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Economy sluggish, jurisdictions look to cut budgets

Government workers in Harford County are being encouraged to take early retirement. In Howard County, departments have been told to cut costs by 5 percent. Baltimore City officials are preparing to close a $15 million shortfall.

Midway through the government budgeting year, local jurisdictions are tightening their belts as revenues fall short of projections and the threat of cuts in state aid looms large.

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State agencies were directed to start cutting a month ago to address a $300 million gap in this year's budget, with another $600 million shortage expected next year. On Thursday, Gov.-elect Larry Hogan declared that Maryland faces a fiscal crisis requiring tough decisions.

That talk has county officials of both parties wondering how those tough decisions will trickle down. The state doled out $7 billion last year to local governments, which are dependent on the money for programs from schools and roads to health departments and community colleges. While some spending is mandated by state law, other funding streams could shrink in the state budget-cutting.

"We're certainly concerned about what's taking place at the state level," said Baltimore County Executive Kevin Kamenetz, a Democrat. "We have a new governor coming in who we have no experience with. Frankly, we don't know what his approach to government will be."

"Our head's above water, but there's not a lot of cushion left," said Cindy Mumby, spokeswoman for new Harford County Executive Barry Glassman, a Republican.

Revenues are down in part because the sluggish economy is generating less in personal income taxes than expected. Baltimore is grappling with the bill for police overtime, while the new Horseshoe Casino has produced less money than officials expected.

Harford is running about $3.6 million short of its projections for its $588 million operating budget with about six months to go in the fiscal year because of lower-than-expected income tax collections. To make up the shortfall, Glassman wants to offer an early retirement option. He's hoping about 100 county employees will take it.

Glassman, who took over from fellow Republican David Craig this month, said he will ask the County Council to approve $6.75 million for retirement payouts. Employees would get a one-time payment of $5,000, payments for unused sick days and leave, and life insurance premium payments.

The new executive wants to permanently reduce the workforce, Mumby said. While there's no official hiring freeze, department heads have been told that "they really need to justify filling any vacancies."

In Howard County, low income tax collections have created a $14.2 million shortfall in the county's nearly $1 billion budget.

New County Executive Allan H. Kittleman, a Republican who took over from Democrat Ken Ulman, said he's asking department heads to turn in reports before the end of the month detailing midyear cuts.

Kittleman said he instructed department heads to delay filling vacant positions except for critical ones such as public safety positions, and the county could defer some projects.

"We're going to be looking everywhere," he said. "Our priorities are going to be to do the least harm possible."

Kittleman said it's too early to say what next year's financial picture will look like, but he hopes the midyear adjustments will help the next budget. And despite the dire talk from Hogan, he said the counties might get an increase in one area: The governor-elect has promised county executives he'd try to increase money for road projects.

Not all local governments are projecting financial troubles for the rest of the fiscal year.

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Even though Baltimore County has seen decreased revenue in the latest round of income tax collections, officials projected revenue conservatively and will be able to absorb the blow, said Kamenetz, who just began his second term.

He said the greatest uncertainty is how the state's finances will affect the county's next budget cycle. Department heads are working under "strict and conservative guidelines" as they begin to draw up their budget requests for the fiscal year that begins July 1, Kamenetz said.

Carroll County also doesn't need midyear adjustments to its $350 million budget, said county spokeswoman Roberta Windham, though she said next year's revenue numbers are expected to be mostly flat. County leaders are fiscally conservative, Windham said, so when revenues do increase, officials don't "go out and buy a mess of new stuff."

Anne Arundel County officials are bucking the regional trend: They are slightly ahead of revenue predictions, according to Owen McEvoy, spokesman for new County Executive Steve Schuh.

As with the other counties, the bulk of Anne Arundel's revenue comes from property and local income taxes. McEvoy said with an improving economy, "property values are increasing, the real estate market is improving. We have that benefit that other counties may not be seeing."

He said money is flowing reliably enough that Schuh, a Republican, plans to advance a property tax cut in his budget proposal for fiscal 2016 — a promise he made during the campaign.

He said state contributions to the county steadily decreased during Gov. Martin O'Malley's eight years in office, so he doesn't anticipate anything under the Hogan administration will be a deal-breaker. Still, the state's overall fiscal health is a concern.

"The wild card is the state," McEvoy said. "The state budget situation is the question of the day."

Baltimore Sun Media Group reporters Bryna Zumer and Blair Ames contributed to this article.

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