County expects budget surplus

$25 million to remain at end of fiscal year

`We planned ... for the bad times'

State's financial woes could bode ill for future

May 03, 2004|By Andrew A. Green | Andrew A. Green,SUN STAFF

Baltimore County Executive James T. Smith Jr. is one of the leading voices as local governments fight to stave off cuts from the state, calling the governor a buck-passer and predicting financial ruin for some jurisdictions.

But Baltimore County's government is, comparatively speaking, rolling in dough.

Thanks in large part to conservative budgeting, a booming real estate market and smaller-than-expected cuts in state aid, the county expects to end the 2004 fiscal year on June 30 with a surplus of about $25 million in an operating budget of about $1.2 billion.

And while other jurisdictions in recent years have raised taxes, instituted hiring freezes and, in some cases, laid off workers, Baltimore County is on track in fiscal 2005 to give across-the-board pay raises to county employees and pump an extra $37 million into new roads and schools. All without touching the tax rate.

"I don't want to gloat, but we properly planned for the bad times," said County Councilman Kevin Kamenetz, a Pikesville-Ruxton Democrat. He said the county learned its lesson during the last recession a decade ago, when its finances were not in such good shape.

"County residents and county employees suffered tremendously," he said. "There were layoffs and cutbacks. It was a very hard time in Baltimore County, and we have been cautious to make sure that event does not repeat itself."

Stable expenses

In good times or bad, expenses in Baltimore County barely budge. Accounting for inflation, the average per-capita tax burden for county residents has grown by only $12 a year for the last decade.

Coming out of this year's legislative session, the situation in Annapolis is far less stable. Legislators passed the fiscal 2005 budget by clearing out the last of the state reserve funds but leaving a structural deficit estimated at more than $800 million for fiscal 2006.

Gov. Robert L. Ehrlich Jr., a Republican, has refused to raise taxes, and administration officials have said he will balance next year's budget through deep spending reductions, possibly including cuts in aid to local governments.

At a breakfast meeting with legislators after the General Assembly session ended last month, Smith, a Democrat, said the governor was passing the buck, avoiding raising state taxes by foisting costs onto local governments.

Smith singled out the idea, floated by the governor's office, that the state would stop paying for teacher retirement - a $430 million expense next year.

"He's not cutting things," Smith said. "He's shuffling them to somebody else to collect for."

Smith's spokeswoman, Renee Samuels, said last week that Baltimore County has managed itself well and shouldn't be punished because the state has not.

James C. Chip DiPaula Jr., Ehrlich's budget and management secretary, said the governor has made clear since before he was inaugurated that if the state failed to legalize slot machines, he would balance the budget through cuts. Aid to local governments is and has always been on the list of possible targets, he said.

Local governments are blessed with a steady revenue stream from property taxes, while the state relies primarily on the relatively volatile income tax, DiPaula said. Rising assessments have allowed local governments to increase revenues without changing tax rates, he said.

In Baltimore County, the average residential property tax bill is expected to rise by $101 to $1,544 this year because of increased assessments. A hot sales market for real estate contributed to the bottom line, too. According to the current projections, Baltimore County will collect about $20 million more than it expected in recordation and transfer taxes this year. It had expected about $60 million.

Conservative culture

But revenues are only half the story. Fiscal conservatism is deeply ingrained in the government culture of Baltimore County, where politicians brag about triumphs only budget wonks understand, such as adherence to spending affordability guidelines and maintaining the constant-yield tax rate.

Baltimore County's fiscal attitude is personified in Fred Homan, the longtime budget chief, who is legendarily stingy with taxpayers' money. Kamenetz said the county is "extremely privileged" to have Homan.

"I think Fred can be stubborn and tenacious, but those are also good qualities when managing taxpayer dollars. I give Fred 100 percent of the credit for the fiscal stability of the county," he said.

Homan has been so influential in large part because Baltimore County voters consistently elect officials who share his philosophy. The county has had fiscally conservative executives for nearly 15 years, and, during budget season, councilmen spend weeks grilling department heads over percentage-point differences in the amount of employee turnover they expect in the coming year.

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