State's shortfall expected to hit home

City, counties gird for trickle-down effect on local budgets

September 20, 2002|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Maryland's newly projected $1.7 billion shortfall has local officials bracing for a financial double whammy - potential cuts in state aid just as many will be forced to slash their own income tax estimates.

The specter of belt-tightening is particularly troublesome for the city of Baltimore and the poorest counties, which rely most heavily on state money. But the announcement Wednesday that the shortfall is increasing has all local officials nervous.

"Everybody's in a difficult situation," said Michael Sanderson, legislative director for the Maryland Association of Counties. "The county executives are finding themselves with budgets out of balance, just as the state is. What the counties don't need is another whack at the pinata by finding another one of the things they balanced their budgets on is going to be compromised."

The state's estimated $1.7 billion shortfall is the total expected for this fiscal year, which began July 1, and the next. Counties don't expect to find out just how bad the news will be until after the election.

Both major-party candidates for governor have said they would not cut education funding, the largest chunk of local aid. But local aid represents a sizable portion of the state's budget, and education funding is more than 90 percent of the local aid - leaving counties fearing the worst.

"In '91, the state had more options," said Howard County budget administrator Raymond S. Wacks. "Logic says, when you look at the state budget, the biggest piece of it is aid to public education and safety. ... I don't think they want to make cuts in that area - I don't know what they're going to do."

State budget officials aren't making any promises.

"Everything's on the table, and I don't know if the locals are going to be affected," said Eloise Foster, secretary of the state Department of Budget and Management, who is drafting proposals. "Obviously, we have a problem, and we're going to solve it."

Looming in the background for counties is the recession in the early 1990s, when legislators cut local aid after repeated cuts in state agency spending. Many of the funding sources taken away then were never restored, Sanderson said.

State Sen. Robert H. Kittleman, a Republican who represents Howard and Montgomery, warned counties not to hope for the best. Education is a large expense at a time when costs have to be reined in, and "everybody's dancing around it," he said.

"If you've got a $1.7 billion shortfall, ... you can't just take it out of the prisons and state government," said Kittleman, a member of the budget and taxation committee. The last recession "hit local government pretty hard - and I think this is probably worse."

Sen. Barbara A. Hoffman, a Democrat and chairwoman of the budget and taxation committee, isn't ready to put it that way. But she has urged Gov. Parris N. Glendening to make cuts now so they can be spread out over more months.

"The goal would be not to cut aid to local governments, but I don't know if you can balance your budget that way," said Hoffman, who represents the city and Baltimore County. " ... We don't know how bad this is going to get."

Baltimore City Council President Sheila Dixon can imagine. The state promised the city $9 million for drug treatment last fiscal year but delayed $2 million of that until this fiscal year because of the shortfall, she said.

"Will the budget be so bad that we won't get that $2 million?" Dixon wondered. "If we get less, we're going to have to do things differently on the city level. We're already stressed. ... We might have to put some things on hold."

Local governments had attempted to stave off big increases in their current budgets. In Howard, which has a good deal of new school construction to do to keep up with growth, employees got no cost-of-living raises, the schools didn't replace textbooks and road maintenance took a cut.

"It's going to be tough for us to do much more, but obviously we're going to have to look," Wacks said. About 20 percent of Howard's revenues are from the state. Nearly every other jurisdiction relies more heavily on such funding.

In Baltimore County, where state aid makes up about a quarter of revenues, "we're concerned and we're watching to see how things develop," said spokeswoman Ellen Kobler.

That's doubly true in Somerset County, where state money accounts for half the revenues.

"Most of that aid comes in the form of grants for specific programs," said Frank Adams, finance and programs coordinator for Somerset. "If those monies were cut, we would have to cut those specific programs."

The state had projected in March that it would collect about $5.07 billion in individual income taxes this fiscal year but now expects about $241 million less, according to the comptroller's office.

Though the counties don't know how the downgraded income tax estimates will affect them individually, those answers should come more quickly than decisions about how the state's pain will be shared.

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