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Public budgets get shaped by squeeze

The Baltimore Sun

Squeezed between rising costs and demands for increased police protection and other government services, elected leaders in the Baltimore area are engaged in a delicate financial balancing act.

The Howard County executive wants 22 new police officers on the streets, but he says he will propose one of the leanest budgets in a decade.

Harford County is offering employees raises to make the jobs more enticing but is otherwise limiting its spending.

In Baltimore County, avoiding any increase in taxes or fees is a goal - and employees get no cost-of-living raises.

The budget proposals being unveiled this spring differ in the details, but they're all the product of tough economic times worsened by cuts in state aid.

And those who craft the spending plans know that this might not be the end of it.

"We're seeing an impact on revenues, and the big question is, where is the bottom?" said Ted Zaleski, Carroll County's budget director.

Howard County Executive Ken Ulman's proposal is due Tuesday. Carroll's three commissioners are to make their budget presentation April 29, followed by Anne Arundel County Executive John R. Leopold's May 1 request. Other local leaders' budget requests for the fiscal year starting July 1 are awaiting legislative review.

Every local leader is preaching austerity, but each has different priorities.

Baltimore Mayor Sheila Dixon's $2.92 billion request contains a 10.4 percent spending increase, though the locally funded $1.3 billion general fund would rise a more modest 4.9 percent.

"This is my first real budget that I've created, and there's a whole host of areas that we want to cover," she said. "I don't want to not be able to complete or continue what I've made commitments to do."

Baltimore is benefiting from a 9.9 percent increase in property tax revenues and 11.4 percent more from income taxes, despite a 31 percent decrease in real estate transfer tax revenues. That enabled Dixon to slightly increase spending for schools and police, while cutting 2 cents off the property tax rate after taking emergency measures last year to make up a looming shortfall. Dixon is proposing eliminating 95 vacant jobs and cutting money for parks and health programs.

Baltimore is in much better shape than Montgomery and Prince George's counties, where tax increases and service cuts are being considered. Prince George's Executive Jack B. Johnson is facing a $121.6 million revenue gap; Montgomery's Isiah Leggett is wrestling with a projected $400 million shortfall.

Baltimore County Executive James T. Smith Jr.'s $2.58 billion request includes no new programs or cost-of-living pay raise - which has provoked teacher demonstrations. State aid cuts totaling $40 million, including $23 million from county schools, helped create a strained fiscal predicament.

"The highlights are slim, quite frankly," Smith said as he presented his request April 15.

He didn't raise taxes either.

In Howard, Ulman is facing labor pacts calling for 5 percent pay raises for teachers and police officers and 6 percent for firefighters. He's also proposed hiring two dozen more police officers.

Ulman wants to raise the county's annual trash disposal fee $50 a year for most residents. Other details will emerge Tuesday, but Ulman said, "This will be one of the leanest budgets the county has seen in the last decade."

Anne Arundel's Leopold is hoping the developing Base Realignment and Closing process will provide the county a boost. Ground was broken at Fort Meade on Wednesday for a 1 million-square-foot building - the first concrete sign that BRAC is real.

"Over 20,000 employees are coming into the county with jobs paying $100,000," Leopold said, anticipating better times ahead.

Still, revenues aren't growing much, he said, adding that a hiring freeze he imposed should save $500,000 by June 30.

Harford Executive David R. Craig's $616 million operating budget request includes the smallest spending increase in a decade. But concerns about attracting good employees and keeping them prompted him to boost pay rates.

A county study had found that nearly 40 percent of job offers extended since July 1 were rejected, often because of low pay.

The 9 percent increase is divided into three segments: a 3 percent cost-of-living raise, 3 percent merit raises, and 3 percent more as a general pay raise.

Worries about revenues extend beyond one year, though.

There could be a delayed reaction from the current economic slowdown in the form of lowered income tax revenues in 2009, economists say.

"If the housing market refuses to correct itself, it could be more and more difficult," said Daraius Irani, director of applied economics at the Regional Economic Study Institute of Towson University.

In addition to lower real estate transaction revenue, Irani said, income tax receipts could be affected next year too, when self-employed business people file income tax returns based on actual, rather than estimated, income.

Howard County budget director Raymond S. Wacks agreed.

"The last couple of years, we've had very good end of the year payments," he said, but that could change next year.

State aid is another concern.

County and municipal officials were relieved that they suffered no major new state revenue losses during the recent 90-day General Assembly session, but their finances remain strained by reductions enacted during last fall's special session.

County governments will get $120 million less state money than last year, said Michael Sanderson, legislative director of the Maryland Association of Counties.

Most of that, nearly $80 million, is from a reduction to the state's Program Open Space program, but other reductions involve road repair funding and income taxes. A slightly higher personal exemption for taxpayers means less taxable income, and thus slightly lower local income tax revenues, which are a percentage of that income.

Meanwhile, anticipated increases in Thornton Commission funding for education, and for libraries and community college aid, are not coming.

Carroll Community College lost $250,000 in state aid, Zaleski said, adding that he's still worried about the $50 million more Gov. Martin O'Malley must cut.

Zaleski is also thinking about the fiscal year that starts in the summer of 2009. Some "pretty big questions" remain, he said.

larry.carson@baltsun.com

Sun reporters Mary Gail Hare, Arin Gencer, Laura Barnhardt and John Fritze contributed to this article.

Regional budgets

The amounts requested for operating expenses and the percentage increase in the budget year starting July 1:

Baltimore City - $2.92 billion, up 10.4%

Baltimore County - $2.58 billion, up 2%

Harford County - $616 million, up 4.32%

Anne Arundel County - To be presented May 1

Carroll County - April 29

Howard County - April 22

Prince George's County - $2.67 billion, up 1.3%

Montgomery County - $4.3 billion, up 3.9%

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