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Howard County committee warns against budget increases as spending continues to outpace revenues

Against the backdrop of the ongoing coronavirus pandemic, Howard County’s Spending Affordability Advisory Committee released its fiscal 2022 annual report Monday, cautioning the same problem it has warned about for the past few years: Spending is outpacing revenues and debt capacity.

According to the committee, county agencies and entities are requesting funding increases in fiscal 2022 that are equivalent to 2.3 times that of projected revenue growth. This would bring the county to what many members of the committee called a “crossroads.”

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“Spending requests are significantly outpacing resources while slower economic growth is the new norm,” the report reads. “This combination makes each additional dollar of debt less affordable. With both revenues and debt capacity stressed, the pandemic has added additional economic uncertainties. Howard County must execute rigorous fiscal discipline.”

The committee makes annual recommendations to the county executive for the upcoming fiscal year on revenue projections, bond authorizations and long-term fiscal outlook. This is the third year in a row the committee’s report has warned about the county’s fiscal future.

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In its report, the committee said projections show, without making changes to the current spending path, the county will have accumulated annual deficits in the range of $118 million to $361 million in the next six years.

The committee recommended a budget increase of 2.3%, or $26.7 million, over the fiscal 2021 budget. With current projections leaving a $36 million funding gap in fiscal 2022, the committee said the funding requests from education and county agencies have to be reduced from the current $62.7 million to align with projected revenue growth.

Committee members are also pushing the county to fund the Howard County Public School System at the state-mandated level of $920.4 million rather than at the Howard County Board of Education’s requested amount of $960 million, which would be an 8% increase from fiscal 2021 funding.

According to the report, the school system’s increased request is nearly the same as the county’s entire projected revenue increase for the upcoming year.

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“To fully fund the superintendent’s budget request would require a significant cut to all other county services or a major tax increase,” the report reads. “Either of these options would greatly impact a significant number of county residents still coping with the pandemic.”

The committee also recommended new authorized general obligation bonds total no more than $50 million in fiscal 2022, a $20 million decrease from last year’s recommendation, and another push to get the county to better control its debt.

Holly Sun, the county’s budget administrator and chair of the Spending Affordability Advisory Committee, said the committee is concerned about the debt the county is accruing and that it wants to prioritize bringing down that debt.

“Remember that in a full-service county, we have to balance these competing needs. We have a growing aging population that’s going to put additional demands on services,” said Ellen Flynn Giles, a committee member. “We have to be a little more disciplined in seeing what we can afford to do and how we can build incrementally to do what we want.”

The committee also urged the county to plan with a long-term outcome in mind, rather than just for fiscal 2022, by using a five-year revenue projection of 2.2% on average.

“While there may be some limited options for grant funding to address infrastructure, the county has no choice but to focus on prioritization to limit spending, implementation of innovative efficiencies in service delivery to lower costs, and employment of effective strategies to grow its tax base,” the report reads.

“The committee, again, recommends that the county proactively work on developing a sustainable multi-year fiscal plan based on prioritizing needs [versus] wants to be better prepared for the challenges of the near-term and future years.”

The committee argued that pausing capital projects, where possible, so the county can focus on deferred maintenance issues that have accumulated over the years should be a priority in fiscal 2022. Deferred maintenance occurs when there is a lack of money for projects, causing the upkeep of those projects to be repeatedly delayed and creating a backlog. If operating projects don’t receive the necessary upkeep, they eventually become capital projects because they have to restart or rebuild, said Todd Arterburn, a committee member.

“We have significant deferred maintenance issues that have accumulated to such levels that in all likelihood they’re going to make their way into the capital budget; that’s roads and sewers and major issues with the detention center,” Arterburn said.

The committee, made up of county officials and citizen volunteers, has been regularly meeting since November with stakeholders, including county agencies. Steven Poynot, the committee’s vice chair, said the added time because of the pandemic — the committee usually begins meeting in January — allowed for question-and-answer periods that were not rushed.

The increase in time led to the Spending Affordability Advisory Committee’s final recommendation: to make the committee a standing committee that meets year-round. Before that request can come to fruition, County Executive Calvin Ball must approve it.

“We’re definitely going to look at that recommendation and the others,” Ball said of the idea of making a standing committee.

“While we need to be responsible and accountable, I think we’re still in a good place. We’re just at a crossroads and have some tough decisions to make and have to really think about prioritization.”

Ball is expected to release his fiscal 2022 capital budget April 1 and operating budget April 19.

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