Agenda Item 8
July 9,2013
Pu blic Hearing
MEMORANDUM
July 3,2013
TO:
FROM:
SUBJECT:
County Council
Robert H. Drummer, Senior Legislative Attorney
rw
If
r!:\
Public Hearing:
Expedited Bill 8-13, Working Families Income Supplement­
Amount
Expedited Bill 8-13, Working Families Income Supplement Amount, sponsored by
Council members Riemer, EIrich, and Leventhal, was introduced on March 19. A Government
Operations and Fiscal Policy Committee worksession will be scheduled at a later date.
Background
The County Working Families Income Supplement (WFIS) is derived from the Federal
earned income tax credit (EITC). The EITC is a refundable tax credit for lower income working
families and individuals. To qualifY for the EITC in Tax Year 2013, a taxpayer must earn less
than:
$46,227 ($51,567 married filing jointly) with three or more qualifYing children
$43,038 ($48.378 married filing jointly) with two qualifying children
$37,870 ($43,210 married filing jointly) with one qualifying child
$14,340 ($19,680 married filing jointly) with no qualifYing children
The Tax Year 2013 maximum credit is:
• $6,044 with three or more qualifying children
• $5,372 with two qualifying children
• $3,250 with one qualifYing child
• $487 with no qualifYing children
Twenty-two states (including Maryland), the District of Columbia, New York City, and
Montgomery County offer their residents a WFIS based upon the EITC. Maryland permits
residents to claim a credit of one-half of the Federal EITe. In 2000, the County began matching
100% of the Maryland credit to help working County residents meet the high costs of living in
Montgomery County. In May 2010, the Council enacted Expedited Bill 33-10, which permitted
the Council to set the WFIS at less than 100% of the Maryland credit by resolution each year.
Accordingly, the Council set the WFIS at 72.5% for FY2011, 68.9% for FY2012, and 75.5% for
FY2013.
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Expedited Bill 8-13 would increase the WFIS to 80% of the Maryland credit beginning in
FY2014, 90% in FY2015, and 100% in FY2016 and beyond. The Bill would also permit the
Council, upon request of the Executive, to approve a lower amount in the annual operating
budget by a vote of at least 6 Councilmembers. This limited waiver provision would apply
during the transition years and after the WFIS reaches 100% of the Maryland credit in FY2016.
A memorandum from Councilmember Hans Riemer describing the purpose of the Bill and
outlining some of the occupations of County residents who are likely to qualify for the WFIS is
at©4.
On May 23, 2013, the Council approved Resolution No. 17-762, FY2014 Operating
Budget of the Montgomery County Government, which appropriated funds to increase the WFIS
to 85% of the Maryland credit during FY2014.
This packet contains:
Expedited Bill 8-13
Legislative Request Report
Councilmember Riemer Memo dated January 31
Fiscal and Economic Impact Statement
Circle
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Expedited Bill No.
8-13
Concerning: Working Families Income
Supplement - Amount
Revised: March
13, 2013
Draft No.
_2_
Introduced:
March
19.2013
Expires:
September
19,2014
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective:
- - - c -___- - - - - - ­
Sunset Date: --=-:N.:::,:on""'e=--_::-_ _ __
ChI _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers Riemer, Eirich, and Leventhal
AN EXPEDITED ACT
to:
(1)
amend the amount paid to recipients under the Working Families Income Supplement
Program; and
(2)
generally amend the Working Families Income Supplement Program.
By amending
Montgomery County Code
Chapter 20, Finance
Article XIV, Working Families Income Supplement
Section 20-79
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double
boldface
bracketsD
* * *
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:
-1­
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EXPEDITED BILL
No. 8-13
1
2
3
Sec. 1. Section 20-79 is amended as follows:
20-79. Amount of Supplement.
W
Subject to subsection (Q1
[The]
the amount of the Working Families
Income Supplement paid to each recipient must equal the amount of
any refund the recipient receives from the State earned income credit
program
[[or
another amount approved in the annual operating budget
or a Council resolution]].
4
5
6
7
8
1hl
At the request of the Executive, the Council may approve
~
lower
9
10
11
amount in the annual operating budget
Qy
an affirmative vote of at
least six Councilmembers.
Sec. 2.
Transition.
Notwithstanding Section 20-79(a), as amended in
12
13
14
15
16
17
18
Section 1, the amount of the Working Families Income Supplement paid to each
recipient:
(a)
must equal 80% of any refund the recipient receives from the State
earned income credit program in Fiscal Year 2014; and
(b)
must equal 90% of any refund the recipient receives from the State
earned income credit program in Fiscal Year 2015.
