State cuts could cost Howard $13 million

About half of reduction expected to affect county school budget

January 25, 2009|By Larry Carson | Larry Carson,larry.carson@baltsun.com

Proposed state budget cuts are expected to cost the Howard County government up to $13 million next fiscal year, but county officials say they are relieved because it could have been worse.

County Executive Ken Ulman said county budget officials are working on a detailed accounting of Gov. Martin O'Malley's $310 million in proposed cuts to local government. But he is particularly relieved that the cost of teacher pensions wasn't shifted to local governments.

"Once you start down that road, every year there's a tough time, you increase it a bit," Ulman said.

If O'Malley had decided to go along with Senate President Thomas V. Mike Miller and shift those pensions to the counties, the cost to Howard alone would be $52 million next fiscal year.

Beyond that one year, pension costs could escalate annually because of poor investment returns in this recession, according to the county's budget director, Raymond S. Wacks.

"That's the scary part for us," Wacks said at an early-morning Spending Affordability Committee meeting Thursday.

Nearly half of O'Malley's cuts would affect the county school budget, which is already a lean 0.3 percent greater than the current year. Wacks said about $5 million in state cuts will be from county schools, with the rest coming from community colleges, library, health and highway user funds.

In addition, O'Malley is proposing to shift the cost of operating state property assessment offices to local governments, which would cost Howard about $1.7 million a year. The state also wants counties to share equally the cost of sending troubled youths out of state to residential treatment centers. The state pays 80 percent of that cost now.

"The cuts being proposed for local governments will be painful," Ulman said, noting that O'Malley's experience as Baltimore's mayor might have spared jurisdictions from even larger cuts.

"When we're talking about no growth in our own revenues, those are tough decisions," Ulman said about his own choices ahead.

The governor's plan calls for state workers to get no cost-of-living pay raises and up to 700 could lose their jobs.

Some of those forthcoming decisions also involve school construction, one of the new topics the county's Spending Affordability Committee was asked to examine this year, Wacks said.

With the dwindling this year of state school construction money and county transfer tax revenues that partially pay construction costs, the county is facing more demands for borrowing.

Wacks told the group that school officials have requested $125 million just for school projects, with less that 20 percent coming from the state or county real estate transfer taxes. Typically, the county borrows less than $100 million annually for all county projects, including schools.

That debt is declining slightly as a percentage of county revenues and is now at 8 percent, Wacks said. But the .county is paying $79 million for debt interest just this year, and total debt is $659 million.

At the same time, all the economic assumptions and models last year's committee used are out the window because of a recession deeper than anyone anticipated, Wacks said.

"Last year's growth rates make no sense," Wacks said.

The committee will examine county spending and revenues before submitting a report to Ulman in March. The county's proposed budget comes out in April.

Many predict the recession will deepen, and Wacks said county income and property tax revenues that make up more than 80 percent of government income could soften even more in fiscal 2010 and beyond.

Still, the county's finance director, Sharon Greisz, said Howard's AAA bond rating is helping in a market where other governments are having trouble selling bonds.

Howard is due to sell about $80 million in bonds to raise cash in March, she said.

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