For first time, revenues from income tax fall

Recession, decline in capital gains blamed

Schools' request frustrates Robey

6.1% drop gives budget a $10 million battering

Howard County

October 01, 2003|By Larry Carson | Larry Carson,SUN STAFF

Howard County is among the nation's wealthiest places, but for the first time in its history, income tax revenues suffered an absolute decline last year, county budget officials said yesterday.

Raymond S. Wacks, the budget director, said falling tax revenues -- the first since the county began collecting income taxes in 1964 -- hit the state's most prosperous counties hardest mainly because of unexpectedly heavy stock market losses.

"This is being driven by a combination of the recession and the unprecedented drop in capital gains," which was more severe in Howard "because of the big earners" who live in the county, Wacks said.

FOR THE RECORD - An article about declining Howard County income tax revenues in yesterday's Howard County edition of The Sun incorrectly identified the purpose of $333 million in federal funds received by Maryland state government this year. Nearly half the money was for Medicaid reimbursement, and the rest can be used for a variety of other government functions. The Sun regrets the error.

The 6.1 percent drop in revenues left a $10 million hole in the Howard County budget for the year that ended June 30, county officials announced yesterday as the school board began reviewing a record request for school construction money for 2004- 2005 that is more than double this fiscal year's amount.

The budget problems and the school request emphasize the increasing and conflicting pressures on County Executive James N. Robey. Tax protesters want less spending and lower taxes, and school officials and advocates ask for more each year. Pat Dornan, president of the Howard County Taxpayers Association, is pushing for a charter amendment to limit taxes or spending.

"There is no way I can fund $150 million under current conditions. I am frustrated that they can ask for it," Robey said of the superintendent's request, which is $88 million more than the amount the schools received for building projects this year.

News of the budget woes prompted quick criticism from Republican Del. Warren E. Miller.

"I really have to question the county's budget process," he said, arguing that spending increased during the boom of the late 1990s but did not decline enough after the boom ended.

Robey, a Democrat, rejected that view.

"To put it bluntly, that's political B.S. I wish Howard County had the federal government to give us $300 million like the state of Maryland got," he said, referring to federal homeland security funds the state received.

He contends that the county has "taken every precaution to be conservative in our projections, prudent in our financial planning and diligent in our spending."

Despite the lower revenues, Wacks said, the county had a $300,000 surplus in the past fiscal year because of canceled purchases, scattered leftover funds and one-time bookkeeping devices that pushed some expenses past July 1 into the current fiscal year.

Based on the lower revenue, Wacks said, he fears that estimates in the current budget might be up to $20 million short, a problem that could force more emergency cutbacks. Robey has $9.5 million put aside to pay for half of a 4 percent pay increase for county employees.

A large income tax rate increase approved in the spring will not take effect until Jan. 1, Wacks said.

The school construction request illustrates the other side of Robey's budget squeeze in a county in which schools are a top priority. "Everything we do in county government is driven by education," Robey said, noting that not much is left for the rest of government after education gets the biggest share.

"It's very difficult to do anything that in your heart you know is detrimental to the school system," he said, but "somebody's got to pay for it."

Robey noted seemingly contradictory complaints he has heard from taxpayers, which he characterized as : "I moved here for the great school system, not for a tax increase."

Robey tried unsuccessfully last year to get state legislative approval of a real estate transfer tax increase to pay for more schools, and he plans to try that again.

The executive said he has not talked to school board members about trimming the request but that "it is troubling when I hear some of their comments without any thought of how we're going to pay for it."

Board members said they have yet to review the budget. "I think there is a very high likelihood the board will be making changes to that budget," member Courtney Watson said.

She also criticized the request. "When you have one year at $150 million and you have [the next] five years at $50 million [average per year], it doesn't appear to be good planning."

Sandra H. French, the school board chairman, said, "If there's anything we can defer even for one year, we'll try to do that." But she was not backing down from the board's wish list.

"If we don't lay out our honest needs, people will say, `You didn't plan properly,' " she said.

Dornan is angry about the big income tax increase Robey engineered but said of the schools, "If we need the seats in the classrooms, we need the seats. There's no question the schools are overcrowded, and something will be done."

He said class sizes can grow and that new homes, such as the 45 going up around crowded Bushy Park Elementary, which his children attend, should have been delayed until a septic system problem was solved.

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