MEMORANDUM

May 5, 2010

TO:

County Council

$ Michael Faden, Senior Legislative Attorney ([\

Robert H. Drummer, Senior Legislative Attorneyf[Yltj

FROM:

SUBJECT: Council's Authority to Reduce the Executive's Recommended Budget for MCPS

You requested an opinion concerning the Council's authority to reduce the Executive's recommended operating budget for the Montgomery County Public Schools (MCPS) in light of a draft memorandum of law MCPS' attorney sent to the County Attorney. MCPS' attorney argued that Md. Code Education Art. (ED) §5-I02 prohibits the Council from reducing the MCPS budget below the level recommended by the Executive. Based on this legal analysis, MCPS' attorney has threatened to file suit against the County if the Council adopts a budget for FYIl that is lower than the Executive's recommended budget for MCPS. Although the issue is not totally free from doubt, we conclude that the Council has authority to adopt an operating budget for MCPS that is below the Executive's recommended budget as long as it meets the minimum local share of the foundation program required by the education law (ED §5-202 (d)(1)(i)).

The Montgomery County Board of Education (the School Board) is created in the Education Article of the Maryland Code. The School Board is responsible for operating MCPS. The Council's authority to approve the MCPS budget is derived from the Education Article. In McCarthy v. Board of Education of Anne Arundel County, 280 Md. 634 (1977), the Court of Appeals held that the General Assembly has expressed its intent to occupy the field of public education and thereby preempted all local legislation in this area. Therefore, we must look to the Education Article to determine the extent of the Council's authority to reduce the Executive's recommended MCPS budget.

The County Charter generally governs the County's budget process. Charter §303 requires the Executive to submit a recommended operating budget to the Council no later than March 15. Charter §305 authorizes the Council to "add to, delete from, increase or decrease any appropriation item in the operating or capital budget." The Council has final authority to approve both the operating and capital budgets. The MCPS operating budget is approved as part

of the County's operating budget. Chesapeake Charter, Inc. v. Anne Arundel County Board of Education, 358 Md. 129 (2000). MCPS' attorney argued that the Education Article overrides the County's budget process as it is applied to approval of the MCPS budget. While the Legislature can do this by enacting a public general law, the Education Article does not manifest an intent to preempt the Council's authority over the County's normal budget process. The Court, in Chesapeake, described the statutory scheme governing county boards of education:

... although the county boards are generally regarded as State agencies because they are part of the State public education system, are subject to extensive supervision and control by the State Board of Education, and exercise a State function, from a budgetary and structural perspective, they are local in character. They are not divisions of or units within the State Department of Education. They are subject to the county, not the State, budget process and must justify their budget requests to the county government. Most of their operational funding comes from the county, not the State, government. (emphasis added) 358 Md. 129, 139

The School Board must develop a recommended budget organized by categories established in ED §5-1 0 I. The School Board must transmit this recommended budget to the Executive under ED §5-102. MCPS' attorney relied on the following language in §5-1 02( c) for the conclusion that the Council has no authority to reduce the Executive's recommended budget:

(c) Reduction by county executive.-

(1) This subsection applies only to a county that has a county governing body that consists of a county executive and county council.

(2) The county executive shall indicate in writing which major categories of the annual budget of the county board have been denied in whole or reduced in part and the reason for the denial or reduction.

(3) The county council may restore any denial or reduction made by the county executive in the annual budget submitted by the county board. (emphasis added)

MCPS' attorney argued that the express authority to restore reductions made by the Executive implies that the Council has no authority to reduce the Executive's recommended levels. While we disagree with this interpretation of §5-1 02 by itself, this construction ignores the next section of the ED Article, §5-103.

Section 5-103 provides:

(a) Amount to be not less than required by §5-202.- The amount requested in the annual budget of each county board for current expenses for the next school year and that is to be raised by revenue from local sources may not be less than the minimum amount required to be levied under §5-202 of this title.

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(b) County commtsstoners or county council may provide for additional funds.- The county commissioners or county council may provide funds that are more than the amount required by §5-202 of this title to support improved and additional programs.

(c) Categories and reasons for reduction of additional funds. - If a county councilor board of county commissioners does not approve the amount requested in the budget that is more than the amount required by §5-202 of this title:

(1) The county councilor board of county commissioners shall indicate in writing, within 15 days after the adoption of the budget, which major categories of the annual budget have been reduced and the reason for the reduction; and

(2) The county board shall submit to the county governing body, within 30 days after the adoption of the budget, a report indicating how the alterations to the budget will be implemented, accompanied by reasonable supporting detail and analysis. (emphasis added)

To understand the meaning of ED §5-103, it is important to discuss the minimum local education funding standards contained in ED §§5-202 and 5-213. ED §5-202 establishes two basic local funding levels for each school board in the State. ED §5-202(a) establishes a formula to determine the "local share of the foundation program." The local share of the foundation program is "the product of the local contribution rate and a county's wealth." See ED §5- 202(a)(8). A county must appropriate funds to meet this local share of the foundation program to receive the State share of the foundation program under ED §5-202(d)(1)(i). The second local funding standard in §5-202(d)(1)(ii) is to appropriate local funds no less than the local appropriation for the prior year. I This maintenance of effort (MOE) appropriation is not mandatory.

