More reserves needed for adversities in city Baltimore: Flush with cash, Mayor Schmoke should start to think about future fiscal hardships.

May 21, 1998

FLUSH WITH cash, some city politicians seem to have XTC forgotten that bad times inevitably follow good.

Instead of planning for future adversities, they are pandering to various pressure groups. Spend, spend, spend is the credo of the day.

This, of course, is awfully shortsighted. And it flies in the face of a strategy the city's finance department proposed to Mayor Kurt L. Schmoke in early 1991.

The cornerstone of the finance department's plan was a recommendation that the city create a 15 percent set-aside from its revenue growth.

It was to be used for two purposes: (1) To provide property tax relief either through an assessment cap or tax rate reduction; (2) To establish a "rainy day fund" to strengthen municipal reserves.

The finance department also recommended further belt-tightening through downsizing of the government, reordering priorities and locating new revenue sources.

"The implementation of the plan is not without sacrifice and, in some cases, may not be politically popular," the 35-page report said.

"If the tough choices are not made now, the choices to be made in the future will be even more difficult."

Seven years later, the plan's recommendations have been partially implemented. A 4 percent assessment cap and two property tax cuts of a nickel each have been enacted. Nevertheless, the city's tax rate still is the highest in Maryland -- more than twice that of any other local jurisdiction.

The "rainy day fund" now totals $8.6 million. But that is a far cry from the $25 million target recommended by bond rating agencies following Baltimore's finances.

As a city that has lost more than one third of its 1950 population, Baltimore needs to keep shrinking its oversize work force. With about 60 percent of the operating budget consisting of personnel-related costs, trimming is essential.

But the city also should quickly to build its its "rainy day" fund up to the recommended level. Not only will that keep Wall Street happy but larger reserves could soften the impact when hardships come.

The time to act is now.

Pub Date: 5/21/98

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