The Budget Picture: A Surplus Of Misunderstanding

December 23, 1990

Former County Executive Habern W. Freeman made a presentation before the County Council Dec. 11 during which he contended that County Executive Eileen M. Rehrmann has been incorrect in her portrayal of the the county budget and the use of budget surplus money. The text of Mr. Freeman's presentation follows:

During the past week we have been presented with a deluge of false information and a fabrication on the subject of "surplus."

County charter section 506:

(1) A statement of all revenue estimated to be received by the county during the ensuing year.

(2) A statement of debt service requirements for the ensuing fiscal year.

(3) A statement of the estimated cash surplus if any available for expenditure during the ensuing fiscal year.

Every April, the council received from the executive a proposed budget for the ensuing year, beginning July 1 and ending June 30.

Surplus:

The proposed budget contains expenditures which are exact and revenues which are estimated. Also, according to law, you must put into the proposed upcoming budget all estimated cash expenditure during the coming fiscal year.

What is surplus?

Surplus is generated from two sources: collecting more taxes and under-spending by the government. It is important to understand that, by law, you cannot intentionally underestimate surplus, deny its existence or save surplus. Surplus must, by law, support and be put into the ensuing year's budget.

History of surplus:

Every year for the past eight years we have used our surplus to fund one-time costs in the ensuing budget. We did not build surplus into the operational side of the budget, so that the cost would not repeat. Salaries and items that would repeat were not supported by fund surpluses.

Yearly surpluses:

Surpluses do not accumulate. They are, by law, to be spent in the "ensuing year," singular. By using surplus to fund one-time projects you avoid future problems if surpluses do not materialize. Surpluses did not materialize in 1983 and 1984. Small surpluses were generated in 1985 and again in 1988. Those surpluses were $4-5 million, most likely the same amount will be the surplus at the end of this fiscal year.

Current surpluses:

The current budget is no exception. Mr. Jewell identified earlier this year $16.5 million as the surplus. This surplus (as per law) was placed in the ensuing budget to fund one-time important projects such as schools, recycling, college projects, libraries and computers for school children.

All this was done properly, by law, with public hearings and legislative approval. In addition to this, auditors clearly identifying $16.5 million in the current budget, they also noted a $1.5 million amount, totaling $18 million dollars. The ensuing budget is now the current budget, the budget we are operating under until June 30, 1991.

Where are we now?

If business closed today, we would have a balanced budget and $4 million in surplus. I can immediately point to $1.5 million in unappropriated fund balance, $2 million in under-spending and at least $500,000 in over-collection of revenues.

Economic outlook:

The ebb and tide of the economy should be constantly monitored and quick prudent action should occur. Several months ago, we requested departments to prepare a base budget with no new positions of jobs. The base budget is $135 million, which includes a $69 million expenditure for the Board of Education. Even with a small fund balance predicted for next budget year, you should, with moderate growth, have $12-15 million available for improvements with no tax increase or borrowing. If borrowing becomes a part of the policy of the government, that is your decision. You will be faced soon with the Board of Education requesting a 30 percent increase; $6.9 million, or a 10 percent increase, over the current allocation of $69 million dollars should suffice, especially in difficult times.

Fiscal authority:

The newspapers, George Harrison and Eileen Rehrmann may not understand fund balances, surpluses and budgets, but you, the council, must. Can you now understand the absurdity of Ms. Rehrmann's quote at her swearing-in: "When the fiscal year began last July, we were told to expect a budget surplus in excess of $18 million at the end of this fiscal year" -- this being a false statement?

Let's examine the brilliance of our reporters. Carol Bowers in (the Dec.

9 edition) of The Harford Sun states, "When auditor Paul Neeper issued his audit of Harford's finances June 30 he predicted the county would have an $18 million budget surplus at the end of 1991." That statement is absolutely false and deserves an apology to me, Mr. Neeper and the public, and a retraction. The editorial in The (Baltimore) Sun was equally false.

The press has been duped, flimflammed and masterfully manipulated.

Excellent shape:

Harford County is in excellent shape, with little debt and an operational budget fully funded. The fund balance, if the books were closed this moment, would have a $4 million surplus. To detract from this fact is deceitful, misleading and harmful to the economy and well-being of our Harford County. You, the council, must examine the intentions of the administration and not be manipulated like the press. This is why I am before you. You are hope. I will come before you whenever misrepresentations are made. Because, very simply put, Harford County is Habern's home also.

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