Committee recommends council approve FY26–31 tax‑supported fiscal plan summary; staff warn of downside revenue risk

Mr. Smith, Council staff for budget matters, presented the tax‑supported fiscal plan summary for fiscal 2026–2031 and asked the Government Operations and Fiscal Policy Committee to recommend the plan to the full Montgomery County Council. The committee voted unanimously to recommend the resolution to approve the plan.

The plan: Mr. Smith said the charter requires the executive to submit a six‑year public service program with the operating budget and the council to approve a fiscal plan summary. He described the document as a "snapshot in time" that will be revised twice over the next 12 months (next in December with updated revenue projections and again in March with the executive's recommended operating budget for FY27). The fiscal plan before the committee incorporated council actions on taxes and assumes no property or income tax increases were adopted.

Why it matters: the plan sets multi‑year revenue and expenditure assumptions that guide budget choices. Mr. Smith highlighted that revenues are projected to grow an average of about 3.5 percent annually over the six‑year period, with a large uptick in FY26 and much lower growth thereafter. Agency expenditure growth is projected at 7.3 percent in FY26 and then significantly lower in subsequent years; council staff noted the amount available to agencies in FY27 is much smaller than FY26 ($61.6 million growth projected for FY27 under current assumptions).

Revenue and risk discussion

Council Member Friedson warned the committee that revenue growth has been high recently but projections for future years are "not projecting the revenue growth to be very high moving forward," and cautioned that downside risk is significant given federal policy uncertainty affecting the region. He noted the high local exposure to federal workers and federal contractors and the ripple effects on local businesses.

Dennis Hetman, Department of Finance, summarized recent indicators: "We got our May distribution for our income tax. It came in slightly better than expected. That's always our goal to the tune of about $10,000,000." He said the department models revenues conservatively because the county is disproportionately exposed to federal policy changes and other macroeconomic shifts.

Reserves and non‑agency commitments

The plan shows non‑agency commitments (debt service, PAYGO, reserves, OPEB) and estimates the county's reserves at about 11.2 percent for FY26, as approved in the operating budget. Mr. Smith noted debt service remains below revenue growth in the plan and PAYGO is at or above policy levels in some years.

Committee action and next steps

Council staff recommended approval because the plan reflects council budget actions taken in May. The committee voted to recommend the plan to the full council for approval. Staff noted the plan will be updated with new revenue projections in December and again with the executive's FY27 budget in March.

Context

Committee members and finance staff emphasized the plan is an evolving document tied to revenue projections; both the Department of Finance and council staff said they will continue to monitor distributions and economic signals and update the plan as new data arrives. The committee's recommendation sends the current, council‑approved fiscal plan summary to the full council for final action.