Harford County Executive David R. Craig has asked department directors to trim this year's budget to address a nearly $7 million shortfall in its $900 million fiscal year 2009 budget. Each agency must cut five percent from its operating costs.
Craig used an unprecedented meeting with the county council to detail "where we are in revenue and where we need to go with expenses, so that we will have money in April, May and June," he said.
He detailed for the council last week how critical cost savings will be this year, when the national economy, the state's fiscal crisis and the decrease in revenues tied to the housing industry and jobs continue to cloud the budget picture.
"We have to plan to get through this fiscal year," Craig told council members in what he called an unprecedented session on the budget crisis. "As we began to develop the fiscal year 2010 budget, we found ourselves coping with unexpected revenue concerns."
Income tax revenues, which account for 38 percent of the county's general fund, have continued to fall below estimates and have led to a $6.8 million gap in the fiscal year 2009 budget, which took effect July 1. Officials are projecting that at best those revenues will remain static or may fall even further during the next budget cycle.
"We are projecting zero growth in income tax revenues, but it could be a negative percentage," said John Scotten, county treasurer. "Income tax revenues for fiscal year 2009 would have to grow at a historically unrealistic level to make budget. In light of the national economy, this is not achievable."
The housing downturn has also created financial problems for Harford, with revenues from impact fees and recordation and transfer taxes significantly off. Property tax revenues grew by nearly 12 percent in fiscal year 2007, the last year of the housing boom, but will not reach 5 percent growth in fiscal year 2010, officials said.
The state, which might face a $1 billion budget deficit next year, is already planning to pass costs to the counties. Harford could have to fund $28 million in teachers' pensions that are currently paid by the state, officials said.
Harford was two months into its budget cycle before officials received state figures that showed the gap in income tax revenues that must be addressed immediately, Craig said.
"Increased expenses do not normally cause heartburn, but we are dealing with falling projections for this year and next," he said.
He has ordered each department to immediately submit plans for a 5 percent cut in operating costs. He also established a personnel action oversight committee to review and evaluate all jobs. Craig stopped short of imposing a hiring freeze or considering furloughs, preferring to rely on attrition to eliminate some of the county's 1,300 jobs.
"Every vacancy and promotion will be reviewed to see if it will be filled," Craig said. "We will use attrition, not layoffs."
An expenditure oversight committee has already begun its task of reviewing all the county's purchases. Employee travel, use of county-owned vehicles and working meals will all be reduced.
"We are not closing our doors," Craig said. "This government will continue to function, but we are meeting this crisis proactively."
The projects under construction, such as Bel Air and Edgewood High schools, will continue to move forward, but many others will likely be delayed. Craig has asked other agencies, including the board of education and the sheriff's department, to join him in the cost-savings efforts.
The county is not considering any cuts in its contributions to the three municipalities, he said.
"We have been preaching that the state should not pass costs onto us," Craig said. "We won't pass costs to the towns."
Craig, who serves as vice president of the Maryland Association of Counties, said many jurisdictions are in worse straits, he said. Montgomery County is coping with a $250 million deficit this fiscal year, and several others are considering staff reductions, he said.
"Every county in Maryland is dealing with this economic crisis," he said.
Earlier, this week, Craig unveiled a 39-page study of efficiency and economy in government that might help Harford adjust to the decreased revenues. The report was the result of 10 months of work by a volunteer committee of officials and business and community leaders, who met with each county department. The report outlines several cost-saving options, including consolidating agencies, reducing overtime and implementing the latest technology.
"We launched this long before anyone could fathom the depths of this economy," Craig said. "The economic times are changing, and government can't act as if it is business as usual. We need to save tax dollars. The report recommends changes, not just where to cut but what to do and how."