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Carroll County budget director predicts $5M revenue loss by year end, as consequence of coronavirus

In two weeks, the Carroll County budget director’s year-end prediction for county revenue went from a $1 million surplus to a $5 million shortfall.

Over that span of two weeks, much changed thanks to the coronavirus pandemic.

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On March 12, the Board of County Commissioners heard an overview of the fiscal year 2021 budget from Ted Zaleski, director of management and budget. They voiced concerns about funding the new fire and emergency medical services department, increased recycling costs and money going to nonprofits. At the time, Zaleski said he predicted the county would finish 2020 with a $1 million revenue surplus and a year-end balance of $8.2 million. The county’s operating budget is just over $418 million.

On March 26, the commissioners met with Zaleski via virtual video conference, and the budget director’s year-end revenue prediction changed drastically.

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“We could be $5 million short of budget,” he said.

Although Zaleski foresees this revenue shortfall by the end of 2020, the county has $4.2 million in its reserve for contingencies, and he predicts another $4.2 million will go unspent this year, which would leave the county with $3.4 million.

However, it was proposed for $4 million to be carried over to fiscal year 2022, he said, but if left with $3.4 million, that would not be possible.

“I’m not saying we know this is the picture,” Zaleski said. “We’re saying this is what we think the picture might look like. Of course the really big question mark here is this revenue number, minus $5 million from budget. Will that be the number?”

Zaleski said he had concerns about the budget before COVID-19, the disease caused by the coronavirus, became a factor. “Then COVID-19 came and changed everything.”

The number of COVID-19 cases confirmed by the state stood at 17 in Maryland as of March 13 and ballooned to at least 774 by March 27.

Zaleski said in an interview his latest prediction was driven by two factors: the Federal Reserve’s decision to cut interest rates to near zero and the likelihood of income tax revenue failing to come in above budget during the pandemic.

“People are losing their jobs,” Zaleski said. “Small businesses are not operating. This is going to hit how much is going into our income tax.”

Zaleski predicts the next income tax distribution, due in late May, won’t be affected much, but he estimates the distribution that comes late in the year will be.

And the county’s interest on investments could see “millions of dollars a year of change” due to the Federal Reserve’s cuts, he said.

In an interview, Zaleski noted the revenue picture could still change.

“This is our first reaction to the situation, but we know it’s not the last,” he said.

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There is always uncertainty in the budget process, Zaleski said, but COVID-19 adds another level to it.

If people don’t buy houses, recordation and property tax revenues go down, he said. If people don’t build, building permit revenue goes down.

“We’re going to need to think real hard about every expenditure we’re looking at,” Zaleski told the commissioners.

The commissioners will begin to hash out the fiscal year 2021 budget March 31.

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