County financial picture looks distinctly pinched


March 09, 1997|By BRIAN SULLAM

FINANCIAL REPORTS are never fun to read, but spending a few hours last week studying a recently issued 142-page tome on Anne Arundel County's fiscal condition proved quite informative.

The reading wasn't easy; I am not used to looking at page after page of columns filled with six- , seven- and eight-digit numbers. However, the "Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 1996" contains the numbers that drive county government policy.

Although this report is actually a snapshot of the year that ended June 30, 1996, it provides a pretty good indication of what to expect in the fiscal year that will begin July 1, 1997.

From what I was able to glean, the county's financial condition looks good, but problems are looming.

One of the more notable is that despite the county's healthy economic climate, revenue collections are to remain flat.

This means that there won't be money for raises for teachers or public employees, nor extra sums to finance capital expenditures such as school renovations or construction. Road resurfacing projects, already behind schedule, will get further delayed.

The root of the problem is the real property tax, which provides about 49 percent of the county's revenues. Those collections are likely to remain stagnant.

Last year, the county collected $288 million from property owners. This year, the triennial assessments are producing increases averaging about 1.5 percent. This means no windfall from this category of tax revenue, if the property tax rate remains at $2.38 per $100 of assessed valuation.

For personal income tax collections, which provide about 29 percent of the county's annual revenue, the picture is much the same. The county collected $170 million last year. Despite relatively low unemployment -- less than 4 percent -- and the county's generally healthy economic environment, income tax collections are likely to produce only small increases because there are no signs that the county's aggregate personal income is rising dramatically.

Tax reduction on the state level also complicates the picture. Depending on the structure of the income tax reduction being considered by the General Assembly, there could be noticeable reductions in the county's income tax collections.

The county income tax rate, sometimes called "the piggyback tax," is now set at 50 percent of the state income tax. If a county resident pays $2,000 in state income taxes, he or she would pay $1,000 in county taxes. If that tax bill drops to $1,900, the county's collection could drop to $950.

This prospect produces frowns among county budget officers because they see the demands for county services rising faster than revenues. It is not a matter of new programs or a desire for lavish spending on existing programs. Anne Arundel's growing population is driving the demand.

Cutting fraud, waste and abuse is one way of getting more bang out of the available bucks. But County Executive John G. Gary's efforts toward that end, as well as those achieved by his predecessor, Sen. Robert R. Neall, have wrung a lot of the wasteful spending out of county government.

There are always opportunities for additional savings. Unfortunately, they won't be of the magnitude of pension reform, which will produce about $3 million annually -- or about 2 cents on the tax rate.

Cutting administrative costs is a favorite means of saving money, but Anne Arundel's government is relatively lean.

The cost of operating the government is less than the annual cost of servicing existing debt. Last year, "general government costs" amounted to $43.1 million, or about 7.3 percent of the budget, compared to the $45.2 million paid in interest on the county's bonds.

Looking through the list of possible savings is not very encouraging either. For example, eliminating all the county's social service spending, which amounts to about .7 percent of the budget, would produce a savings of only $3.8 million.

Tax cap maneuvering

While the tax cap limits real property tax collections to increase at the rate of inflation, the county has some maneuvering room.

Since the assessable base has only increased about 1.5 percent and the inflation rate is about 2.5 percent, the government has an opportunity to raise property tax revenue by 1 percent. This could be done by raising the tax rate by 2 or 3 cents.

This would add about $4 million to county coffers and provide the government with a slightly larger cushion to cover emergencies.

From a budget standpoint, raising the property tax makes sense. Without the increase, services will invariably have to be cut. These could take the form of more textbook shortages in schools, less policemen on the beat or fewer road maintenance workers filling potholes.

Reading these financial reports may be difficult, but not nearly as hard as assembling a budget that provides the level of services county residents say they want.

Brian Sullam is The Sun's editorial writer in Anne Arundel County.

Pub Date: 3/09/97

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