Temperatures may begin to rise soon, but the city's financial freeze is not expected to thaw until the end of June.
A procession of top officials from Mayor Martin O'Malley's administration delivered the chilly fiscal forecast to City Council members during two days of midyear budget hearings that wrapped up last week.
Officials presented a bleak picture of declining taxes and rising spending that has led to an economic outlook that Edward J. Gallagher, deputy director of the Finance Department, called the worst he has seen in years.
Based on six months of data through Dec. 31, budget officials project $10.6 million in overspending for the 2003 fiscal year that ends June 30.
"I can't remember a time in recent history when we've been so off on revenues," Gallagher said. "But we are optimistic that we can deal with this problem with the budget freeze."
Last month, O'Malley ordered 2.5 percent spending cuts in all departments except fire and police and the city prosecutors' office. Gallagher said the budget could be balanced by June 30 if departments honor the hiring and spending freezes.
Gallagher said the recession has led to a $5 million reduction in the city's primary revenues. The city had predicted it would receive $939 million in income, property, hotel and capital gains taxes, convention center fees, interest on invested income and other taxes. It now expects to receive $12.8 million less. Parking fees and taxes on real estate sales, however, are expected to exceed the city's projections by $7.8 million, and reach $58 million.
Health care benefits, including prescription drugs, continue to drain the budget, Gallagher told members of the council's Budget and Appropriations Committee.
"We're going to be seeking increased cost sharing on the co-pay side and the co-sharing of the premiums," Gallagher said.
The city paid $74.3 million for prescription drugs for its active and retired employees last year. City employees pay a range of $5 to $15 for generic and brand name drugs. O'Malley's administration is expected to ask for substantial increases of employee health care contributions next year. The mayor said in his Feb. 3 speech that he expects such a move would require a "sacrifice on the part of every city employee."
Negotiations with the city's unions began this month, with many labor leaders saying they would fight major increases.
"The mayor is asking us to suffer the major brunt of this budget crisis," said Glenard S. Middleton Sr., president of the American Federation of State, County and Municipal Employees Union Local 44. "If he's talking about pain, the mayor needs to let us look at all the high-paid, high-level people he has hired."
Councilman Nicholas C. D'Adamo Jr., chairman of the budget and appropriations panel, is sympathetic.
"I think it's outrageous to ask city employees during tough times to kick in more from their pockets when employees are living check to check," he said. "You don't make big money working for the city, and we try to compensate them with better health care and prescription plans. It looks like that's all going to be thrown out the window."
Increased employee contributions would not start until 2004 when health plans are selected.
For now, balancing the current budget will require cutting down on police and fire overtime. The projected $10.6 million in overspending this year has come mostly from overtime costs in those departments. The Police Department projects it will surpass its $250 million budget by $14 million.
Acting police Commissioner Kevin P. Clark said he plans to impose policies to keep overtime at bay and to scrutinize expenses more carefully.
The Fire Department projects that it will come in $2.25 million over its $117 million allotment. That number could hit $7 million if Fire Chief William Goodwin Jr.'s strategy to reduce overtime backfires. Late last year, Goodwin ordered firefighters to accept compensatory time instead of cash for every other overtime shift. So far the policy has saved $1 million.
But the department's two unions challenged the plan because it is not permitted in their contracts. "It's not real popular," Goodwin said.
If he loses the arbitration initiated by the unions, the department will have to pay cash for the overtime shifts that have been paid in compensatory time.
That means the onus to balance the budget will fall even harder on the surpluses projected by the Public Works, Housing and Community Development and Recreation and Parks departments. Those surpluses, refinancing of debt with lower interest rates and other savings reduce the overall budget shortfall to $10.6 million.
Councilman Bernard C. "Jack" Young expressed frustration with the idea of balancing the Police Department's overtime with the sacrifices of other agencies.
"The firefighters gave back, and now they think they have to give back again," Young said. "And the Police Department has a blank check for $14 million in overtime."