Math Error To Cost Maryland $31 Million
Monday, January 12, 2009
As fiscal flubs go, this was a doozy. An error of simple addition in late 2007 threw off a government estimate of Montgomery County property wealth by $16 billion -- an amount equivalent to the gross domestic product of Jordan -- and spread, viruslike, through the budgets of at least 18 counties before it was corrected.
Eight months passed before the error was confirmed, last summer, by mid-level number crunchers in state government. Five more months went by before word reached Montgomery, victim of the miscalculation, just before Christmas.
The mistake set off a chain reaction that penalized Maryland's largest school system, which lost $24 million in state funds for the fiscal year that ends in June. The same flawed math kicked out overpayments totaling $31 million to 17 other school systems. Gov. Martin O'Malley (D) has pledged to restore the lost $24 million to the 139,000-student Montgomery school system. He does not expect other counties to return the excess funds, which means the error will cost Maryland $31 million in a dire budget year.
The incident has prompted an apology to the governor from the head of the state Department of Assessments and Taxation. Montgomery lawmakers have called for an investigation. They say the error and its aftermath illuminate a vulnerability in state and local government. Here was a slip of the calculator that affected dozens of agencies, their fiscal fates intertwined in a maze of funding formulas. Yet workers in those agencies apparently kept to their silos rather than collaborate to identify the mistake and those affected.
"I don't think we can just walk away from this without finding out how it happened and how we can keep it from happening again," said Sen. Nancy J. King (D-Montgomery).
The slip-up came in November 2007, when two workers in the state assessments office estimated the value of taxable real estate in Montgomery, part of a statewide calculation. New to the job, they mistakenly entered $179,739,399,000, the projected value of county real estate in July 2008. They should have entered $163,916,000,000, the value for July 2007. The figure was $15,823,399,000 too high.
Several agencies rely on those numbers. One is the Maryland State Department of Education, which employs a sophisticated formula to shift money from school systems with more wealth to those with less.
The error affected how roughly $4.5 billion in state education dollars were divided among Maryland's 24 school systems. In Montgomery, which appeared to be exploding in property wealth, schools got too little. Most other school systems got too much. Anne Arundel County's system was overpaid by about $5 million. The overpayments totaled $3 million in Howard County, $2.5 million (Charles), $2 million (Frederick), $1.5 million (St. Mary's), $1 million (Calvert) and less than $100,000 (Prince George's).
The state education agency announced the numbers to school systems in a Jan. 16 memo. Montgomery administrators suspected a discrepancy. The figures "looked impossible," recalled Marshall Spatz, the school system's budget director.
Several Montgomery officials say they questioned the figures in e-mails and telephone calls to people in state government. Perhaps the most important was a Jan. 21 e-mail from Robert C. Bates, an intergovernmental relations officer in the county, to Laura Kittel, a state assessments worker who officials indicate was partly responsible for the error.
He asked: "Have you found out whether the November base numbers on [the Department of Assessments and Taxation's] web site are correct?"
According to John Sullivan, the agency's director, Kittel did not reply.