Depending on whom you talk to, the county government's disclosure that it has an extra $3.5-million surplus is either a sign of Harford'sthrift or extravagance.

It has also renewed debate over whether county employees should get merit or step raises denied them earlier this year because of the county's worsening fiscal situation.

County Executive Eileen Rehrmann last week announced that cash reserves of $9.8 million were left after fiscal year 1991 ended June 30.

That's considerably higher than the $6.3 million rainy day fund Rehrmann created, saying it was needed to help Harford achieve a favorable bond rating when it goes to the bond market this year.

The higher surplus is attributed to salary and hiring freezes and other budget cuts Rehrmann imposed after taking office in December, which resulted in savings of $2.2 million. Another $1.3 million came from corporate taxes and investment income the county did not anticipate receiving.

Rehrmann said she intends to use the extra money -- and another $500,000 from the emergency fund -- to make up for an expected $4-million cut in aid the state may be imposed to help balance its budget.

"If we hadn't done what we did -- with the state cuts coming -- we would be in a deficit right now," she said Thursday.

The question of what to do with the $3.5 million has revived a debate over whether Harford should have set aside money to guarantee its debt payments or grant $2.5 million in annual step raises denied to county employees in July.

The surplus proves that the county did not need to create the emergency fund in the fiscal 1992 budget adopted in May, said Council President Jeffrey D. Wilson, a Republican.

"I felt at that time that we had the ability to give the steps to employees and now everybody knows it," he said. "If you don't take care of your employees, how can you expect them to take care of services?"

Wilson cast the only vote opposing creation of the $6.3-million rainy day fund.

Councilman Barry T. Glassman, R-District D, agreed that employees should get merit raises. He noted that everybody lost their cost-of-living raises this year.

"Even the steps would benefit only 30 to 40 percent of employees who aren't at the top of the pay scales," he said. "So, the majority of county employees would not get anything."

Glassman argued that $4 million was too much to sock away as protection against further cuts in state aid. He believes the General Assembly will probably raise taxes to balance the budget.

Wilson said Rerhmann was "just finding excuses" to avoid paying employee raises.

But Rehrmann said that the $3.5 million cannot be used for raises because the windfalls from budget cuts and unanticipated revenue won't be repeated.

The county would not be able to pay everybody's increased salary next year if the economy doesn't improve, she said.

"I don't want to give raises now and then have to do layoffs," Rehrmann said.

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