Agenda Item 9
October 5, 2010
Action
MEMORANDUM
TO:
County Council
FROM:
SUBJECT:
Robert H. Drummer, Senior Legislative Attorney
Action:
Expedited Bill 43-10, Administration
Council - Fiscal Impact Statements
~Cj
approve with
Legislative Branch - County
Management and Fiscal Policy Committee recommendation (3-0):
amendments.
Expedited Bill 43-10, Administration - Legislative Branch - County Council Fiscal
Impact Statements, sponsored by Councilmember Knapp, Council President Floreen, Council
Vice President Ervin, and Councilmembers Andrews, Trachtenberg, EIrich, Leventhal, Navarro,
and Berliner was introduced on July 27, 2010. A public hearing was held on September 21 and a
Management and Fiscal Policy Committee worksession was held on September 27.
Background
A complete fiscal impact statement is an important tool for the Council to review in
making public policy decisions necessary to enact legislation. The Code does not currently
require a fiscal impact statement. A recent report from the Office of Legislative Oversight
(OLO) concluded that fiscal impact statements should be made uniform and required for each
bill.
I
Bill 43-10 would require the Director of the Office of Management and Budget (OMB) to
submit a fiscal impact statement to the Council for each bill under consideration before Council
action. The Bill would also establish a timeline for submission and the required content for the
statement. A Bill would not be subject to challenge solely because OMB failed to timely submit
a fiscal impact statement to the Council.
Public Hearing
OMB Director Joseph Beach testified in support of the Bill on behalf of the Executive.
See ©6-7. Mr. Beach suggested that the Bill's description of the required contents of a fiscal
impact statement be clarified and that OMB be given additional time to prepare statements on
The OLO report
is
available online at
http://www.
montgomerycountymd.gov icontent/cQunci1!olo/reports/pdf/FINA LReport20 10-\ O.pdf
1
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complex legislation or during busy times. Mr. Beach promised to provide proposed amendments
at the worksession.
Issues
1.
What is the fiscal impact of the Bill?
The OMB fiscal impact statement points out that the Bill would require long-range
estimates and multiple scenarios with varying assumptions that are not currently being done. See
©S. OMB estimates that this new requirement would add 6-8 hours of preparation and review
time for each bill, but will not require additional resources. A revenue and expenditure estimate
for the next 6 years is critical information for the Council in order to accomplish a structurally
balanced fiscal plan as required by Council Resolution No. 16-1415. The additional staff time
required to prepare these long-range estimates would be an important allocation of the County's
scarce resources.
2. Should the timeline for submission of the statement be extended?
As promised at the public hearing, OMB Director Joe Beach provided additional written
comments and a suggested amendment in a September 23 memorandum. See ©8-10. Mr. Beach
suggested the following language be added after line 18:
ill
If Executive Branch staff need additional time to prepare the analysis they will
notify the Council President inciicating when the fiscal impact statement will be
submitted.
Mr. Beach points out that the required analysis will vary for different bills and that the
analysis may require information provided by non-government sources over which OMB has no
control. The suggested amendment would permit OMB staff to grant themselves an extension of
time to submit the statement. The timeline in the Bill is not a hard deadline.
It
is a guideline
using the word "should" rather than "must." There is no penalty for missing the 21-day
guideline. The 21-day guideline may be unreasonable for some bills sponsored by a
Councilmember. The Committee decided to amend the Bill to require the OMB Director to
notifY the Council President when a delay is necessary for a Bill sponsored by a Councilmember,
the reasons why, and the new delivery date. The Committee also added a sentence authorizing
the Council President to establish a new delivery date if the Council President finds that the
OMB revised delivery date is unreasonable. See lines 19-24 of the Bill at ©2. Committee
recommendation
(3-0):
amend the Bill as shown on lines 19-24.
3.
Should the County Code require a fiscal impact statement for legislation?
OMB routinely provides a fiscal impact statement for legislation. Although it is not
required by law or Council rules, the Montgomery County Plain Language Drafting Manual
requires it? The Drafting Manual is a 2S-year old document that was created for use by Council
2
Administrative Procedure 1-12 requires the preparation of a fiscal impact statement for Executive Regulations.
2
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staff. The Drafting Manual is referred to in the Council Rules, but it does not have the force of
law. An alternative to legislation would be a Council Rule of Procedure requiring a fiscal impact
statement for legislation. However, the Montgomery County Council Rules of Procedure do not
bind the Executive Branch and can be suspended for a specific matter upon a vote of 6
Councilmembers. This Bill would require the Executive Branch to submit a fiscal impact
Committee
statement for each bill and establish the required content and timing.
recommendation (3-0):
enact the Bill with amendments.
