State's counties among hardest hit by recession

March 03, 1992|By Carol Emert | Carol Emert,States News Service

WASHINGTON -- The recession has hit Baltimore and Maryland counties harder than it has many local governments elsewhere, according to a survey by the National Association of Counties.

The survey found that local governments, and their citizens, have fared worse in those states where local budgets are funded to a considerable extent by taxes closely tied to local economies. Maryland counties have suffered because of their reliance on income taxes and taxes based on real estate transactions, an association researcher said. In some states, counties have been hurt by a drop in proceeds from sales taxes.

"The effects of the recession were most acute in counties where local taxes closely track the economic activity such as Maryland, Virginia, California and New York," said the report, which was released recently.

In a survey of the nation's 100 largest jurisdictions, the association received responses from Baltimore, New York City and 78 counties in 28 states.

In Maryland, the survey included Anne Arundel, Baltimore, Montgomery and Prince George's counties.

In many states, counties rely primarily on property taxes, which are assessed on a rolling basis that helps blunt the effects of a temporary economic downturn, said Fred Zeldow, a research associate for the association.

For example, in states where property values are assessed every three years, one-third of properties are reassessed each year. Although declining property values may reduce revenues from one-third of the tax base, the other two-thirds will continue to yield revenues at higher, pre-recession levels.

Only counties in Maryland, Indiana and Kentucky depend on income taxes for a portion of their revenues, Mr. Zeldow said. In such states, counties suffer a sharp and immediate decline in funds when unemployment goes up and incomes fall, Mr. Zeldow said. In a flat economy, the demand for services can outstrip revenues.

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

All of the 80 local governments who responded to the survey have been forced to reduce services and/or lay off employees to offset low revenues.

Baltimore and the four Maryland counties said they have terminated 2,572 employees since January 1991.

The fiscal problems of local governments have been exacerbated by a sharp drop in state funding in Maryland and many other states. For instance, Maryland has cut funding to local governments by $320 million, 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 crime, he said.

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