MFP Item 3
September 27, 201 0
Worksession
MEMORANDUM
TO:
County Council
FROM:
SUBJECT:
Robert
H.
Drummer, Senior Legislative Attomey{j
Worksession:
Expedited Bi1l47-1O, Administration - Legislative Branch­
County Council Economic Impact Statements
Expedited Bill 47-10, Administration Legislative Branch County Council- Economic
Impact Statements, sponsored by Councilmember Knapp, Council President Floreen, Council
Vice President Ervin, and Councilmembers Navarro and Berliner was introduced on July 27,
2010. A public hearing was held on September 21.
Background
A complete economic 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 an economic impact statement. Bill 47-10 would require the Director of the Office of
Management and Budget (OMB) to submit an economic 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 an economic impact statement to the Council.
Public Hearing
OMB Director Joseph Beach testified in support of the Bill on behalf of the Executive.
See ©7-8. Mr. Beach suggested that the Bill's description of the required contents of an
economic impact statement be clarified and that OMB be given additional time to prepare
statements on 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 economic impact
analysis not currently being done. See ©5-6. OMB estimates that this new requirement would
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add 6-8 hours of preparation and review time for each bill. OMB also states that the required
economic analysis would require the development of a model by a consultant at an estimated
cost of $20,000 to $40,000. OMB estimates that the additional staff time to prepare statements
can be accomplished without additional staffresources.
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 ©9-11. Mr. Beach
suggested the following language be added after line 19:
ill
If Executive Branch staff need additional time toprepare the analysis they will
notify the Council President indicating when the
fisc~l
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 the Executive
Branch has no control. The suggested amendment would permit Executive staff to grant
themselves an extension of time to submit the statement. The time line 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. Although we agree that the 21-day guideline may be unreasonable
for some bills, the recommended amendment would make the 21-day guideline less meaningful.
3. Should the Director of Finance be substituted for the Director of OMB?
Mr. Beach pointed out that the Department of Finance is responsible for economic
projections and recommended substituting the Director of the Department of Finance for the
OMB Director. Council staff agrees with this suggestion.
4. Should the County Code require an economic impact statement for legislation?
OMB has recently added an economic impact statement to its fiscal impact statements for
legislation. Although it is not required by law or Council rules, the Montgomery County Plain
Language Drafting Manual requires a Legislative Request Report that includes a section for
economic impact. The Drafting Manual is a 25-year old document that was created for use by
Council 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 an
economic 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 an economic
impact statement for each bill and establish the required content and timing.
The County Council, as the final fiscal authority, must insure that tax money is spent
wisely. The Council, as the elected legislature for the County, has an additional responsibility to
enact laws to promote the health and welfare of the County's residents. Promoting economic
2
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development in the County is a critical part of this duty. The Council must consider the
economic impact of legislation in order to perform this duty. Although the preparation and
review of an economic impact statement would require additional resources, the additional
resources identified by OMB appear to be small compared to the potential benefit.
Council staff
recommendation:
approve the Bill with an amendment substituting the Director of Finance for
the OMB Director.
This packet contains:
Expedited Bill 47-10
Legislative Request Report
Fiscal Impact Statement
Testimony of Joseph Beach
OMB September 23 memorandum
F:\LAW\BILLS\I047 FIS - Economic Impact\MFP Memo.Doc
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4
5
7
9
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Expedited Bill No.
...!..47!.--...!..10~
_ _ _ __
Concerning: Administration - Legislative
Branch - County Council - Economic
Impact Statements
Revised: July 28. 2010 Draft No .
.JL
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 Navarro and Berliner
AN EXPEDITED ACT
to:
(1)
require the Executive to submit a statement to the Council describing the economic
impact of a bill before Council action; and
(2)
generally amend the law governing the consideration ofbills 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.
47-10
1
Sec.
1.
Section 2-81A is added as follows:
2-81A. Economic Impact Statements
2
3
4
ill
Definitions.
In this Section, the following words and phrases have the
following meanings:
5
Director
means the Director ofthe Office of Management and Budget.
Economic impact
means an estimate of the costs and benefits to private
organizations and individuals in the County attributable to
the law.
(Q)
~
6
7
8
change in
9
10
11
12
Economic impact statements.
The Director must submit
~
statement to
the Council describing the economic impact, if any, of each bill under
consideration
by
the Council. The Director must submit
statement for each bill.
~
separate
13
14
W
Time for submission.
submitted to the Council:
An
economIC impact statement should be
15
ill
no later than
1
days before the public hearing on each bill
16
17
18
19
introduced
by
the Council President at the request of the County
Executive; and
ill
@
no more than 21 days after
~
bill sponsored
by
~
Councilmember
is introduced.
20
21
Content
gf
economic impact statement.
statement must include:
Each economIC impact
22
ill
ill
the sources of infonnation, assumptions, and methodologies
used;
~
23
24
25
description of any variable that could affect economic impact
estimates;
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EXPEDITED Bill
No. 47-10
26
27
ill
the bill's positive or negative effect, if any, on employment,
spending, saving, investment, incomes, and property values in the
County; and
28
29
30
31
ill
if
~
bill is likely to have no economic impact, why that is the case.
