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Troubling assumptions in mayor's report

FinanceBudgets and BudgetingStephanie Rawlings-BlakeJob Market

Tuesday of last week was such a great time to be a Baltimorean. Then came Wednesday.

One day after approximately 200,000 fans helped the Ravens celebrate their second Super Bowl victory, Mayor Stephanie Rawlings-Blake announced that without significant financial reforms, the city will face growing budget deficits every year for the foreseeable future. According to a budget forecast developed by Public Financial Management, a Philadelphia-based consulting firm, by 2023 the cumulative total of these annual shortfalls could reach $744.8 million.

By Monday, during the State of the City address, the mayor was requesting the public's support for reductions in the property tax, the size of the city's workforce and municipal employee benefits — among other changes — based solely on a 15-page summary report that her office released last week and the promise of more information to come. That's a lot to ask.

I had questions. For example, why was the city so dependent on the work of an outside firm? One legacy of the global financial crisis was the increased privatization of the public sphere. In the most extreme examples, from California to Greece, governments have sold what used to be public assets to pay the bills. Would this report represent a very small part of this much larger trend? Why couldn't the city make its own projections, and what were the assumptions underlying the 10-year forecast?

This week I spoke separately with Ian Brennan, the mayor's press secretary, and Michael Nadol, one of the consultants behind the budget forecast, to gain insight into a process that so far has looked more technocratic than democratic.

Why the reliance on a private firm? Mr. Nadol said that he could not think of any city of Baltimore's size that had its own team of actuaries that could, for example, estimate the changing costs of municipal employee benefits over a relatively long timeframe. Additionally, Mr. Nadol and Mr. Brennan said the city wanted the credibility that would come from working with an independent third party. PFM provided not only budget projections but some of the policy recommendations that the mayor will present in the coming weeks.

How reliable could a 10-year forecast be? As indicated in the summary, the forecast involves "assumptions about future growth to thousands of individual revenue and expenditure lines," i.e. many educated guesses extending well into the future — guesses that will be spelled out more clearly in the full report. Mr. Nadol acknowledged that shorter municipal budget forecasts of three or five years were more typical. A lot can change in 10 years, but he believes his team made reasonable assumptions and that a longer time horizon gives the city a better opportunity to address its structural budget issues.

I asked Mr. Brennan if releasing the full report sooner might have made this process more transparent. When we spoke Monday, he said the final report was not yet complete but would be released during a presentation next Wednesday. The mayor's press conference and State of the City address, he said, were just the beginning of a much longer process that will involve the City Council and hearings the council will likely hold to consider the mayor's proposals.

We will be discussing this report and its aftermath for at least the next decade.

In her December 2011 inaugural address, Mayor Rawlings-Blake's goal of attracting 10,000 new families to Baltimore was little more than an idea. Now she's offering details about how she'd like to promote growth using the type of painful, long-range planning most municipalities only undertake if they are forced to do so. For that she deserves a great deal of credit. But to prepare the ground for the reforms she wants to implement, she has deliberately ignited concerns about a potential bankruptcy while releasing information in stages.

Her approach so far has been brisk and high-handed. These are big numbers that will affect many people's lives. If the public is to have any real confidence in the mayor's analysis and proposed reforms, we'll need every bit of the information that the mayor's office is promising — and a real debate.

Lionel Foster is a freelance writer from Baltimore. His column appears Fridays. Email: lionel@lionelfoster.com. Twitter: @LionelBMD.

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