Transition Leader Gives Lighthizer 'B' In Finance 101

November 20, 1990|By Samuel Goldreich | Samuel Goldreich,Staff writer

A top official in Anne Arundel's transition government said the outgoing administration of O. James Lighthizer earns a "B" for its management of county finances.

But he warns that a worsening economy means that the incoming county executive, Robert R. Neall, will have to hit the budget books much harder to keep that grade.

"I'd probably give them a good, solid 'B,' " Robert J. Dvorak, Neall's chief of staff, said Friday. "They're leaving the county in a good financial condition. The only reason that I don't give them a higher grade is that they were very fortunate in having eight years of good economic times."

County planners are full of bad news these days as concerns about recession are reflected in public coffers. Reports of slowing growth or actual declines in non-state and federal revenue and soaring fuel costs have already prompted budget-cutting efforts.

In the four months since fiscal 1991 began July 1, recordation and transfer revenue -- which rises and fall with real estate sales -- dropped $6.2 million, a 24 percent decline from the same period last year.

Licenses and permits fees -- which reflect general business activity -- also sank by $245,593, marking a 12 percent drop.

Although income tax revenue has grown by $1.3 million, that 5 percent increase is far less than the 8 percent and 11 percent annual improvements in 1989 and 1990.

"The 5 percent really concerns us, because it is our second-largest source (22 percent) of income," assistant county budget officer Steven E.

Welkos said Friday.

Likewise, although property tax revenue has risen $13.5 million, that 7.2 percent increase marks a decline from last year's 9 percent.

Property tax revenue accounts for more than one-third of this year's $67 million operating budget.

"The only good part of it is that's the one area where we're always very conservative in our estimates," Welkos said.

That conservatism could be crucial to the county's fiscal salvation as departments try to cope with spending increases that are beyond their control.

With the fiscal year only one-third gone, the Persian Gulf crisis has already busted the county's fuel and oil budget by more than $1 million, and the school system alone is expected to double its $1.6 million allotment. Projections are worse for next year.

"What all this means is we're not going to have much of a cushion to roll over to next year," Welkos said.

Neall, a Republican, was often critical of county spending habits during his campaign. But budget officials attribute the county's fiscal health to conservative financial reforms adopted under Lighthizer, a Democrat.

As personal income in the county more than doubled during the past eight years, budget officials planned annual surpluses -- sometimes in double digits -- that have been central to fiscal policies under Lighthizer.

During his tenure, Anne Arundel has turned around from a deficit-ridden county in 1983 to a sound credit risk that scores near the top of Wall Street bond-raters' scales.

The county has used most of the annual surpluses to pay up front for capital projects, saving taxpayers more than $50 million in interest on borrowed money.

With a property tax cap defeated at the polls, Neall has reassessed his goal of limiting the surplus to 5 percent of the operating budget. The current surplus is expected to be about $54 million (almost 9 percent).

Because budget officials planned for the drop in revenue expectations for next year, Welkos predicted that about $12 million of the surplus would be carried over into next year. Neall could apply that to a 7 percent to 8 percent surplus that he said might be needed to guide the county through any financial emergencies.

That marks a stark contrast from 1983, when Lighthizer inherited a budget deficit exceeding $6.9 million from outgoing Republican executive Robert Pascal, who left office with a big property tax cut.

Likewise, lower than expected revenue has left the state and many neighboring localities scrambling to avoid deficits this year by cutting jobs and spending.

"But (the surplus) is a source of revenue that's going to be without question less next year and probably significantly less," Welkos said.

Dvorak points out that the challenge is to maintain fiscal health during lean times. "Anyone can look like a genius" during the longest economic boom since the Depression, he said, contrasting Lighthizer's good luck with the fact that Pascal had to deal with two recessions.

There will be immediate demands for county tax dollars next year as Neall and the Board of Education face contract negotiations with the county's 11,000 employees.

Even without a cost-of-living increase, the county can be expected to spend an additional $14 million on merit raises next year if it has the same number of employees.

But Dvorak said he doesn't expect new contracts to break the budget, because labor leaders will be willing to adjust to the times.

"Most of the unions recognize that the economy is certainly in a downswing, and the first year (of the Neall administration) is going to be lean," he said. "We can just hold some positions vacant until we know what's happening."

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