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Maryland’s local governments brace for sharp decline in revenues as they fight coronavirus

As local governments in Maryland race to contain the spread of coronavirus, they know another enormous challenge is just around the corner —balancing their budgets amid an economic and health crisis.

The outbreak has ramped up just as local budget directors around the state are preparing spending plans for the coming fiscal year that begins in July.

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On Friday, Baltimore Mayor Bernard C. “Jack” Young ordered a freeze on nonessential hiring and spending.

Young, a Democrat, said the city must be “fiscally prudent as we navigate this unprecedented emergency.” The move does not affect the hiring of police officers, paramedics, firefighters and other public safety workers.

“The hiring and spending freeze represents a pair of necessary first steps to ensure that as revenues continue to decline, we remain in a position to quickly respond to the needs of our residents and first responders," Young said in an announcement.

As businesses shutter and more Marylanders lose their jobs, local finance officials are trying to sort out just how badly the economic fallout will hurt revenue streams — including income and hotel taxes, casino revenues and local fees.

"This has come up so fast and we haven’t seen anything like this before,” said Kevin Kinnally, associate director of the Maryland Association of Counties, which has been fielding calls from local budget directors this week. "Obviously this is going to have a massive impact on state and local economies.”

Adding to the uncertainty is that no one knows how long business closures and travel restrictions will last.

“It’s hard for them to predict the timeline here,” Kinnally said of local finance officials. “It’s really hard right now to be a revenue estimator.”

State lawmakers passed an emergency bill that allows Gov. Larry Hogan to take up to $50 million out of the state’s rainy day fund to respond to coronavirus. Additionally, lawmakers put a provision in the state budget that allows him to use another $100 million on top of that.

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Andrew Schaufele, director of the state’s Bureau of Revenue Estimates, said while it’s clear the pandemic will have significant effects on tax revenues, it is too early to make specific projections.

“I think it could run a gamut of scenarios,” he said.

Maryland’s workforce may be somewhat protected relative to the rest of the country because of its higher proportion of employees in the government and professional-services sectors, who can work remotely while offices are closed.

Still, “we are absolutely losing money from lost work,’ he said.

For counties around the country, “our costs are going up at the same time that our revenue will plummet,” said Matthew Chase, executive director of the National Association of Counties.

In recent years, American counties have already seen “massive demands” on social safety net programs as the middle class struggles and communities grapple with opioid addiction, Chase said. Now local health departments are the “ground troops” in the fight against coronavirus.

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The association is pushing for access to personal protective equipment for first responders and health care workers, as well as for federal assistance for small businesses and for vulnerable populations.

This week, the U.S. Conference of Mayors wrote to congressional leaders, requesting $250 billion in federal emergency assistance to cities — from help covering overtime costs of city employees to assistance for residents who can’t pay their rent or mortgage.

Baltimore City Councilman Eric Costello, a Democrat and chair of the budget committee, said he expects a briefing from the city finance director early next week. But he’s anticipating that the costs associated with the pandemic will be “unlike anything we’ve seen before.”

He’s thinking ahead to the impact on the hospitality sector, and how quickly the city’s unemployment rate will rise.

“We are in dire need of federal and state assistance, as is every other major city in the country,” Costello said.

Baltimore County Executive Johnny Olszewski Jr. said the pandemic will require “an unprecedented response” from government. Even though the focus now is on the health emergency, his staff is contemplating the long-term economic effects.

“Every day the situation is changing," said Olszewski, a Democrat. "We’re seeing more cases, and it’s hard to tell where this will end.”

It is clear that the crisis will put “tremendous pressure on local jurisdictions,” said County Councilman David Marks, a Perry Hall Republican.

“We’re going to need to do everything we can to temporarily help businesses that are shut down and individuals that are out of work,” Marks said.

Olszewski’s budget proposal is due to the County Council in mid-April. Typically, the county executive delivers the budget message in a formal speech at the Towson courthouse, attended by local leaders and county employees.

But with government offices closed and crowds deemed dangerous to public health, this year’s could look different.

“Will he deliver an online budget broadcast?” Marks said. "I suspect he will.”

Baltimore Sun reporters Talia Richman and Pamela Wood contributed to this article.

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