Md. tax payments to localities plunge

Baltimore Co. getting 44% less, city 23%, Talbot 65%

November 28, 2009|By Larry Carson | larry.carson@baltsun.com

State income tax payments to local governments fell sharply in November, with Baltimore and Montgomery counties and some jurisdictions on the Eastern Shore recording drastic declines, according to a new report from the Maryland comptroller's office.

Income taxes are the second-largest source of money, after property taxes, for local governments, which use the funds for schools, libraries, highways and other services.

The news from Maryland's comptroller of a $339 million drop in revenues - which represents a 28.3 percent decline from the corresponding period a year earlier - reflects the impact of the economic downturn in Maryland.

"There's a good deal of fire where we see all this smoke," said Michael Sanderson, director of the Maryland Association of Counties.

"It continues to be tough times. It's not a secret," Howard County Executive Ken Ulman said.

Counties pay close attention to the money because it marks the first distribution from the state of the fiscal year that began in July. The state collects the money and then returns it to local jurisdictions periodically throughout the year.

Some officials warned that the November distribution can be deceptive, because the state also uses it to settle accounts for earlier payments based on estimates.

"The previous year's [payments] were overinflated," said Anne Arundel County budget director John Hammond, and now the state is making up for that. "The economy is soft. It's soft across the nation."

State officials said the lower distributions reflect several factors, including the state using the November payment to settle accounts for previous distributions that may have been too high or low. As individual taxpayers have increasingly asked to pay their income taxes later, those estimates lose accuracy.

"These reconciling distributions are extremely volatile," said David Roose, head of the bureau of revenue estimates for the state comptroller's office.

The sharpest drops, on a proportional basis, were 65.9 percent for Talbot County and 54.6 percent for Kent County.

"This was stunning. This was out of the blue," said Philip Carey Foster, Talbot County Council president, noting that the county generated $4 million in state income tax revenue, down from $12 million the previous November.The largest declines, in dollar figures, were in the most populous jurisdictions.

In Montgomery County, which is battling a projected $370 million shortfall, the new numbers represented "a huge reduction," finance director Jennifer Barrett said.

Montgomery residents paid about $168.6 million less in income taxes to the county than in the corresponding period in 2008.

Raymond S. Wacks, Howard County's budget director, said he expects the county's 19.6 percent drop in the November distribution to even out some over the rest of the fiscal year, coming closer to his prediction of a 5.5 percent drop in income revenues.

Baltimore County's payment declined $84.5 million, or 44.5 percent, and Dorchester County's was off 51.4 percent. Baltimore City's payment dropped $16.8 million, or 23 percent.

"It does have a significant impact on the city budget," said Scott Peterson, Mayor Sheila Dixon's spokesman. "If this is a blip, then that is one thing. If it is to continue, then we are very concerned."

Other Baltimore-area jurisdictions suffered less of a decline - 11.8 percent in Anne Arundel; 8.7 percent in Carroll; and 6.2 percent in Harford.

Cecil County was the only county with an increase (2 percent) and Prince George's and Charles counties nearly matched last year's figure.

Roy W. Crow, chairman of the Kent County commissioners, said the number of county taxpayers with incomes over $1 million dropped from 72 to 52 in the past year, resulting in about a $1 million decline in revenues for the 20,000-person jurisdiction. Overall, Kent is seeing a 30 percent decline in income tax revenues, Crow said.

Howard County's Wacks said the numbers mean that he and Ulman need to find more savings this fiscal year.

"It's the late payments [down 46 percent in Howard] that make up so much of the difference," Ulman said.

Wacks said the county has $8.1 million that was to go into the $48.7 million rainy-day fund that will now go to fill the budget gap instead. Howard has another $2 million in capital budget cash that can be diverted to fill the hole.

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