Court Decision Cuts Cecil County Future Tax Revenues $1.3 Million a Year; County Council Slogs Through Budget for Spending Cuts

May 20, 2015

A new US Supreme Court decision will cost Cecil County an estimated $1.3 million a year in future lost income tax revenues, and refunds for past taxes struck down by the court could cost the county up to $1.4 million more than previously expected.

The fiscal bad news came as the Cecil County Council continued its long march through the minutiae of the $184.7 million Fiscal 2016 operating budget proposed by County Executive Tari Moore in April. The Council members have been going line-by-line, with virtually no amount too small to be questioned by the councilors, who have demanded detailed answers from county department heads and top administration officials. At times there have been testy exchanges between Council members and county employees, while Moore has been above the fray—she is reported to be out of the country on vacation.

The Supreme Court ruled Monday that Maryland had improperly imposed the “piggyback” income tax, which is collected by the state but turned over to the 23 counties and Baltimore City, on income earned in other states. The state’s own income tax system allowed credits to offset taxes paid to other states by a citizen or business, but the credits were not applied to the county portion of taxes paid.

That practice is “discriminatory,” the high court ruled. “Maryland’s tax scheme is inherently discriminatory and operates as a tariff,” according to the opinion written by Justice Samuel Alito in the court’s 5-4 decision.

Maryland Comptroller Peter Franchot has been warning the General Assembly about the possible fiscal ramifications if the ruling went against the state, and in a report last year he calculated the impact of refunds, and required interest payments, at over $241 million for three tax years from 2009 through 2011. An estimated 55,000 taxpayers could be affected statewide, and people could file amended tax returns for three past years under a statute of limitations.

Franchot also worked with legislators on a plan to phase in the costs to the counties, with the result that the state will deduct refund costs to taxpayers from distributions of piggyback tax revenues to the counties beginning with one payment in June, 2016. Then there would be four payments required in each of the next two years.

For Cecil County, Franchot calculated required taxpayer refunds at an estimated $3.92 million, but the figures could go higher due to interest due on the refunds and uncertainty about how many people will file amended tax returns seeking the court-mandated tax relief.

Winston Robinson, Cecil County’s Director of Finance, told the Council Tuesday that the county had set aside $3.5 million in an “assigned” reserve fund to cover the costs in case the court ruled against Maryland. But he said Tuesday the actual refund costs could rise to $4 million or up to $4.9 million.

And on top of that cost—and the potential need to come up with an extra $500,000 to $1.4 million beyond the money that had been set aside for refunds— the county is estimated to lose $1.3 million a year in income tax revenues going forward due to the required change in the piggyback tax system.

Although Cecil County’s actual dollar losses are not the highest in the state—that problem lands on the fiscal plate of Montgomery County, with the largest population and many commuting workers—Cecil County actually has the highest proportion of taxpayers eligible for the refunds. Franchot calculated that from 2.8 percent to 3.1 percent of local tax returns showed income earned across state lines. (Montgomery County’s percentages ranged from 2.1 to 2.4 percent of tax returns showing out of state income.)

Cecil County officials have long lamented the fact that a lack of local jobs requires county residents to commute long distances for work, including to nearby states such as Delaware and Pennsylvania. “We need to get those people jobs in Cecil County,” said County Council President Robert Hodge (R-5).

Robinson pointed out it was not just earned income from jobs held by individuals, but businesses operating in multiple states and interest or dividend income would also be affected by the court ruling.

The full fiscal impact will not be dumped into the new budget being considered by the Council—which covers the period from July 1, 2015 through June 30, 2016— but it appears that at least one installment of refund payments will be tapped by the state at the end of the new budget year. And it appears that local tax revenues based on returns people file next April 15 will be lower due to the changes in the tax system.

Meanwhile, during two meetings on Tuesday 5/19/15, the County Council members sharpened their pencils—and questions of county officials—to cut nearly $250,000 from Moore’s budget. That figure is on top of $1.06 million in cuts tentatively supported last week. The cuts so far are just tentative proposals and agreements and no final decisions have been made [SEE previous Cecil Times report here: ]

The Council is trying to find enough spending cuts to prevent Moore’s proposed two-cent increase in the property tax rate from going into effect. That would require finding $2.27 million in spending reductions. Under a change to the county’s Charter approved by voters last year, Moore had an extra month to prepare her budget while the Council has two fewer weeks to review it than in past years.

So the councilors are going line-by-line through the budget to look for savings, a point that put members at odds with county attorney Jason Allison, who maintains the Council lacks the authority to make line-item spending cuts and can only address broad categories of spending. “The Council doesn’t have the right to line-item veto” spending, Allison said.

But Councilor Joyce Bowlsbey (R-2), who was a key leader in the drafting of the Charter and in winning voter support for it, disagreed. “The Council has the right,” she said. And Hodge chimed in, “The Charter is very clear.”

Allison contended that the executive can move money around within departmental budgets and the Council’s view on how the money should be spent “doesn’t bind the executive branch to anything.”

Hodge then gave Allison a lesson in practical politics: the executive would ignore the council’s wishes “at her peril.” If she came back to the Council seeking a budget amendment for additional funds or re-allocation of money from one program to another, “it would not be in her best interests” to have ignored the budget directives of the legislative body. “It’s to her detriment to go against our wishes,” Hodge said.

“We ultimately get a final say,” observed Councilor Dan Schneckenburger (R-3).

In the latest round of spending cuts, the Council nipped an estimated $249,400 from the budget, including $66,000 in overtime pay for the Department of Emergency Services. Departmental officials have said required overtime pay is built into the schedule for dispatchers in the 911 center. “Maybe some of the exempt people can answer some of the calls,” quipped Councilor George Patchell (R-4). (Richard Brooks, the DES department head, is the county’s second-highest paid employee.)

