% of our Total Revenues. If the county wishes to have the authority to sell more bonds and take on more debt, we first must receive permission from the state government. We meet with our state delegation on a yearly basis to ask for any additional bond authority. No additional bond authority was requested in this budget cycle.

Last, Fund Balance is a source of revenue for non-recurring expenses. When we have funding left over in the budget and it gets moved into the Fund Balance, that money can be used for capital projects. Fund balances can grow when we underestimate revenues and receive more money than anticipated and when we do not expend the full amount of money allocated for the budget. One easy example: we budget for an employee’s salary, but if that employee retires and it takes two months to fill the position, then we have two extra months of salary that was not expended and can be rolled into the fund balance.  

Digging Deeper

Digging a little deeper, I wanted to take a look into some of the major areas of the budget. Each of the different Budget Work Sessions are dedicated to particular areas of the budget and the requestors can make their case and answer any questions that the commissioners may have. Primarily the commissioners look at any change requests and increases in employees.

County Departments Operating Budget

The Commissioners are given access to all of the budget request packages and previous three years of expenditures for each department. One step I have taken every year is to go through every single department line by line and look at the requested budget, the current year’s expenditures to date and previous year’s actual expenditures. I keep a spreadsheet of the lines that I identify and can now compare four and half years of actual expenditures to what the budget request is. My goal in this exercise is to identify areas where we are budgeting money that is not being expended. For example, one department budgeted $500 every year for publications, but did not have any subscriptions and was not using any of the funding in that line—that means that $500 could be used for something else but was tied up in this budget line only to end up in the fund balance later in the year. Doing this exercise has resulted in hundreds of thousands of dollars of savings without reducing any services. I stress to the department heads that I am looking for accuracy in budgeting; I’m not asking for them to spend less money, I’m asking them to budget what they accurately will use.

This budget will add 42.1 positions to County Government. Most of these positions are going to the Emergency Services Department: 12.5 employees for the new Animal Shelter that will be opening in the fall and 13 EMTs, Paramedics and Quality Assurance for our 9-1-1 responders. Ensuring that when a resident calls 9-1-1 there will be a timely response is one of my top priorities and I’m happy that we are able to take this next step for our system. This is the second half (first half was approved in last year’s budget) of the request that came from our Emergency Services Board on what is needed from the county to support our dedicated volunteers in a growing population.

As an employer, the county competes with the Base and private industry to keep good employees. We can not compete with salary, but every year we try to stay current and ensure our valued employees know they are appreciated. We also try to stay consistent with salary increases across county employees, Sheriff’s Office personnel and Board of Education personnel. This year the budget provides a one-step merit increase and 2% COLA for all employees.

Also interesting, this budget is the first county budget to include snow removal. The county maintains all of the county owned roads (easy way to tell…roads that have a number (5, 235, 249, 243, etc.) are state owned roads). Historically, it snows every year. The amount varies and the cost of removing the snow and cleanup from the storms will fluctuate, but we know the cost will be there. In previous years, the funding would come out of fund balance or the Commissioner’s Reserve account when the bills were due, but this year we included $849,475 for Snow Removal in our Highways budget line.

Enterprise and Other Funds

Enterprise funds are budget tools within county government that allow for certain areas to operate similar to a private business. Simply put, the fees paid into those funds are intended to cover the work done in those funds. For example, the Recreation and Parks Enterprise Fund covers childcare programs, therapeutic recreation, gymnastics, the aquatics center, and sports programs. Residents pay a fee to make use of these programs and the fees collected cover the cost—funding does not come from tax revenue.

Our other Enterprise Funds are the Wicomico Shores Golf Course and the Solid Waste and Recycling Fund.

One of our newest special funds is the Emergency Services Billing Fund. Following the nationwide trend, St. Mary’s County instituted 9-1-1 emergency billing. If a resident needs to call 9-1-1 for an emergency, their insurance will be billed for the services provided. We are one of the last counties in the state to institute this and it was necessary to offset the growing expenses for emergency services. The billing is considered “soft billing”, meaning that if a resident receives a bill but does not pay, debt collectors are not being sent to track them down. No one should ever hesitate to call 9-1-1 if they are in a true emergency situation.

County CIP

The County’s Capital Budget for FY2023 totals $65,082,283. The Commissioner’s goal in building this budget is to leverage multiple sources of funding to provide the most “bang for the buck” and deliver needed amenities in a timely manner. This budget breaks down into five major areas: Highways, Land Conservation, Public Facilities, Recreation and Parks, and Public Schools.

