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Baltimore faces $42.3 million deficit as the coronavirus pandemic upends economic activity

Baltimore officials expect to end the fiscal year with a $42.3 million deficit as the coronavirus pandemic slows economic activity to a crawl.

With fewer people driving, the city is collecting less money from parking meters and cameras that record traffic violations. With fewer people traveling, revenue tied to tourism is plummeting, meaning less coming in from hotel taxes. And with fewer people working, income tax revenue is expected to be down, too.

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“We’re facing a very tough budget outlook,” Democratic Mayor Bernard C. “Jack” Young said this week.

Under normal circumstances, members of Young’s administration would have spent Wednesday morning explaining the preliminary budget to Baltimore’s Board of Estimates.

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But the proposal his administration has spent months preparing has become “largely irrelevant,” said budget director Bob Cenname, as the city stares down the public health crisis and the resulting widespread economic uncertainty.

Cenname used Wednesday’s meeting to brief the spending panel on the city’s fiscal outlook, and warned its members that city staff will have to almost completely retool the proposed budget before they finalize it in early May.

He projected the city will bring in about $100 million less in revenue than anticipated for the fiscal year that begins in July.

“Everything has to be on the table because of the size of the shortfall,” Cenname said in a conference call with reporters.

Even before the coronavirus pandemic, Baltimore was gearing up for a challenging budget season. Young had instructed all agencies to plan to cut costs 5% by 2022 in anticipation of an expensive statewide plan to improve public schools that each locality must contribute to.

That mandate — issued before the world had been introduced to the COVID-19 disease — now seems insufficient and out of date. Such a move would’ve freed up only about $70 million.

With city officials eyeing the pandemic’s possible effects earlier this month, Young announced some measures intended to blunt the economic impact.

The city instituted a freeze on nonessential hiring and spending, with an exemption for police officers, paramedics, firefighters and other public safety workers. Agencies can request other exemptions for positions that provide “direct essential services" or generate revenue, Finance Director Henry Raymond wrote in a March 20 memo to fiscal officers.

“Even if the health risk passes, most economists believe that the economy will suffer for many months or even years with minimal growth and lower employment levels,” he wrote.

More than 5,000 people in Baltimore recently filed for unemployment.

Young said Wednesday that he hasn’t contemplated laying off city employees, but cautioned that “if we don’t have revenue, everything has to be on the table.”

He repeated his call for Republican President Donald Trump to boost the amount of federal money flowing to cities like Baltimore as local governments grapple with the economic consequences of the pandemic.

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“I personally don’t want to see layoffs, but if the budget dictates that, we have no other choice unless our president sends us some relief,” Young said.

Before the pandemic hit, Baltimore forecast a $26.4 million surplus in its general fund. Now, it’s projecting a $68.7 million decline in revenues by the end of the fiscal year.

Cenname expects expenditures will remain essentially flat. While the city has so far incurred about $3 million in emergency expenses — for costs such as public health messaging, protective gear and premium pay for some employees — it is saving money by cutting back on “nonessential” spending.

The Department of Public Works, for example, suspended bulk trash pickup and graffiti removal.

“Because we have such rapidly declining revenues, we want to make sure we’re only spending on what is absolutely essential,” Cenname said.

The preliminary budget is due May 6 to the Board of Estimates, which must approve it before it goes to the City Council.

“It’s too early to talk about what the revisions will be or what the reductions will be in the budget,” Cenname said, but officials will have to make "really tough choices about how we’ll balance in 2021.”

Getting public input on the budget also will be a challenge, given that Republican Gov. Larry Hogan has instituted a “stay-at-home” order to stop the spread of the highly contagious virus. The city is expected to hold a virtual “Taxpayers Night” on April 7, during which residents will hear a presentation from Cenname and can testify by calling in to a video conference.

Residents can view the forum by going to bit.ly/TaxpayersNight. They can also dial in to 408-418-9388, using access code 719 116 074. People can sign up to give testimony at bit.ly/BOETestimony​ or email their thoughts to budget@baltimorecity.gov.

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