State Short-Changed Montgomery Schools

Error Cut $24 Million From Funding

An accounting error in Maryland's budgeting process cost the Montgomery County school system $24 million in lost revenue in the current fiscal year, and some of the money was mistakenly distributed among the state's 23 other school systems, officials said yesterday.

Some Montgomery leaders are vexed about the mistake, which they found out about just before Christmas. Gov. Martin O'Malley (D) said that he would give the funds back to the county and that school systems that were overpaid can keep the money.

"Sometimes state government makes mistakes," O'Malley said yesterday. "The mistake has been corrected."

State government leaders knew of the error by mid-August. Montgomery School Superintendent Jerry D. Weast said state officials sat on the knowledge for months and have yet to notify school systems that received too much money or too little for the 2008-09 academic year.

"The issue isn't a mistake. The issue is a coverup," Weast said. "And this kind of mistake affected every school system in the state."

O'Malley said state officials didn't immediately discover the underpayment to Montgomery because they had more pressing concerns: correcting their math to forecast property tax revenue in a dire budget cycle.

"That was their first order of business," O'Malley said. "We've been working on it at a staff level since August 11, trying to get to the bottom of it."

County Executive Isiah Leggett (D) said he told the governor of the lost revenue last week. Leggett said he did not think information was withheld intentionally by the state. O'Malley handed Leggett an IOU for the money yesterday at an event to reopen River Road in Potomac after last week's flooding, in a lighthearted gesture of goodwill.

"He said to me today that . . . the state owes Montgomery County $24 million, and he plans to make it good," Leggett said.

The school system will receive the money as a "deficiency appropriation" in the fiscal year that begins in July, O'Malley said.

The error occurred when an employee of the State Department of Assessments and Taxation mistakenly overvalued Montgomery real estate by about $16 billion in a complex "wealth" formula that is used to award state aid to school systems in inverse proportion to their affluence. The worker might have counted newly built properties twice, said Timothy Firestine, chief administrative officer to Leggett.

As a result, the $400 million state aid package to Montgomery schools for the current fiscal year was short $24 million, and other school systems received a larger share of aid than they should have.