Sec. 3. Expedited Effective Date.
19
20
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on July 1,2013.
Approved:
21
Nancy Navarro, President, County Council
Date
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LEGISLATIVE REQUEST
REPORT
Expedited Bill 8-13
Working Families Income Supplement
-
Amount
DESCRIPTION:
Expedited Bill 6-13 would increase the WFIS to 80% of the
Maryland credit beginning in FY 2014, 90% in FY 2015, and 100%
in FY2016 and beyond. The Bill would pennit the Council, at the
request of the Executive, to approve a lower amount in the annual
operating budget by a vote of at least 6 Councilmembers.
Due to the economic recession, the County reduced the WFIS to less
than 100% of the Maryland credit. The high cost of living in the
County has made it difficult for lower income working families and
individuals to meet expenses.
To mandate in law that the WFIS must be 100% of the Maryland
credit.
HHS, OMB, Finance
To be requested.
To be requested.
To be requested.
To be researched.
Robert H. Drummer, 240-777-7895
Not applicable.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
None.
f:\law\bills\1308 working families income supplement\legislative request rep
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Memorandum
Date:
To:
From:
Re:
January 31, 2013
Council Colleagues
Councilmember Hans Riemer
Legislation to restore the Working Families Income Supplement
I am writing to ask for your co-sponsorship of the attached bill, which would restore the county's
Working Families Income Supplement (WFIS) to 100% of the level of the state's Earned Income
Credit.
The impact of this bill is to provide badly needed income for our county's poorest residents,
money that may be used to buy groceries or make a rent payment or repair a car.
The county's WFIS is derived from the federal Earned Income Tax Credit (EITC). Started in 1975,
the EITC allows households earning income to apply tax credits to their returns. The credits are
available to those with earned income ranging from $13,980 (for single people with no children)
to $50,270 (for married coupLes with three or more children). The maximum federal credit is
$5,891.
The State of Maryland allows residents to claim half the federal credit on their state income tax
returns. In 2000, Montgomery County began matching the state's credit to help working people
meet the high costs of living here. But in 2010, the recession forced the county to reduce its tax
credit at the very moment that working residents needed it the most. At the County Executive's
request, the council passed Bill 33-10, which abolished the requirement in county law that the
county match the state's credit dollar for dollar.
In FY11, the county cut its credit to 72.5% of the state's level. In the following year, the county
cut its credit to 68.9% of the state's level. At the same time, the number of households who
received the credit rose from less than 20,000 to more than 30,000.
In last year's recommended budget, the County Executive proposed to keep the county's tax
credit at 68.9% of the state's credit, the same record-low level as last year. The council raised
the county's match to 75.5%. But there is no assurance that the credit wiLL ever return to the
100% match that the county was able to sustain for ten years. This bill will provide that
assurance.
Recipients of the WFIS include some of the lowest-paid residents of the county. Following is a
sample of occupations in the Bethesda-Rockville-Frederick metro area with annual wage payments
that might qualify for the WFIS.
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occupation
Fast Food Cooks
Dishwashers
Cashiers
Childcare Workers
Retail Salespersons
Janitors
Construction Laborers
Office Clerks
Source: U.S. Bureau of Labor Statistics.
Annual Wages,
2011
19,600
19,700
22,320
22,890
25,680
26,640
28,360
$31,190
WFIS recipients also reflect the county's diversity:
Demographic
White (Non-Hispanic)
Hispanic
Black
Asian
%
of County Households
57%
12
17
13
%of
County Households
with less than
550,000
income
43%
19
27
11
Source: U.S. Census Bureau, American Community Survey, 2011.
Due to our exceptionally high cost of living, these workers are barely able to make it in our
county. The Maryland Community Action Partnership estimates that a single adult with a
pre-schooler needs
$64,060
to be economically self-sufficient in Montgomery County.
1
What does the county's tax credit mean for working families? In
FY11,
the county had
33,840
WFIS recipients who received-an average amount of
$381.81
each. A restoration of the county
match to
100%
would put an extra
$124
into the pocket of each recipient, for a total of
$505.81.
For workers on the edge, that could mean making a car payment or paying an overdue utility bill,
meeting rent or a car payment. Or consider that, as we participate in Councilmember Ervin's
SNAP challenge, it would provide $5 per day for
101
days.
