Why county dare not tap $9 million Rainy Day Fund The bond rating could suffer BALTIMORE COUNTY

November 21, 1992|By Larry Carson | Larry Carson,Staff Writer

Baltimore County has $9.1 million in a Rainy Day Fund, but its budget director says the money can't be used as an umbrella to help shield Towson from this year's downpour of state budget cuts.

As Fred Homan, the county's chief financial officer, explains it, the administration of County Executive Roger B. Hayden is in sort of a "Catch-22" situation as it tries to deal with $27.5 million worth of reductions in state aid.

Normally, the Rainy Day Fund and a $5 million surplus from last year might be used to help offset the deficit the state created when it cut local aid in two special legislative sessions this year.

But in today's financial climate, using the money to patch the hole in the dike could cause the county's bond rating to drop, Mr. Homan said.

That could cost far more over the long run, he said, because the bond rating governs the interest rate the county must pay investors who buy the long-term bonds it issues to finance schools, roads and bridges.

New York bond rating houses, Mr. Homan said, want to see permanent reductions in the size of county government, or tax increases to match the permanent reductions in state revenues.

They don't want to see one-time, slide-by measures, especially since the county used a variety of tricks to get through another series of state budget cuts last year.

If the rainy day fund isn't used, the money to make up the state cuts will have to come from killing useful county programs, or possibly laying off or furloughing county workers.

Mr. Hayden, who will have to decide what to cut and when, said he was at least relieved to know that the General Assembly's vote to reduce state aid this week will be the final one this year.

"We have every reason to believe that we are going to see some logic and stability now," the executive said.

"That is why we worked to support the House and Senate leadership" in pushing through the cuts.

Overall, the General Assembly cut $147 million from the state budget by eliminating its traditional assumption of employers' Social Security taxes for teachers and librarians.

Mr. Hayden wouldn't provide specifics about his plans to cut the county budget. Nor would he say what percentage of the cut is to be assigned to county schools. He said some specific measures will be announced next week.

Baltimore County's share of the latest cut is $20.6 million, which brings total reductions in state aid to $27.5 million during this fiscal year, which began July 1.

Under the legislative guidelines, no more than 42 percent -- or $8.7 million of the latest cut -- can be assigned to the county schools. The current, locally funded school budget is $357 million, which represents 40 percent of the county's $841 million locally funded spending.

The county has a $9.1 million rainy day fund, and another $5 million surplus.

Since Baltimore County raised its piggy back income tax rate from 50 to 55 percent last year, Mr. Hayden could recoup another $24 million by raising the tax to the limit of 60 percent of the state levy next spring.

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