Rx for a Fiscally Sound Baltimore

January 31, 1991

Baltimore has reached a point where the existing revenue base cannot support the current level of services. This is the conclusion of the city's Finance Department, which has issued a challenge to the Schmoke administration to improve the city's long-term financial health.

The department's strategic plan includes a recommendation that the city create a 15 percent set-aside from its revenue growth for two purposes. One is to provide property tax relief either through an assessment cap or tax rate reduction. The other is the establishment of a "rainy day fund" to strengthen municipal reserves, which currently are practically non-existent.

These measures would have to be accompanied by further belt-tightening through downsizing of the government, changing priorities and locating new revenue sources.

"The implementation of the plan is not without sacrifice and, in some cases, may not be politically popular," the plan says. "Until fiscal stability is achieved, there will be disruptions to the status quo. Budgets will be smaller and some agencies may go through a period of vast transformation. If the tough choices are not made now, the choices to be made in the future will be even more difficult."

The ideas contained in the Finance Department's 35-page document reflect a sober acknowledgment that too many things in Baltimore have changed for the city to continue its current operating practices.

The city has lost too much of its population (which dropped from 905,000 to 741,000 between 1970 and 1990). It has experienced a debilitating exodus of the middle class, which continues because Baltimore's tax rate is double that of any surrounding county. As a result, the city's assessable property tax base per capita keeps shrinking. Its tax base is now half the state average.

We welcome the Finance Department's proposals even though the medicine will be bitter. With about 60 percent of the operating budget consisting of personnel-related costs, controlling those expenses must be a key element of any downsizing effort. This means labor contracts that can be met within available resources. Yet unless costs can be decreased -- and homeowners' property tax burdens lowered -- Baltimore has little chance to remain a vibrant and workable city.

We urge Mayor Kurt L. Schmoke to give his unequivocal endorsement to this process of re-establishing Baltimore's priorities according to its means. His leadership is essential because it would demonstrate to the General Assembly in Annapolis that the city is serious about its recovery and deserves increased state support.

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