Localities are stung by tax shortfall City's, counties' share of revenue lower than expected

Fee increases, layoffs loom

Problem complicated by promised cuts from Washington

November 29, 1995|By LARRY CARSON | LARRY CARSON,SUN STAFF Staff writers Anne Haddad, Dan Morse, John Rivera, Sherrie Ruhl and Eric Siegel contributed to this article.

Baltimore-area localities, already braced for deep cuts in state and federal aid this winter, just got more bad news. The localities' shares of state income taxes for the key third quarter were dismal in both Baltimore am last year's third quarter, Baltimore County's was flat and Anne Arundel County's rose just 1.8 percent.

Even in fast-growing Carroll County, whose quarterly share of state income taxes rose by 2.4 percent, officials are concerned because they had expected an increase twice that size.

"We're freezing everything," said city budget director Edward J. Gallagher, who warned of "reductions" in nonessential public safety and education workers.

The shortfall has local governments rushing toward early retirement incentives, cutbacks in services and warnings about possible layoffs -- especially in Baltimore and Baltimore County, where the problems are most severe.

So far, local officials appear to be protecting expenditures for police and schools. But other agencies, such as public works, could take a big hit. Officials in Baltimore, for example, are considering an increase in water and sewer fees to ease the budget crunch.

And as local officials prepare 1996-97 budgets, they are worried about a dropoff in aid from Annapolis and Washington, and they are considering spending cuts.

"For '97, we're like cats on hot tin roofs. We're nervous," said John R. Hammond, Anne Arundel County's financial officer.

Overall, Maryland had a 1 percent increase in income tax revenue for the third quarter, but Baltimore's share dropped more than expected.

Over a full year, that would mean $1.2 million less for a city already saddled with a $32 million education funding shortfall and property tax revenues that have fallen $2 million.

But in the city, cuts are made to agencies that are deemed untouchable in the counties. Judge Joseph H.H. Kaplan, administrative judge of Baltimore's bustling Circuit Court, said he is already $600,000 short for this year.

"It's incredible," he said. "The demands on the system get greater every year and the amount of money goes down every year."

In terms of income tax revenue, Baltimore County had the second-lowest growth rate in the region and the sixth-worst in Maryland. That has forced county executive C.A. Dutch Ruppersberger to prepare for hard times.

Since the county budget had forecast 2 percent growth from state income taxes, the county will likely receive $5 million to $7 million less than expected during the fiscal year, county officials say.

The fear of cutbacks is already so great that Baltimore County workers are turning down promotions to jobs rumored to be on a "hit list."

"People are asking for demotions and are resisting promotions to avoid setting themselves up to be laid off," public works director Charles R. "Bob" Olsen said at a meeting of county department heads yesterday.

Added James Clark, president of the Federation of County Employees, "There's a lot of fear -- it's out there."

Administration officials say the fears are exaggerated and that they plan to entice 150 early retirements to avoid layoffs. Still, they admit that some anxiety is justified.

County department heads were told to plan budgets for next year based on 5 percent to 10 percent reductions from current spending. With state and federal budget cuts, things could get worse, Mr. Ruppersberger and his top fiscal aides warned at the meeting.

Because 80 percent of the county budget is salaries, and much of the rest is tied up in mandatory spending for schools, debt service and public safety, middle-management jobs are on the line, the department heads were told.

Baltimore-area localities are also worried about property tax revenue -- an even more important budget item, said David Bliden, executive director of the Maryland Association of Counties.

"All the counties are in poor shape," he said, noting that property tax revenues are expected to grow only 2 percent over the next five years, while 60,000 more students are expected to flood Maryland classrooms over that period. Increased school expenses "are driving counties to the brink."

Local leaders also fear cuts in state aid as Gov. Parris N. Glendening struggles to correct his own budget shortfall of about $60 million this year and more than $100 million next year.

In Howard County, officials expect that money from state income taxes will be close to forecasts. Still, a drop in revenue from property taxes will hurt.

County Executive Charles I. Ecker has announced a plan to cut government spending by 12 percent within about three years.

But with a $3.7 million shortfall expected this fiscal year, Mr. Ecker has ordered some of the budget-cutting to begin now. He hopes to make the larger, 12 percent target -- a total of $13.3 million from all areas except schools and debt service -- through attrition.

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