The attached bill would raise the county's WFIS match to
80%
in
FY14, 90%
in
FY15
and
100%
in
FY16
and thereafter. Last year's committee staff packet estimated that each percentage point
increase would cost the county
$187,500.
Based on that estimate, I expect the county to pay an
additional
$843,750
in
FY14, $2.7
million in
FY15
and
$4.6
million in
FY16
and thereafter. Now
that the worst of our fiscal crisis is hopefully behind us, I believe that these are manageable
expenditures for us as well as critical income to our county's working class.
I appreciate your consideration of this legislation and ask for your support and co-sponsorship.
The SelfSufficiency Standard for Maryland, 2012.
Diana F. Pearce, University of Washington School of
Social Work. Prepared for the Maryland Community Action Partnership, 2012.
1
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 208S0
Isiah
Leggett
County Executive
072220
MEMORANDUM
April 16, 2013
TO:
FROM:
Nancy Navarro, President County Council
Jennifer A. Hughes, Director, Office of Management and Budget
Joseph F. Beach. Director, Department
ofFinanc~
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SUBJECT:
Council Bm
8·13,
Working Families Income Supplement-Amount
Please find attached the fiscal
and
economic impact statements for the above-referenced
legislation.
JAH:a2a
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Josepb F. Beach, Director, Department of Finance
Michael Coveyou, Department of Finance
Robert Hagedoorn, Department ofFinance
Uma Ahluwalia, Director, Department ofHealtb and Human Services
Pat Brennan, Department ofHealth and Human Services
Patricia Stromberg, Department ofHealth and Human Services
Sara Black, Department of Health and Human Services
Sharon Strauss, Department of Health and Human Services
Erika Lopez-Finn, Office of Management and Budget
Pofen Salem, Office of Management and Budget
Ayo ApoUon, Office of Management and Budget
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monlgomerycountymd.gov/311
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240-773-3556 TTY
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Fiscal Impact Statement
Council Bill 8-13, Worldng Families Income Supplement - Amount
1. Legislative Summary.
This legislation proposes to increase the Working Families Income Supplement Non
Departmental Account in order to increase the County's contributions to the State Earned
Income Tax Credit (EITC) to the amount of 80%
in
FYI4, 90%
in
FY15, and 100% in FYI6.
This legislation requires that the amount can only be lowered if approved by six members of
Council.
2. An estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
Increasing the portion of EITC benefits for County residents will proportionally affect the
amount of revenue with which the County can fund other items. Currently the Working
Families Income Supplement Non-Departmental Account (WFIS NDA) has an average cost
of $456.93 per recipient with County funding matching 80% ofthe State's contribution with
the NDA having a total appropriation of$16,661,800.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
For FYI4, the WFIS NDA has a County Executive Recommended amount of$16,661,800.
This amount is consistent with the proposed legislation, specifically the 80% match for the
County.
For FY14 the full 100% match would increase the program cost by $3,952,500 from
$16,661,800 (80% match) to $20,614,300 (100% match). Since the administrative costs are
fixed regardless of the match amount, the relationship is not purely linear. As a result,
amounts will differ based on the match percentage, and is approximately $200,000 for each
1% change.
Please see the chart below for a breakdown by fiscal year.
!
Fiscal
I
I
I
J
Year
2014
2015
2016
2017
2018
2019
I
Administration
Costs·
$34,700
$36,700
$37300
$38,800
$39300
$39900
Current WFIS
NDA Total Cost
$16661800
$17124,600
$18,100 300
$19,031,100
$19986500
$20965,300
Number of
Recipients
36389
38640
39,653
40,636
41,615
42,594
Average
Credit··
456.93
494.98
563.77
578.41
593.20
607.97
WFIS NDA Cost
with Legislation
$16661800
$19162800
$22,392,400
$23,543 000
$24724,900
$25,935,800
Additional
Funds Needed
$0
$2,038,200
$4292,100
$4,511 900
$4738,400
$4970,500
I
*=This figure is included In the WFIS NDA Total
**: This figure is for the current WFIS
NDA
(j)
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4.
An
actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
This legislation does not affect retiree pension or group insurance costs.
5. Later actions that may affect future revenue and expenditures if the bill authorizes
future spending.
Section 1b of the legislation notes that, "Council may approve a lower amount in the annual
operating budget by an affirmative vote of six. members.
n
If this were to occur, spending
projections would be lowered.
6.
An
estimate of the staff time needed to implement the bill.
No staff time needed to implement the bill because the fonnulas are only changed to reflect
the new state match amount.