In 94 Opinions of the Attorney General 177 (2009), the Attorney General recently described the differences between these two local funding provisions:

A county government's/ power to reduce a local school board's budget is limited by the State "foundation program" and the MOE requirements in the State education law. See 64 Opinions of the Attorney General 51, 53 (1979) (requirement to levy taxes to raise sufficient funds for the minimum county share - what is now called the foundation program - is mandatory); 76 Opinions of the Attorney General 153, 162 (1991) (failure of a county to meet its MOE requirement would result in forfeit of increase in State aid otherwise due the local board).

I The County's FYII local share of the foundation program is approximately $660 million. The FYII MOE level is approximately $1.47 billion.

2 Although the power of the Council to reduce the school board's budget was not at issue in this Opinion, it is relevant that the Opinion discussed the "county government's power to reduce a local school board's budget" and not the county executive's power to do so.

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The distinction between the two local funding provisions in ED §5-202 - that is, one is mandatory and the other is not - becomes clear by examining the following language in ED §5- 213:

(b)

If the Superintendent finds that a county is not complying with the maintenance of local effort provisions of § 5-202 of this subtitle or that a county fails to meet the requirements of Subtitle 4 of this title, the Superintendent shall notify the county of such noncompliance.

(2) If a county disputes the finding within 30 days of the issuance of such notice, the dispute shall be promptly referred to the State Board of Education which shall make a final determination.

(3) Upon receipt of certification of noncompliance by the Superintendent or the State Board, as the case may be, the Comptroller shall suspend, until notification of compliance is received, payment of any funds due the county for the current fiscal year, as provided under § 5-202 of this subtitle which are appropriated in the General State School Fund, to the extent that the State's aid due the county in the current fiscal year under that section in the Fund exceeds the amount which the county

(1)

received in the prior fiscal year. (emphasis added)

Although the loss of an increase in State funding over the prior year if a county does not meet its MOE levee is often characterized as a penalty, this is not an accurate term. Rather, the potential loss of eligibility for an increase in State funding over the prior year serves as an incentive for each county, not a legal requirement.

As previously shown, ED §5-1 03( c) permits a county council to refuse to appropriate "the amount requested in the budget that is more than the amount required by §5-202." The only logical interpretation of the "amount required by §5-202" is the mandatory local share of the foundation program required by §5-202(d)(J)(i) because the MOE level in §5-202(d)(J)(ii) is not mandatory. The language in ED §5-213 (b)(l) underscores this point by using the phrase "the maintenance of local effort provisions of §5-202" as the trigger for the loss of an increase in State funding over the prior year.

The School Board must approve a budget that meets or exceeds the mandatory local share of the foundation program. Both the Executive, under ED §5-1 02, and the Council under ED §5- 103 may reduce any amount of the Board's recommended budget that exceeds the mandatory

3 ED §5-202(d)(7) authorizes the State Board of Education to waive the MOE provision.

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local share of the foundation program. Any final appropnation by the County above the minimum local share is permissible, but a final appropriation that is below MOE, absent a waiver approved by the State Board of Education, would result in the loss of any increase in State funding over the prior year.

MCPS' attorney effectively rewrote ED §5-103 by erroneously concluding that "the amount required by §5-202" refers to the MOE provision of ED §5-202. However, only the local share of the foundation program is required by §5-202. The MOE provision is an optional funding level that qualifies the county to receive any increase in State funding; this is referred to in §5-213(b) as "the maintenance of local effort provisions of § 5-202."

Once this fundamental flaw in the MCPS' attorney's argument is exposed, the entire argument falls like a house of cards. ED §5-102 authorizes the Executive to reduce the Board's recommended budget and authorizes the Council to restore these reductions. It is silent as to the Council's authority to reduce the Executive's recommended budget. This silence cannot be read as a prohibition in light of the clear authority given to the Council in ED §5-103 to reduce the Board's recommended budget. The Education Article is prescriptive and detailed in its allocation of authority to local school boards, county governments, and the State Board of Education. If the Legislature had intended to further qualify the Council's broad authority to reduce the school budget in §5-103, they would have expressly said so. Likewise, if they had intended to put further limits on the Council's authority to modify the Executive's recommendations in §5-1 02, that could have been specifically noted.

For all of these reasons, we conclude that the Council has the authority to reduce the Executive's recommended budget for MCPS as long as the final appropriation meets or exceeds the mandatory local share of the foundation program.

We would be happy to answer any questions about this issue.

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