Robey acts to head off cash pinch

Departments told revenue shortfall is threatening

Layoffs are not planned

`We face a problem,' budget chief tells members of council

Howard County

October 12, 2001|By Larry Carson | Larry Carson,SUN STAFF

Facing a grim revenue outlook, Howard County Executive James N. Robey has ordered department heads to reserve 5 percent to 10 percent of their current budgets to guard against a shortfall.

Robey, who was county police chief during the severe recession a decade ago, said the prospect doesn't feel any different to him now. There are no layoffs or furloughs planned, but Robey said he wants to be ready.

"I don't want to wake up one morning and say, `My God!'" the executive said.

The signs, while not as ominous as they were in 1991, are not good, budget Director Raymond S. Wacks warned the County Council yesterday.

For any doubters, Wacks had a quick example, noting that the county's unanticipated surplus for the fiscal year that ended June 30 is virtually nil ($100,000), compared with $6 million for fiscal year 2000 and $12 million the year before.

"We face a problem. We face a challenge," Wacks told council members, who, anticipating the bad news, greeted him jovially as "Dr. Gloom." Later yesterday, Wacks briefed school officials on the county's revenue woes.

Wacks was careful to point out that the county has "a different [more diversified] economy than 10 years ago" and a $31 million rainy day surplus fund, too. But income tax and investment revenue estimates are down sharply from spring's predictions, even though property tax revenues are expected to keep rising.

The lack of a year-end, unanticipated surplus does not mean Howard is in worse shape than other governments, he said. "What it means is we're just a little too successful in guessing" what the surplus will be.

Wacks said he guessed the county would have about $20 million left over from last fiscal year, and that's how much was applied to the current budget. But normally there's some excess, and this time - for the first time in a decade - there's just about $100,000 left.

With central bank interest rates down to 2.5 percent, Wacks said, the county figures to lose about $2 million on investments. "I don't think anyone anticipated we'd have the lowest interest rates in 40 years," he said.

And because true income tax revenues won't be known until next summer - after people finish their tax returns - the hit there isn't certain. But Wacks warned that his predictions in the spring of a 40 percent decline in capital gains revenues now seem "wildly optimistic."

In light of all that, and the still unknown economic effects of the Sept. 11 terrorist attacks, "I think we're facing some difficult time, and some difficult choices," Wacks said.

Property tax revenues represent the good news, he said, because of the hot real estate market. This round of state assessments will cover the western and southeastern county, and chances are that nearly every home will be worth the maximum allowable increase of 5 percent a year for the next three years, he said.

"That's bad news," western county Republican Allan H. Kittleman said jokingly.

After the meeting, Council Chairman Guy J. Guzzone, a North Laurel-Savage Democrat, said he is concerned, but not surprised.

"I don't think Ray told us anything that any person doesn't know from our daily lives," he said.

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