Highways includes completion of FDR Boulevard, Culvert Replacement and Repair (an ongoing process around the county), Roadway improvements, and sidewalk retrofit, among other things. Land Conservation makes use of Rural Legacy Funds and Navy REPI funds to preserve agricultural land. Public Facilities includes the Airport, Animal Shelter, Building Maintenance and Repairs, Emergency Communications Center Expansion and the start of a new Sheriff’s Headquarters Facility. Recreation and Parks includes several parks improvements and build outs, including the Shannon Farm Park that will be located by the Homegrown Farmers Market, and the start of the YMCA. Public Schools includes renovations in various school buildings, the largest being a Modernization of Lettie Marshall Dent Elementary School.

Board of Education

The funding of the St. Mary’s County School System is written into state law—this is known as Maintenance of Effort. The simple definition of this is that we must fund the per pupil amount to the same level as the previous year. The minimum funding that must go to the Board of Education from St. Mary’s County in this budget is $116.3 million. Funding to the school system can be controversial when the Board of Education asks for more than the commissioners are willing to fund. Fortunately, this year the Commissioners are allocating $120.6 million to the school system. This is enough funding for them to meet their negotiated agreements with the Education Association of St. Mary’s County (EASMC) and ensure continuation of their operations. We also provided funding to increase the pay of school bus drivers, something that is critical for the hard work that they do—you may remember that other counties had large strikes when their bus drivers were not compensated fairly, but our dedicated drivers worked through the system and continued to keep our schools open!

One change that I advocated for that has helped in the budget process is moving the Board of Education request forward in the process. As the largest outgoing expenditures for the county, it did not make sense to save them for the end of the process. We all benefit from strong schools and a well-educated population, and I’m appreciative of the close working relationship with the Board of Education members.

Sheriff’s Office and Other Elected Officials

The Sheriff’s Office makes up another large portion of the county budget. This budget includes $55,749,107 for the Sheriff’s Office, which is an increase of over $2 million from the previous year. This allows for promotional ranks for law enforcement officers and corrections personnel and five new positions.

Elected officials are broken out separately in the budget because they have control over the funding provided to them by the county. They are duly elected by the citizens and it is their responsibility to manage their budgets. Other elected officials include the Circuit Court, Orphans Court, State’s Attorney and County Treasurer.

Boards and State Agencies

Various boards and state agencies also receive funding from the county. Some of these have minimums required by law. The Health Department will receive $3,167,852 in Operating Funds and the Board of Elections will receive $2,223,296. The Board of Elections funding is increasing 33% in this budget because of the requirement for new early voting locations in the upcoming elections.

Funding also goes to support the College of Southern Maryland, the Tri-County Council, the Department of Social Services, the University of Maryland Extension, and many other groups. The Library Budget is increasing to $3,310,048 in order to hire staff to operate the new “Mobile Library”.

Non-Profits

Every year the county provides funding to a variety of non-profit organizations that do important and valuable work in St. Mary’s County. A process was created several years ago that offers a non-partisan scoring system to allocate the funding. The total amount of funding going to non-profits is $1,049,682. Some of the non-profits that receive funding include the ARC of Southern Maryland, Center for Life Enrichment, Feed St. Mary’s, Special Olympics, Three Oaks Center, Southern Maryland Navy Alliance, 7^th District Optimist Club and the St. Mary’s County Arts Council.

One budget tool that I will periodically discuss is using Fund Balance to cover the grants that we provide to the Non-Profit Organizations. Some have suggested that I don’t value the non-profits because I want to change the way we fund them, but that is not the case. Since they are required to apply for this grant every year, I do not consider it “recurring” and believe that we can use fund balance in order to supply the funding that goes to these organizations. I have not suggested reducing the funding to the organizations because they do great work in our community.

Other Considerations

Throughout the process it is important to maintain a safe level of reserve funding. The county adopted a policy to maintain a 15% fund balance reserve “to avoid sudden disruption or elimination of services…the county reserve allows time to plan and address changes such as revenue shortfalls or cost shifts.”  

Additionally, after the last Budget Work Session there was an excess of $885,980 of revenues. These funds were placed in a “Public Hearing Reserve” and will be realigned and allocated after the public hearing and during the appeals process.

Final Thoughts

All of this is subject to change, but the Recommended Budget was approved unanimously by all of the commissioners.

The budget is not final until the final vote is taken in May, and there is still time for appeals and changes as new information is gathered. The Public Hearing for the Budget will be on Tuesday, April 26^th at 6:30 pm at Chopticon High School and will be available for viewing afterward on Cable Channel 95 or the County’s YouTube Channel. Comments can be mailed or emailed in.

If you have read this entire post, thank you. My hope is that this provides more clarification instead of confusion on what can be a difficult topic to understand. If you have questions about anything in particular or would like to learn more about a particular area of our budget or county government, please do not hesitate to reach out!

There is a lot of information that I did not cover—this is a huge topic and this post just scratches the surface. If you are interested in digging into the budget deeper, you can view the entire budget on the St. Mary’s County Department of Finance website at: https://www.stmarysmd.com/finance/

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