Harkins ponders possible tax cut

Budget surplus, improved economy leave executive `cautiously optimistic'

December 19, 2004|By Ted Shelsby | Ted Shelsby,SUN STAFF

A reviving economy along with a sizable surplus for the fiscal year that ended June 30 and a big jump in the county's work force has County Executive James M. Harkins thinking about a tax cut for the first time since he took office in 1998.

"It's very early into the budget process," Harkins said, "but we are cautiously optimistic that we are coming out of the recession, and the trends we are seeing are positive. I believe this year, knock on wood, will be better than the last few years."

Good enough for a tax break?

He didn't rule one out during an interview last week. "I'm not ready to make any bold statement either way," he said, but noted the economic indicators look good.

"In the past," he said, "I've never even had the luxury of being able to even consider such a thing, not until this year.

"We have been in the cellar the last couple of years," he said, noting that one recent budget was smaller than the previous year's spending plan, a fiscal event that he said is practically unheard of.

Before any consideration of a tax cut, Harkins would first like to increase the wages of county workers.

"These are the people that stick with us through thick and thin times," Harkins said. "They go out and plow the snow, protect our streets and educate our kids. They do it all when times are good and times are bad."

He said that when he and staff members "sit down and talk about the goals we would like to achieve in this budget, clearly a raise for our employees is one of our top priorities."

This month, he disclosed that the administration is working with the public school system, the Board of Education and the County Council on a plan to raise teacher salaries.

Over the past three years, the starting salaries of teachers in Harford have failed to keep pace with those in other counties in Maryland. Harford has dropped from 12th on a statewide public schools salary list to 21st this year.

Only Allegany, Garrett and Somerset counties pay their beginning teachers less.

The salary lag has made it difficult for the county to hire and retain qualified teachers.

"That has to change," school board President Robert B. Thomas Jr. said this month. "These people are too critical to be left behind."

Much of Harkins' optimism for the year ahead has to do with the $22.6 million surplus for the fiscal year that ended June 30.

He said the extra money came from various sources, including:

A freeze on discretionary spending.

"Like anyone else," Harkins said, "when times were tough, we tightened our belt."

John J. O'Neill Jr., the county's director of administration, said that job vacancies were not filled. The belt-tightening saved about $7 million.

Another $6 million came from the state comptroller's office when William Donald Schaefer agreed to return the portion of the county's piggyback income tax normally held back by the state each year.

The state holds 6 percent of the tax revenue to cover such situations as a taxpayer moving from one county to another during the tax year. The state determines which portion of the taxes goes to each jurisdiction.

A 4.35 percent increase in income tax revenue, stemming largely from new jobs in the county, raised another $5.2 million.

Harford County led the state in job growth during the 12-month period beginning with the first quarter of 2003, according to J. Thomas Sadowski, the county's economic development director. He said employment rose 6.7 percent, or by 4,713 jobs, during the period.

A $4.4 million increase in property tax revenue accounted for the remainder of the surplus.

Harkins said the bulk, if not all of the surplus, would be used to help pay for the new Patterson Mill middle and high school complex to be built just south of Bel Air.

Through a process called forward funding, the county is paying the full cost of the $52 million school with hope - but no guarantee - that the state will reimburse half the cost later.

The county executive said some of the surplus may also be used for the $53.5 million expansion and renovation of North Harford High School.

He said it would not be sound fiscal policy to use any of the one-time money for such things as teacher raises, which would need to be paid every year.

Harkins said he would be even more excited about the rosy economic outlook but for one dark cloud on the horizon.

He said the state still has budget problems, and that the state could pass on the cost of teachers' retirement benefits to the counties. In Harford, that would amount to about $21 million, according to O'Neill.

"There is still that threat," Harkins said. "And that has tempered my joy."

He said that in his role as president of the Maryland Association of Counties, he has pleaded with Gov. Robert L. Ehrlich Jr. "not to bury the state budget ax into the back of the counties."

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