Fueled by fears of a slowing economy and the future costs for county employee retirement health care, members of Howard County's annual Spending Affordability Committee are warning County Executive Ken Ulman and the County Council that they will face growing deficits if they don't trim county spending.
"I'm a proponent of this committee being realistic. I think there has to be a strong message, an accurate message," said committee member Sang Oh, a lawyer and a top aide to former County Executive James N. Robey.
The committee, made up of private citizens and county officials, meets each winter. Once a year, it recommends spending levels for the following fiscal year's budget. Ulman is expected to announce his capital budget about April 1 and the operating budget two weeks later. The fiscal year begins July 1.
The advisory group's warning at last week's meeting was a sharp departure from the past, when it has limited itself to recommending a level of borrowing for capital projects in the coming year.
Led by Howard Bank President Mary Ann Scully, members stressed that they don't want to tell elected officials how to do their jobs. Still, they made it clear that officials must be realistic about the future.
Until now, several members said, the group has used unrealistically low estimates of future spending.
Scully said the increase in education spending in the computer model created by county Budget Director Raymond S. Wacks was 6.5 percent, less than the usual increase. This year, the request is for an 8.3 percent increase, fueled mostly by the 5 percent pay raise for teachers the board already has agreed to.
"When was the last time it grew at 6.5 percent?" Scully asked.
"That's a good question," Wacks replied.
"Why not put in a percent that's reasonably accurate?" asked committee member Arnold Holz. "Set a spending level that falls within the revenue stream. Above that, it gets really ugly."
"We need to be more explicit" on spending, Scully said, to send a signal that the county faces serious fiscal problems.
In one projection using the 6.5 percent increase for education spending, the county would have a $6.4 million deficit in the next fiscal year, even with 7.5 percent growth in property tax revenues and 6 percent more from income taxes.
During the discussion, committee members said they realize that the level of borrowing makes little difference in the county's overall fiscal health, while a spending change of as little as 0.25 percent would roughly double the projected deficit by 2016, to nearly $50 million.
"I want the council to understand how sensitive this is," Oh said.
Oh pointed out that the projections of growing deficits over the next eight years roughly equals the amounts the county plans to devote to pay for health benefits for future government retirees, benefits that few private sector companies provide.
A change in federal accounting standards two years ago required every government in the country to begin counting those future costs - such as retiree benefits - as liabilities, and most are starting to put aside money to cover those debts. Some have also begun reducing the cost by trimming the benefit or raising the age at which workers can receive it.
Howard County is committed to saving $53 million annually for that purpose by 2016. The county's total debt is estimated at $477 million and is growing.
"If we didn't have this expense, we're pretty close to even," Oh said.
Wacks presented the group with a variety of computerized economic models at Friday's meeting to let the board see the implications of various projections. Members use the models to see how, by changing revenue projections, projected spending increases would affect the county over the next five to 10 years.
What they found was that even large changes in annual bond borrowing would have little effect compared with changes in revenue assumptions or projected spending growth.
The committee also discussed the economic situation the county faces.
"I don't think we need anyone to tell us the economy is in some kind of transition," Wacks told the group. "It's almost impossible to tell where it's going, but it seems clear we're headed into some kind of a recession."
Despite that, he said, Howard's economy should remain healthy over the long term. The county's top-rated AAA bond rating was reaffirmed recently by the three New York rating houses, and the county had scheduled the sale of $11.5 million in bonds yesterday.
Bond borrowing authorized for this year won't begin to affect the county's budget for two to three years, when the projects they are intended to pay for are built and the bonds are sold. If the county sells $100 million in bonds each year, interest payments on the debt are expected to increase about $22 million, to $92.3 million a year, by fiscal 2013.
larry.carson@baltsun.com