Md. counties most hurt by recession Budget is more tied to local economy, report says.

March 02, 1992|By Carol Emert | Carol Emert,States News Service

WASHINGTON -- Maryland counties are suffering more from the recession than the counties of most states, according to a survey by the National Association of Counties.

The main reason is that in states like Maryland, where county budgets are funded in part by taxes that are closely tied to the local economy, counties more heavily feel the impact of any economic downturn, the report found. Baltimore and Anne Arundel, Baltimore, Montgomery and Prince George's counties were a part of the survey.

Only counties in Maryland, Indiana and Kentucky depend on income taxes for a portion of their revenues, said Fred Zeldow, a research associate for the association.

Thus if unemployment goes up and incomes fall, such as during the current recession, counties suffer a sharp and immediate decline in funds, Mr. Zeldow said.

Twenty-six percent of the money raised by Maryland counties comes from income taxes, he said.

Maryland also is one of only nine states where counties are partially funded by real estate fees, such as transfer taxes, that are levied when property is bought and sold, Mr. Zeldow said. The depressed real estate industry has resulted in decreased revenues from real estate transaction fees for those states, he said.

In most other states, counties depend more heavily on property taxes, which are assessed on a rolling basis that helps blunt the effects of a temporary economic downturn, Mr. Zeldow said.

For example, in states where property values are assessed every fTC three years, a third of properties are reassessed each year. During a year when property values decline, a third of the properties will pay lower taxes, but the other two-thirds will continue to be taxed at higher, pre-recession levels.

The association report found that 80 of the 100 counties that responded to the survey have been forced to reduce services and/or lay off employees to offset low revenues.

Baltimore City and the four Maryland counties polled in the survey have laid off 2,572 employees since January 1991.

The counties' fiscal problems have been exacerbated by a sharp drop in state funding in Maryland and many other states. For instance, Maryland has cut $320 million in funding to local governments, said Prince George's County Executive Parris Glendening, who spoke at a news conference after the poll was released.

In 1992, the state has cut funding for Anne Arundel County by $17 million, Baltimore County by $51 million, Baltimore City by $37.5 million, Montgomery County by $54.7 million, and Prince George's County by $48.7 million.

The cuts come at a time when the budget should be growing rather than shrinking, Mr. Glendening said.

"People turn to local governments in hard times" for services such as health care and battling the rising incidence of crime, he said.

Mr. Glendening said the funding problem is structural, as well as economic. "Cities and counties are the last rung on the feeding chain," he said. "All of the problems and cuts get passed on to us [from the federal and state governments] and we have no one to pass them on to."

To remedy the problem, Kaye Braaten, association president and commissioner of Richland County, N.D., called on Congress to "take some action immediately so that counties -- large and small, urban and rural" can provide necessary services.

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