Council action on
£!
bill that is otherwise valid is not
W
Compliance.
invalid because of any failure to follow the requirements of this Section.
32
33
34
Sec. 2.
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.
35
36
37
Approved:
38
Nancy Floreen, President, County Council
Date
39
Approved:
40
Isiah Leggett, County Executive
Date
41
42
This is a correct copy ofCouncil action.
Linda M. Lauer, Clerk ofthe Council
Date
f:\law\bills\1047 tis - economic impactlbill 5.doc
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LEGISLATIVE REQUEST REPORT
Expedited Bill
47-10
Administration - Legislative Branch County Council-Economic Impact Statements
DESCRIPTION:
The Bill would require the Director of OMB to submit an economic
impact statement to the Council for each bill under consideration by
the Council. The Bill would also establish a time line for submission
and the required content for the statement.
A complete economic 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 an economic
impact statement.
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.
To be researched.
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:\LA
\\lIB
ILLS\ I047 FIS - Economic Impact\LRR Economic.Doc
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph
F.
Beach
Director
MEMORANDUM
September 17, 20 I 0
TO:
FROM:
SUBJECT:
Nancy Floreen, President, County Council
Joseph F. Beach,
D~
Expedited Bill 47-10, Administration - Legislative Branch - County Council- Economic
Impact Statements (EIS)
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 ofManagement and Budget (OMB) to
submit an economic impact statement (EIS) 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.
FISCAL SUMMARY
The County Code does not currently require an EIS for all legislation. However, as a
normal practice, an EIS is prepared for each bill and Executive Regulation before the County Council. This
bill would specifically state what the content ofan EIS should be, and is modeled after a report from the
Office of Legislative Oversight which examined the Fiscal Impact Statement and EIS process.
The subject legislation will not cause an economic impact, but will increase Executive
Branch department workload and require additional resources to implement. The requirements in the
legislation regarding the specific content of each EIS will increase staff time needed to complete the EIS
and require development of an economic model to analyze the economic impact of legislation. Specifically
the subject legislation requires, analysis of"the bill's positive or negative effect, ifany, on employment,
spending, saving, investment, incomes, and property values in the County."
In
order to detennine the
positive or negative effects on those variables, certain economic models must
be
available to analyze the
effects of the Bill on all of the variables. More specifically, the analytical framework that identifies and
measures the interactions and interdependences of the variables is crucial in the development ofeconomic
impact estimates. The development of such a model is estimated to cost approximately $20,000 to $40,000
depending on the consultant selected
to
develop the model and the complexity and features of the economic
modeL
On
average over the past four years, the Council introduces and considers 40 bills per year.
It
is estimated that the requirements ofthis bill
will
add an additional six to eight hours per EIS in
preparation and review time, which is approximately one-tenth ofa workyear. The constrained timelines
Office of the Director
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Nancy FJoreen, President, County Council
September 17, 2010
Page
2
for preparing and submitting an EIS 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 ofManagernent 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 of Finance
Alex Espinosa. Office ofManagement and Budget
John Cuff, Office of Management and Budget
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Testimony:
Expedited Bill 43-10 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 Isiab 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 COlUlty 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
tlexibility in the timeline for Council sponsored legislation when the complexity of legislation
requires extensive collaboration between OMB, Finance, and other departments to understand and
analyze the fiscal and economic impacts ofthe legislation.
In 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 timefrarne 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 or the capital budgets.
Page
10f2
(j)
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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 otTer 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 MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
September 23,2010
TO:
FROM:
SUBJECT:
Bob Drummer, Legislative Attorney
JosePhF.Beac~
~
-<
Comments: Expedited Bill 43-l0 Fiscal Impact Statements and Expedited Bi1147-l0
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 infonnation, assumptions, and methodologies used (Lines 12-22).
Comment: Depending on the legislation, Executive staff is sometimes dependent on non-government or
unpublished sources for infonnation.
In
that case, care must be taken on the reliability of such
infonnation 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 infonnation provided by
non-government or unpublished sources is reliable and current.
In
order to ensure reliability ofthe
infonnation and data, more time
may
be required to prepare the economic impact statement than specified
in Section 2-81A(c) to validate that infonnation and data. Therefore, we recommend that upon receipt of
the Bill for analysis, Executive Staff will infonn 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:
(l)
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 introduced;
(3) If Executive Branch staff need additional time to prepare the analysis they will notify the Council
.
President indicating when the fiscal impact statement will be submitted.
Office of the Director
Floor • Rockville, Maryland 20850 • 240-777-2800
viww.montgomerycountymd.gov
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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. No 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 ofthis 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)
include:
Content of economic impact statement. Each economic impact statement must
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 frrst step should be to
identify
those variables that
directly
affect the economic
impact estimates, that is, the primfUY 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 ofthat variable is the next logical step. No amendments recommended.
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Bob Drummer, Legislative Attorney
September 23, 2010
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 of the variables. More specifically, the
analytical framework that identifies and measures the interactions and interdependences of the 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 of the 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 Chief Administrative Officer
Aron Trombka, Office of Legislative Oversight
David Platt, Chief Economist
Michael Coveyou, Department of Finance
@