Budget outlook bleak for city $20 million gap raises prospect of new taxes, layoffs

March 21, 1997|By Robert Guy Matthews | Robert Guy Matthews,SUN STAFF

Weeks before Mayor Kurt L. Schmoke submits his plan to balance the city's $2.3 billion budget, the mayor's budget analysts are painting a financial picture that shows Baltimore struggling in an era of plummeting revenues from key tax sources.

XTC The consequences: New taxes. Layoffs. Or both.

For the fiscal year that will begin July 1, internal documents obtained by The Sun show, budget analysts say a $20 million gap must be closed in the general fund, the city's principal operations budget.

That gap takes into account a drastic, cut-to-the-bone proposal to eliminate 182 positions in city government, many of them at the Department of Recreation and Parks.

Much of the $20 million gap comes from an $11.6 million charge to raise employee salaries.

Even though the mayor is still putting the budget together, the early forecast shows some of the issues city leaders must wrangle with in the next two months:

Property tax assessments are expected to decline $2.4 million, or 0.5 percent, from $468.4 million this year to $466 million next year.

Hotel taxes are expected to fall $600,000, or 7.3 percent, from $8.2 million this year to $7.6 million next year.

The phase-out of the beverage container tax is expected to result in a revenue decline of $2.7 million, or 93.1 percent, from $2.9 million this year to $200,000 next year.

And, even though general fund revenues are expected to increase slightly, from $801 million to $816 million, most of that is expected to come from an increase in a state grant. That grant, along with smaller increases expected in income tax revenues ++ and parking fees, would help offset declines in other categories.

Finance Director William R. Brown Jr. said the city has little room to move within the budget because the mayor's funding priorities -- crime, grime and education -- take up about 75 percent of the general fund budget.

"We are certainly looking at ways to generate a source to cover the gap, whatever it may be," Brown said.

The early projections call for the Department of Recreation and Parks to lose 100 positions next year. The department, which gets most of its budget from the general fund, was cut by $2.86 million in the current budget year.

The Public Works Department is scheduled to lose 33 positions, and the Police Department will lose 22 positions as a result of privatization. The fire, planning, health and housing departments also will lose positions.

Budget officials project that even after those cuts, it will cost $814.1 million to operate those agencies, before the $11.6 million in salary increases. Although general fund revenues are projected to be $816 million, $10 million is earmarked for "pay-as-you-go" capital projects, leaving $806 million for operating expenses and $825.7 million in expenses.

The remainder of the budget is made up mostly of state and federal grants that are earmarked for specific purposes and can't be shifted to other needs.

To balance the budget, a requirement by law, more layoffs are likely to be proposed, budget officials say.

On April 2, the Finance Department will submit its $2.3 billion budget proposal to the Board of Estimates for review. The proposal then will go to the City Council, where changes are likely.

Although Schmoke has said he is open to enacting new taxes -- but not to a property tax increase -- it seems unlikely that the council would back a tax large enough to cover the spending gap.

Skittish about supporting tax increases, the council pushed for the phase-out of the container tax last year.

Last year, the council rejected Schmoke's plan for a increase in the city's "piggyback" income tax that would have raised the rate by 10 percent to cover a $4.9 million shortfall.

After a seven-week budget battle last spring, the mayor and the council approved an amusement tax and a parking fee increase.

Less than a year later, a council tax committee is considering whether to slash the annual collection from the amusement tax to $600,000 from $1.2 million.

"They always give the worst-case scenario," said a skeptical City Council President Lawrence A. Bell III. "I think they are trying to build up a case for more taxes."

Pub Date: 3/21/97

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