This packet contains:
Expedited Bill 43-10
Legislative Request Report
Fiscal Impact Statement
Testimony of Joseph Beach
OMB September 23 memorandum
Circle
#
1
4
5
6
8
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Expedited Bill No.
::!;43~-..!.;1O~
_ _ _ __
Concerning: Administration - Legislative
Branch - County Council - Fiscal
Impact Statements
Revised: September 29,2010 Draft NO.5
Introduced:
July 27,2010
Expires:
January 27,2012
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: _ _ _ _ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Knapp, Council President Floreen, Council Vice President Ervin, and
Councilmembers Andrews, Trachtenberg, EIrich, Leventhal, Navarro, and Beriiner
AN EXPEDITED ACT
to:
(l)
(2)
require the Executive to submit a statement to the Council describing the fiscal
impact of a bill before Council action; and
generally amend the law governing the consideration of bills by the Council.
By adding
Montgomery County Code
Chapter 2, Administration
Article IV, Legislative Branch
Section 2-81A
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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exPEDITED BILL
No. 43-10
1
Sec. 1. Section 2-81A is added as follows:
2-81A. Fiscal Impact Statements
2
3
!ill
Definitions.
In this Section, the following words and phrases have the
4
following meanings:
Director
means the Director of the Office of Management and Budget.
Fiscal impact
means an estimate of changes in future County revenue
5
6
7
and expenditures attributable to
~
change in the law.
8
9
10
11
®
Fiscal impact statements.
The Director must submit
~
statement to the
Council describing the fiscal impact, if any, of each bill under
consideration
Qy
the Council. The Director must submit
statement for each bill.
!.£)
Time/or submission.
A fiscal impact statement should be submitted to
~
separate
12
13
the Council:
14
15
16
17
18
19
20
21
ill
no later than
Z
days before the public hearing on each bill
introduced
Qy
the Council President at the request of the County
Executive; and
ill
no more than 21 days after
~
bill sponsored
Qy
~
Councilmember
is introduced.
If the Director is unable to submit the statement within the time required
by paragraph (2), the Director must notify the Council . President in
writing of the delay, the reason for the delay, and the revised delivery
date. If the Council President finds that the revised delivery date is
unreasonable,
deadline.
@
Content Qifiscal impact statement.
Each fiscal impact statement must
th~
22
23
24
25
26
Council President may set a. different delivery
include:
(J;­
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EXPEDITED BILL
No. 43-10
27
28
ill
ill
the sources of infonnation, assumptions, and methodologies
used;
an estimate of changes in County revenues and expenditures
regardless of whether the revenues or expenditures are assumed
in
~
recommended or approved budget;
29
30
31
32
33
34
35
36
37
ill
(4)
revenue and expenditure estimates covering at least the next
fiscal years;
an actuarial analysis through the entire amortization period for
each bill that would affect retiree pension or group insurance
costs;
ill
®
ill
later actions that may affect future revenue and expenditures if
the bill authorizes future spending;
an estimate of the staff time needed to implement the bill;
an explanation of how the addition of new staff responsibilities
would affect other duties;
38
39
40
41
42
43
44
45
46
47
48
49
ill
(2)
an estimate of costs when an additional appropriation is needed;
~
description of any variable that could affect revenue and cost
estimates;
ilID
ranges of revenue or expenditures that are uncertain or difficult to
project; and
liD
if
~
bill is likely to have no fiscal impact, why that is the case.
ill
Sec. 2.
Compliance.
Council action on
~
bill that is otherwise valid is not
invalid because of any failure to follow the requirements of this Section.
50
51
Expedited Effective Date.
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date on which
it
becomes law.
52
53
6)
f:llawlbills\1043 fiscal impact statements\biIl5.doc
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LEGISLATIVE REQUEST REPORT
Expedited Bill 43-10
Legislative Branch - County Council - Fiscal Impact Statements
Administration
DESCRIPTION:
The Bill would require the Director ofOMB to submit a fiscal impact
statement to the Council for each bill under consideration by the
Council. The Bill would also establish a timeline for submission and
the required content for the statement.
A complete fiscal impact statement is an important tool for the
Council to review in making public policy decisions necessary to
enact legislation. The Code does not currently require a fiscal impact
statement. A recent report from the Office of Legislative Oversight
(OLO) concluded that fiscal impact statements should be made
uniform and required for each bill.
To enhance the information available to the Council when making
public policy decisions necessary to enact legislation.
OLO,OMB
To be requested.
To be requested.
To be requested.
Maryland law requires fiscal impact statements for state legislation.
