Deficit looms in officials' budget plans

Figures indicate $22 million shortfall in next fiscal year

`Problem we have to face'

Hearing scheduled for tomorrow

more requests likely

Howard County

March 11, 2001|By Larry Carson | Larry Carson,SUN STAFF

As Howard County Executive James N. Robey prepares for tomorrow's annual budget hearing, he faces the classic financial dilemma - spending requests for next year are $22 million over projected county income.

Being asked for more money than is available isn't unusual in itself, county officials said. "You always expect that," said council member C. Vernon Gray, an east Columbia Democrat.

The tough part this year, said county Budget Director Raymond S. Wacks, is that built-in salary increases and higher-than-expected health insurance costs will eat up all the new income the county expects to take in.

That means the 21 new police officers and the 140 new teachers requested for next year may not be affordable. Even the county's fire service, which is supported by a separate tax, is projected to cost $4.6 million more than the current tax would produce, Wacks said.

All the public discussion over less-prosperous times and lower revenues isn't the real problem, Wacks told the County Council during a meeting Thursday. "The situation is dismal not because of revenues, but because our expenditure base is increasing so fast. We have a problem we have to face," he said.

A portion of that increased expenditure involves higher construction costs, something that council Chairman Guy J. Guzzone called "the biggest problem we face. It's unfathomable" how demand is driving up costs, he said.

Figures Wacks' office released last week show county revenues are expected to be up about $30 million for the fiscal year that begins July 1, and the county will still have about $18 million in surplus cash to spend on school construction and other capital budget projects.

The problem is that spending requests for next year are up by $52.3 million, and the $30 million in new revenue would just cover automatic salary increases and a small cost-of-living raise for county workers. Health insurance increases would cost an additional $4.3 million, Wacks calculated. There is also $12.4 million requested for new hiring and programs.

"These are the issues the county executive is wrestling with," Wacks said.

Further requests

But tomorrow, Robey probably will hear requests for more spending, not less. People who want everything from a 12th high school to money for band uniforms, more police and fire protection, and road improvements will be out in force.

One possible solution is higher taxes, but there was no apparent support for that among the council members Thursday. Each penny increase in property taxes would generate about $2 million more in revenue.

"I will not support raising taxes," western county Republican Allan H. Kittleman said after the meeting. Gray agreed.

Kittleman and Christopher J. Merdon, an Ellicott City Republican, said they thought Wacks' revenue estimates might be a bit too conservative, thereby limiting spending too much. During the last few years, items sliced from budget requests could have been provided, paid for by large surpluses that turned up later.

Better projections

"We could probably do a better job of projections and not have a $20 million surplus," Merdon said.

But Wacks said no one anticipated the huge revenue gains from capital gains taxes on skyrocketing stocks during the late 1990s, and Howard County officials are expecting that income to drop by a third next year after a year of flat or falling stock prices.

"Will that happen? Who knows?" Wacks said. Prosperous counties like Howard and Montgomery, Wacks told the council, benefited greatly from the bullish stock market, but now those counties are likely to see the largest drop in capital gains income. Capital gains taxes represent only 10 percent of the county's revenue, he said, "but so much of the [revenue] growth comes from that 10 percent."

Still, Howard County remains prosperous, Wacks said, and revenue is growing at a healthy pace. For example, he said, demand for housing is so strong that buyers are including guarantees to beat any rival offer by $5,000.

"Overall, the county is strong and vital revenue is growing. Our revenues are fine, except for capital gains growth," Wacks said.

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