City budget: End of recession?

April 15, 1993

When the Board of Estimates received the Schmok administration's proposal for a $2.072 billion budget yesterday, the following exchange took place between City Council President Mary Pat Clarke and Comptroller Jacqueline F. McLean.

MPC: "The recession is officially over."

JFM: "Who said so?"

MPC: "The budget did."

JFM: "No, it isn't, either."

The local and national economy are sure to have many bumps ahead but the city budget proposal assumes smooth going for the municipal government. It expects public services to be continued without major cuts. It even includes the first pay raise to city workers in three years.

This is the good news that gets the headlines.

The bad news is that Baltimore's basic economic condition is dangerously stagnant. The annual rate of growth in taxable property value has dropped precipitously. "This depressed growth reflects the continuing effects of the recession and the exceedingly weak nature of the current recovery," the finance department says.

The weakness of the recovery is also mirrored in the anemic growth forecast for income tax receipts -- which actually declined in calendar year 1991. Yet, the local income receipts, along with the property tax base, are the most accurate indexes of the city's long-term financial well-being.

Over the years, the city's budget analysts have done excellent work in the accuracy of their projections. Their current underlying optimism is based on such assumptions as a hefty increase in aid from Washington.

Considering the amount of talk from the Clinton administration about an added emphasis on alleviating urban problems, such an expectation seems justified -- even though federal assistance for some programs may decrease as a result of the city's diminished Census count. Another major outside source of revenues -- state grants -- also have been not only maintained but, in many cases, increased.

These kinds of optimistic assumptions are likely to produce another City Council attempt to reduce the homeowner's property tax burden. The budget proposal calls for the continuation of the tax rate at $5.90 per $100 of assessed value -- a rate that is twice as high as in any surrounding jurisdiction.

No one should be surprised if the council tries to knock 5 cents off that rate on the grounds that city homeowners deserve relief. There is nothing wrong with such a tax cut attempt. But in order to establish realistic tax options, the council ought first to conduct a thorough and comprehensive review of the budget.

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