Budget outlook far from clear, council is told

No shortfalls foreseen for fiscal year, Wacks says

`Things are still uncertain'

Cuts in state aid possible

capital gains revenue low

October 22, 2002|By Larry Carson | Larry Carson,SUN STAFF

Howard County Budget Director Raymond S. Wacks wore a Merlin the Magician black cone hat - complete with embroidered moons and stars - as he explained the county's financial outlook to the County Council yesterday, but as one wag whispered, what he really needs now is a crystal ball.

Wacks later explained that the hat was a gag gift from his wife - bought after he announced last month that the county had eliminated a once-projected $18 million budget shortfall for the year ended June 30.

But predicting the county's financial future is a lot trickier, he told the attentive council members at their monthly administrative meeting in Ellicott City.

"At this point in time, it does not appear we will have any revenue shortfalls this fiscal year, but things are still uncertain," he said.

A recession brought on by war with Iraq, another terrorist attack, or more Enron-style business scandals could darken the economic horizon once again, he said.

Uncertainty over the possibility of state aid cuts is also an unknown factor, Wacks said, though the $400 million state budget shortfall predicted for this fiscal year is "manageable," he said. State officials project a $1.3 billion revenue shortfall next budget year.

Almost all state aid to Howard goes directly to the county school board and community college; they will undoubtedly seek relief from the county if the state cuts funding, he said.

Although county revenues should continue at a generally lower level, things appear stable for now, Wacks said. Property tax revenue should increase steadily over the next few years driven by sharply higher real estate prices, while revenue from such things as investments and capital gains income tax should remain sharply lower.

"We've largely squeezed out capital gains from our revenue stream," he said, noting that the county "is back to where we were five or six years ago," before the stock market bubble of the late 1990s produced several annual surpluses of more than $20 million each.

Because Howard County has a 5 percent annual cap on assessment increases, real estate prices that have jumped 25 percent since last year should ensure a steady 5 percent annual increase in the assessable base for the foreseeable future, Wacks said.

He even had an answer for council member Mary C. Lorsung, a west Columbia Democrat, who asked if constant news stories about businesses closing and layoffs are taking a toll.

"Businesses have closed in Howard County, but job growth is so strong," Wacks said, adding that the positions are absorbed in the county's growing economy.

That means personal income, and thus income tax revenues, should remain stable, even though stock market declines have curtailed capital gains revenue, he said.

Councilman Christopher J. Merdon, an Ellicott City Republican, asked for a list of items in the county budget for the year ended June 30 that were not funded. Savings from $9 million in budget cuts and $9.3 million in higher-than-expected revenue erased the $18 million budget shortfall, Wacks said.

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