Robert H. Drummer, Senior Legislative Attorney
NA
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
NA
F:\LAW\BfLLS\f 043 Fiscal And Economic Impact Statements\LRR FiscaLDoc
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph
F,
Beach
Director
MEMORANDUM
September 17, 2010
058723
TO:
FROM:
SUBJECT:
Nancy Floreen, President, County Council
Joseph F. Beach,
~
Expedited Bill 43-10, Administration Legislative Branch - County Council- Fiscal
Impact Statements (FIS)
The purpose of this memorandum is to transmit a fiscal and economic impact statement
to the Council on the subject legislation.
LEGISLATION
SUMMARY
The Bill would require the Director ofthe Office of Management and Budget (OMB) to
submit a fiscal impact statement (FIS) to the Council for each bill under consideration by the Council.
The Bill wouJd also establish a timeline for submission and the required content for the statement.
FISCAL SUMMARY
The County Code does not currently require
a
FIS for
all
legislation. However,
as
a normal
practice, a fiscal impact statement is prepared for each bill and Executive Regulation before the County
Council. This bill would specifically state what the content of a FIS should be, and is modeled after a report
from the Office ofLegislative Oversight which examined the FIS process.
The subject legislation
will
not cause an economic impact or an increase in costs. However,
the requirements in the legislation regarding the specific content of each FIS, including developing long·range
estimates and mUltiple scenarios with varying assumptions, will increase the workload in departments and
OMS when preparing a FIS. On average over the past four years, the Council introduces and considers
approximately 40 separate bills per year.
It
is estimated that the requirements ofthis bill will add an
additional six
to
eight hours per FIS in preparation and review time, which is approximately one-tenth of a
workyear. The constrained timelines for preparing and submitting a FIS
will
impact operations during peak
workload times,
as
staff shift assignments to meet the new deadlines, but will not require additional resources.
The following contributed to and concurred with this analysis: Alex Espinosa and John Cuff,
Office of Management and Budget; and David Platt, Department of Finance.
JFB:jc
c: Kathleen Boucher, Assistant Chief Administrative Officer
Dee Gonzalez, Office ofthe County Executive
Jennifer Barrett, Director, Department of Finance
David Platt, Department ofFinance
Alex Espinosa, Office of Management and Budget
John Cuff, Office ofManagement and Budget
Office of the Director
101 Monroe Street, 14th Floor • Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Testimony:
Expedited BiIl43-10 Fiscal Impact Statements
&
Expedited Bill
47-10
Economic Impact Statements
Good afternoon, I am Joseph Beach, Director of the Office of Management and Budget and I
am here to testify on behalf of County Executive Isiah Leggett in support of Expedited BiIl43-1 0
Fiscal Impact Statements and 47-10 Economic Impact Statements.
This legislation proposes to require the Executive to submit a fiscal and economic impact
statement for each bill before the County Council and specifies the content and required timeline for
submission for each statement. The subject legislation is submitted in response to the
recommendations ofOLO Report 2010·10.
The OLO report provided several findings and recommendations that would improve the
content, consistency, and timeliness of fiscal and economic impact statements.
\Vhile the Executive welcomed the OLO Report and supports this legislation we believe that
some amendments are necessary to: 1) clarify the required content so that future fiscal impact
statements adequately address the concerns identified in the OLO report; and
2)
provide some
flexibility in the timeline for Council sponsored legislation when the complexity of legislation
requires extensive collaboration between O:MB, Finance, and other departments to understand and
analy-ze the fiscal and economic impacts of the legislation.
[n addition, because ofthe specific economic analysis required in Expedited Bill 47-10 we
believe there are some resource requirements to develop an economic model that would allow the
Department of Finance to efficiently provide the economic impact analysis required
in
the
legislation.
For most legislation we believe the three week timeframe is achievable. However, with
reduced staffing levels in OMB and other departments, the legislation's required timeline for
submitting the fiscal impact statements may not be realistic especially during times ofpeak
workload in developing the operating ot the capital budgets.
Page 1 of2
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Testimony:
Expedited
Bill 43-10
Fiscal Impact Statements
&
Expedited Bill 47-10 Economic Impact Statements
During
the
Committee worksession we will offer specific amendments to
the
legislation to
address these concerns.
Thank. you
for
allowing me to comment on
this
important legislation.
We
look forward to
working with the
Management and
Fiscal Policy Committee and the Council on this
legislation.
Page 2 of2
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OFFICE OF MAl''-lAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
r>1
c.n
September 23,2010
-0
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TO:
FROM:
SUBJECT:
Bob Drummer, Legislative Attorney
JOSePhF.BeaC~
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Comments: Expedited Bill 43-10 Fiscal Impact Statements and Expedited Bill 47-10
Economic Impact Statements
This memorandum is to provide the Council with comments and suggested amendments
for the subject legislation.
Expedited Bill 43-10, Administration - Legislative Branch - County Council - Fiscal Impact
Statements
1.
Timeframe and the sources of information, assumptions, and methodologies used (Lines 12-22).
