After a year issuing dire warnings about the state of Baltimore’s budget amid the coronavirus pandemic, city officials said Tuesday Baltimore will end the 2021 fiscal year with an $8.9 million surplus due in large part to an infusion of federal funding.
News of the surplus, announced during a meeting of City Council’s Ways and Means Committee, marks a turnaround since June when city financial officials said they expected to need $50 million in American Rescue Plan funding to balance the 2021 budget. The 2021 fiscal year ended June 30.
Since then, Baltimore has received $30.9 million in reimbursements from the Federal Emergency Management Agency for COVID-related expenses in 2021. That’s in addition to the $54.1 million in federal CARES Act, a separate pandemic aid program, spent in 2021.
That infusion of cash as well as higher than anticipated income taxes and recordation taxes, paid when properties are sold or transferred, will allow the city to offset sizeable losses in parking and hotel tax revenue which have been hardest hit by the pandemic, Budget Director Bob Cenname told members of the committee.
The money will also help the city avoid tapping into the $640 million it is receiving from the federal American Rescue Plan to balance the budget. That funding that has more flexible uses than previous pandemic relief packages.
To balance the budget as required by the city’s charter, Baltimore financial officials have proposed dozens of supplemental appropriations totaling about $156 million to fund overages in the 2021 budget, the majority of which are pandemic related. About half will be covered by CARES Act or FEMA funding.
While Baltimore has been largely successful in its applications to FEMA for reimbursements, some expenses were rejected by the agency, Cenname said. About $600,000 spent by the Baltimore City Board of Elections on armed security guards to protect ballot drop boxes introduced for the first time during the pandemic was not considered a pandemic expense by the agency, he said.
Another $600,000 spent by the Department of General Services for building security during the pandemic was deemed “excessive,” Cenname said. Finance officials have proposed covering both expenses with recordation tax money.
Officials did not seek federal funding for other pandemic expenses such as $6.5 million in hazard pay for the Baltimore Police Department. Officials have instead proposed using speed camera revenue, which was higher than usual in 2021, to cover the cost.
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“We felt more comfortable charging for direct personnel where the guidance is more clear,” Cenname said of applying for CARES Act funding to cover police expenses.
Cenname noted that overtime costs for the police department were significantly less for 2021 at $32 million compared to 2019 when police incurred more than $50 million in overtime costs.
Proposed supplemental budget appropriations are due to be considered by the Board of Estimates Wednesday. City Council will then also get the chance to weigh in.
The Board of Estimates will also consider moving about $5 million forward to the fiscal year 2022 budget.
While the 2021 fiscal year ended in the black, Cenname cautioned that the financial strain created by the pandemic is not over. Losses in parking revenue are likely to be permanent as many employees continue to work remotely, he said, and tourism-related revenues will be slow to rebound as the delta variant of COVID remains a threat.
The city can also expect a decrease in real estate values and subsequently tax revenue in fiscal year 2023 as downtown properties are reassessed post-pandemic, Cenname said.
“We weathered the storm only because of some very generous federal aid packages,” he said. “We’re certainly not out of the woods yet.”