Earlier in the day, Brooks appeared before the Council to justify his plan to install a new “P25” emergency call system that would replace the existing system that has had problems interacting with other agencies’ communications systems at fires or crime scenes. He brought manufacturer’s representatives to explain the new system and the problems that are expected to come up when replacement parts are no longer available sometime in the next two years for the existing communications system.

Brooks has proposed phasing-in the costs over several years, with the first installment of about $2.3 million coming in the new Fiscal 2016 budget. At a previous meeting with the Council, Brooks had indicated the total costs would be $20 to $25 million, but on Tuesday the representatives claimed a total cost of about $11 million.

Reviewing budget items later in the day, Patchell expressed concerns that the numbers seemed to be changing and demanded that the Council be given a firm, detailed year by year calculation for the P25 system.

Tags: , , , , , , , , , , , , , , , , , , , , , ,

6 Responses to Court Decision Cuts Cecil County Future Tax Revenues $1.3 Million a Year; County Council Slogs Through Budget for Spending Cuts

  1. Almost Heaven on May 21, 2015 at 10:18 am

    “Maryland’s tax scheme is inherently discriminatory and operates as a tariff,” according to the opinion written by Justice Samuel Alito. Cecil County Public Schools, and this Councils blind implementation of Common Core curriculum through the good ole boy’s back door is just another Maryland tax scheme designed to turn over local control of educational decisions to the federal government.

    Shut, up and pay your ever increasing property taxes for a failed system of “education”. Just hand over your money, and do what your told while we dumb down the children is what this Council is telling us when they continue to give more and more of our hard earned money over to the CCPS.

    Why do they need more money for less students? How can they demand more taxpayer money when the economic times do not warrant raises for public sector employees? Why doesn’t Cecil county wake up and demand an end to unfunded federal mandates like Common Core, and CCPS administrators who take home more money than the Governor?

    It’s past time to demand an end to the expensive, untried, un-American intrusive dumbing down of children with Common Core FED ED, and return to local control of education or fall off the financial cliff with the rest of the Progressive Parasitic Parade.

    No more tax increases for CCPS garbage, and Common Core FED ED

  2. Mike R on May 21, 2015 at 1:47 pm

    Oh hell, $11 million $20 million $25 million what difference does it make? It’s still way too much money to be spending on a communication systems that will be out dated before it’s completely installed. Has anyone calculated the cost per incident where such massive communication would be used?

    With Brooks big salary comes big communication system. Frankly, both Brooks salary and his communication system need to be cut way back. Law enforcement officers and the sheriff deserve more salary than Brooks who just sits behind a desk in a more than elaborate office with way more staff than his department needs. Stop the good old boy mentality with Brooks and cut from his department budget as well.

  3. Jeannette Houle on May 23, 2015 at 1:21 pm

    In speaking with friends and colleagues there are a multitude of us that feel we are not being heard. It is time the County Council listens.

    Since the county council is going line by line, I want to note Jason Allison is the county attorney but he seems to think he can bully people on the internet and not worry about his paycheck. He is now getting big bucks and still can’t determine what is permitted and what is not under this charter; I think by now he should know that Charter inside and out. Council should look at that position and decide if they are getting “our” moneys worth. Personally, I think not!

    With the decrease in students in the school system, why, just why do we have to spend money on a system that we know does not work. Common core doesn’t work; I see my grandkids trying to do this new math, by golly I can subtract, divide, multiply and add faster than the high school teens can add 1 + 3. New teaching methods don’t work so why would we throw good money after bad. Teachers should not be in a position to dictate how the taxpayers money is spent. Enough money has been provided for the schools and any increase should be turned down.

    The taxpayers are sitting on the outside looking in, but it is pretty easy to determine that spending the $11, or $25 million for a communication system is ludicrous. THIS IS NOT NEW YORK CITY, life in Cecil County is pretty simple and we can continue to provide service needed without some elaborate system that will be obsolete before it’s completely installed. Brooks needs a reality check; I concur with others that this money should not be spent and that Brooks’ department should be audited and downsized.

    It seems to me that the thrust for Cecil County would be to bring in businesses who can provide jobs and help build the economy. Spending on these superfluous “toys” and highly overpaid department heads is certainly just throwing good money after bad.

    This is your opportunity County Council members to shine and do what you were elected to do. Keep the cost of government down!

  4. Kelly Frost on May 26, 2015 at 10:36 pm

    Brooks has proposed phasing-in the costs over several years, with the first installment of about $2.3 million coming in the new Fiscal 2016 budget. At a previous meeting with the Council, Brooks had indicated the total costs would be $20 to $25 million, but on Tuesday the representatives claimed a total cost of about $11 million. ??? So many people need to be fired.

    • Kelly Frost on May 26, 2015 at 11:00 pm

      How about we remove / delete the County Executive hand picked
      Drug Czar (that lives in Delaware) and the salary that accompanies it. I mean he’s doing such a bang up job for our local entities– there is really no need for that position, especially when he is the treasurer of a Non-Profit. Hmmm??

  5. Pam Tomlinson on June 9, 2015 at 11:23 pm

    My husband works in Delaware and we live in Cecil County and we have had to pay $1000.00 each year to Maryland. Does this mean we might get something back or did they shoot this down.

    (CECIL TIMES responds: Pam, you can file an amended Maryland tax return, going back up to three years, to claim a refund on the Cecil County portion of the “piggyback” income tax. You still have to pay the state income tax, which already gave you a credit for taxes paid to Delaware. You can contact the Maryland Comptroller’s office for information about how to go about filing an amended return.)

Leave a Reply to Kelly Frost Cancel reply

Your email address will not be published. Required fields are marked *


Fine Maryland Wines
Proudly made in Cecil County