Comment: Depending on the legislation, Executive staff is sometimes dependent on non-government or
unpublished sources for information.
In
that case, care must be taken on the reliability of such
information and the timeliness of the data. We agree that a complete fiscal and economic impact
statement is an important tool for the Council, and it is also important that the information provided by
non-government or unpublished sources is reliable and current.
In
order to ensure reliability ofthe
information and data, more time
may
be required to prepare the economic impact statement than specified
in Section 2-S1A(c) to validate that information and data. Therefore, we recommend that upon receipt of
the Bill for analysis, Executive Staff will inform Council Staff if more time is required in preparation of
the economic impact statement to ensure reliability. We recommend amending this bill and EB 47-10 as
follows:
(c) Time for submission. A fiscal impact statement should be submitted to the Council:
(1)
no later than 7 days before the public hearing on each bill introduced by the Council President at the
request of the County Executive; and
(2) no more than 21 days after a bill sponsored by a Councilmember is
introduc~d;
(3)
If
Executive Branch staffneed additional time to prepare the analysis theywill notify the Council
President indicating when the fiscal impact statement will be submitted.
----------------------------------- ----------------------------------------------
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
Office of the Director
(j)
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Bob Drummer, Legislative Attorney
September 23,2010
Page 2
2.
An
actuarial analysis through the entire amortization period for each bill that would affect retiree
pension or group insurance costs (Lines 28-30).
Comment: Depending on the availability of the Actuary and the complexity of the legislation this may
not be accomplished in the timeframe allotted in the bill. N9 amendment recommended except to the
time for submission noted above.
3.
"later actions that may affect future revenue and expenditures if the bill authorizes future spending"
(Lines 31-32).
Comment: Suggest inserting "government between "later" and "actions" to clarifY the specific action
that could impact revenues and expenditures.
4. an explanation of how the addition of new staff responsibilities would affect other duties (Lines 34-5).
Comment: This requirement assumes that a department can identifY specifically where an department
would tend to pare back responsibilities in order to implement the bill, and it also assumes that a
department must make a judgment, before the legislation is discussed at the committee level, about what
responsibilities would go unmet as a result of the legislation. The specific management of this workload
should be left to the program managers. However, the FIS should indicate that this type of workload
management will have to take place and identify some potential programmatic impacts. Suggest inserting
"general" before explanation to indicate the level of detail required in the explanation.
Expedited Bill 47-10, Administration - Legislative Branch - County Council- Economic Impact
Statements
Section 2-81A(d) - Content of economic impact statement. Each economic impact statement must
include:
1.
Definitions. Director (Line 5)
Comment: The Department of Finance is responsible for economic projections and preparing Economic
Impact Statements. Suggest eliminating "Office of Management and Budget" and adding "Department of
Finance". However, all EIS' will be combined with FIS' into one memorandum that will be submitted to
the CounciL OMB and DOF will coordinate the preparation of the consolidated statement.
2. Time for submission (Lines 13-19) see above for recommended amendment.
3.
A description of any variable that could affect economic impact estimates (Line 24-25).
Comment: Within any conceptual economic framework, a myriad of variables could affect economic
impact estimates. The flIst step should be to
identify
those variables that
directly
affect the economic
impact estimates, that is, the primfllY economic effects and the basis for selecting that variable either
through previous economic impact studies or literature review. Once those variables have been identified,
then a description of that variable is the next logical step. No amendments recommended.
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Bob Drummer, Legislative Attorney
September 23, 20 I 0
Page 3
4.
The Bill's positive or negative effect, if any, on employment, spending, saving, investment, incomes,
and
property values in the County (Line 26-28).
Comment:
In
order to determine the positive or negative effects on those variables, certain economic
models must be available to analyze the effects of the Bill on all ofthe variables. More specifically, the
analytical framework that identifies and measures the interactions and interdependences ofthe variables is
crucial in the development of economic impact estimates. The development of such a framework is
necessary to provide a complete economic impact statement that would be important to assist the County
Council in reaching a decision "necessary to enact legislation." For example, are there tradeoffs between
employment and investment, employment and
personal
saving, and spending and saving? Also do the
terms spending and saving refer to spending and saving by the County or the private sector as well?
These are conceptualldefmitional issues that require careful analysis to achieve the intent ofthe Bill.
As mentioned in the Executive branch testimony and the fiscal impact statement this
provision will require additional resources in the range of $20,000 to $40,000 to develop an economic
model that will allow the Department of Finance to efficiently provide the complex analysis proposed
in
the legislation. No amendments recommended.
JBF:df
c: Jennifer Barrett, Director, Department of Finance
Kathleen Boucher, Assistant ChiefAdministrative Officer
Aron Trombka, Office of Legislative Oversight
David Platt, Chief Economist
Michael Coveyou, Department of Finance