7. An explanation of how the addition of new staff responsibilities would affect other
duties.
Not Applicable.
8. An estimate of costs when an additional appropriation is needed.
Please see the chart provided for question number 3.
9. A description of any variable that could affect revenue and cost estimates.
A key variable affecting revenues and cost estimates would be the number of County
recipients that receive the EITC. A sharp increase in the number of recipients would divert
and strain fiscal resources. Ifthe economy were to decline, the County could face an
increase in recipients and a decrease of revenues which would place an excess burden on the
COWlty.
The State's BITC contribution amount can affect the County's contribution. For example, in
the most recent State Legislative session, Maryland House Bill 845 and Senate Bill 703 were
introduced and proposed increasing the State's match ofthe Federal BITC from 25% to 30%.
Ifpassed, this increase would have affected the County's BITC contribution.
The Federal BITC amount is another factor which could influence the County's cost, since
the County pegs its EITC to the State, which pegs its own BITC to the Federal Govenunent.
A Federal EITC increase would obligate the County
to
pay a higher EITC.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
The number of recipients or any changes to the Federal EITC would be difficult to forecast
(j)
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11.
If
a blll is likely to have no fiscal impact, why that is the case.
Not Applicable.
12. Other fiscal impacts or comments.
Not Applicable.
13. The following contributed to and concurred with this analysis:
Erika Lopez-Finn, Office of Management and Budget;
Pofen Salem, Office of Management and Budget;
Robert Hagedoom, Department of Finance;
Michael Coveyou, Department of Finance;
Pat Brennan, Legislative Liaison, Department of Health and Human Services;
Patricia Stromberg, Budget Team Leader, Department of Health and Human Services;
Sara Black, Special
Needs
Housing, Department of Health
and
Human Services;
Sharon Strauss, Office of Community
Affairs,
Department of Health
and Human
Services
,
Director
c of Management and Budget
er
A.
Date
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Economic Impact Statement
Expedited Bill 8-13, Working Families Income Supplement - Amount
Background:
This legislation would:
• Increase the County's Working Families Income Supplement (WFIS) to 80
percent of the Maryland Earned Income Tax Credit (EITC) beginning in Fiscal
Year
(FY)
2014, to 90 percent in FY2015, and 100 percent in FY2016 and beyond
• Pennit the County Council, upon request of the County Executive, to approve a
lower amount in the annual operating budget by a vote of at least six Council
members.
1. The sources of information, assumptions, and methodologies used.
The methodology used by the Department ofFinance to estimate the amount of the
County's WFIS incorporates the growth in population, the change in total personal
income, the amount of the Federal EITC, refundable EITC formula in Maryland, and
historical trends in prior year amounts. Changes in population and personal income
are
derived from historical trends from the Census Bureau and Bureau of Economic
Analysis, U.S. Department of Commerce, and assumptions developed by the
Department of Finance for the operating budget. Data on the amount of the Federal
EITC come from the Intemal Revenue Service, U.S. Treasury. Finally collection and
refund data from the Maryland Comptroller are incorporated into the estimate of the
County's WFIS.
2. A description of any vanable that could affect the economic impact estimates.
The following variables could affect the economic impact estimates:
a.
The number of recipients from FY2014 and beyond,
b. Changes
in
economic conditions that impact the earnings
of working families.
c. The percentage of reduction in the matching amount from FY2014
and
beyond, and
d.
The demographic economic variables discussed in paragraph 1
~
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment, incomes, and property values
in
the County.
The bill
will
have a positive economic effect on the recipients ofthe WFIS in the
amount of additional income that they would receive under Bill 8-13 compared to
current policy. Finance estimates
that
the total cost from Bill 8-13 would be $2.038
million above current policy in FY2015, or an increase in the average credit of
Page
1
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Economic Impact Statement
Expedited Bill 8-13, Working Families Income Supplement - Amount
$38.05, and $4.971 million above current policy in FY2019, or an increase in the
average credit of$151.04.
4.
If
a Bill is likely to have no economic impact, why
is
that the case?
Yes, recipients under the Working Families fucome Supplement would see an
increase in their disposal income. The average amount of the increase would be
$52.75 in FY2015 to $116.69 in FY2019.
5.
The following contributed to and concurred with this analysis:
Rob Hagedoom,
Chief, Treasury Division, David Platt, and Mike Coveyou, Finance.
d;ruekJttecto~--
Department of Finance
'-/"-13
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