Budget adds to O'Malley's problems

Shrinking tax base leaves city facing $20 million deficit

February 10, 2000|By Gerard Shields | Gerard Shields,SUN STAFF

As if trying to stem the city's murder rate and to move mounds of snow weren't test enough, Mayor Martin O'Malley faces a $20 million deficit in balancing his first city budget while union contract negotiations with 16,000 city employees get under way.

City budget officials will present a preliminary 2000-2001 budget to the Board of Estimates on April 1. They have been able to trim the damage of what was projected to be a $31.5 million shortfall for the next fiscal year, which begins July 1.

Baltimore's long-predicted structural shortfall -- tax income that has fallen below city spending -- is expected to wash ashore in the first wave of projected annual deficits. They are expected to build to a projected cumulative $153 million deficit by 2003.

"Our problem is our revenue base is just not growing," said city budget director Edward J. Gallagher, who will present his 18th city budget under his fourth consecutive mayor.

Under state law, the city must pass a balanced budget, meaning that no deficit is allowed. That will press the new mayor and department heads to begin the tough task of trying to rein in runaway spending in a city with a shrinking population -- or find alternative funding.

O'Malley, Gallagher and Baltimore state legislators are hoping that Gov. Parris N. Glendening -- sitting on a $1 billion state surplus -- will provide short-term help to the city when his supplemental state budget comes out in March.

But even a state boost won't change the city's need to drastically change the way it operates to fend off future red ink.

Over the past five years, citizen watchdog groups have followed city budget hearings, seething at Baltimore's avoidance of certain budget choices that other big cities have made, such as reducing the work force or opening city services to private competition.

That procrastination, critics say, has left the budget mess squarely in O'Malley's lap.

"I'm somewhat sympathetic to the fact that there is an outgoing administration and an incoming administration," said George Nilson, an attorney and former president of the Baltimore Homeowners Coalition who served on O'Malley's finance transition committee. "Yet the new administration needs to deal with the issue early."

Poor timing for raises

O'Malley and the City Council may have worsened matters by recently approving $301,000 in salary hikes for themselves and City Comptroller Joan M. Pratt. Those raises won't be lost on city unions, which have begun negotiations by pointing to the increases at the top of city government as evidence that times may not be as tough as officials claim.

"From a public relations standpoint, the raises were a huge mistake," said Douglas P. Munro, director of the Calvert Institute for Policy Research, a conservative think tank based in Baltimore. "Whether they are justified or not, they should have been delayed."

O'Malley defends the salary increases, at least in the mayor's office, where the potential maximum pay for his new top aides will rise from $108,700 to a maximum $140,000. O'Malley said he plans to make up the added cost by consolidating other mayoral slots to end up with an overall budget reduction in his office.

Other departments are on alert to reduce spending, O'Malley said. The only sacred cow in the budget process will be public safety, O'Malley said.

"What can I say?" O'Malley said of the looming problem. "Everybody wants more money, but we can't give them more money."

City Council Budget and Appropriations Committee Chairman Nicholas C. D'Adamo Jr. said the city has traditionally cried wolf at the start of the budget process. D'Adamo remembers three years ago when the budget deficit was initially projected at $24 million but in the end the council had to make up an $8 million shortfall.

"There are panic buttons they push that administrations have always pushed to get the public's attention," D'Adamo said. "My experience is that it's not always as bad as it looks in the beginning."

Before departing, the Schmoke administration put out a "state of the city" booklet agreeing. "The city is financially sound today and, with continued good management, will remain that way in the future," the report said.

Help from business

O'Malley has begun to take steps that other cities have taken to make their governments more efficient.

The Greater Baltimore Committee and the President's Roundtable minority business group have lent managers to examine agencies for ways to save money. Those reviews are expected to be completed by May as the budget process gets in stride. The GBC recently hired a former deputy mayor from Philadelphia who helped that city take itself out of red ink eight years ago.

Even with cost cutting, most observers of the city's financial structure agree that Baltimore must find new income sources and reduce its lopsided reliance on property taxes.

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