Spending Cuts First

Our View: Tough Choices Await, But Increasing Baltimore's Already High Property Taxes To Help Close A Projected $130 Million Budget Gap Should Be A Last Resort

December 04, 2009

Baltimore doesn't have a lot of good options to deal with its rapidly worsening budget situation. Buffeted by the recession, cuts in state aid and ballooning pension payments, the city is expected to face a $130 million shortfall in the next fiscal year.

But City Council members were right when they said in a briefing this week that increasing the property tax should not be the answer. In this economy, in a city where unemployment is high in the best of times and where the property tax rate is already a massive disincentive to families looking to buy a home, tax increases should be the last resort.

When times are good and governments are able to expand services, politicians like to talk about prioritizing their investments into core services, such as education and public safety. In a time of downsizing, they need to approach the problem in reverse. Protect those top priorities and start cutting things that aren't essential. Despite the budget cuts the city has already made, there is no doubt that non-essential spending remains. The ferocity with which the Dixon administration fought City Council efforts earlier this year to cut funding for the city's cable station - in truth, little more than a glorified infomercial about the mayor - suggests that it hasn't yet done all it can to cut the fat.

The budget crisis also underscores the need to reform a pension system for firefighters and police officers that is unsustainable. The $130 million figure doesn't include a projected $64 million extra the city will have to pay into that pension fund next year if it doesn't enact reforms. The city needs to increase the retirement age, drop a variable benefit plan that gives officers permanent increases based on stock market bubbles and reform the board that manages the pension to guarantee its independence.

The city's budget problems are serious, but look at them in context. Baltimore is scrambling to deal with a $130 million gap in a $2.2 billion budget, a shortfall of about 6 percent. The state is facing a $2 billion shortfall in a $13 billion budget. That's about 15 percent, and it comes after years of more severe budget cutting than the city has had to make. Yet the leaders in Annapolis remain determined not to raise taxes, even though they have options for doing so that would have far less negative consequences than a city property tax increase.

No doubt Baltimore will have to cut services, and that will have a negative impact on some of the city's most vulnerable. But there is also no doubt that cuts can be made that would not be so dire. Mayors have so much budgeting authority in Baltimore that the City Council almost never exercises its power to cut from the executive's proposal, and over the years that lack of outside scrutiny tends to lead to spending that, if not wasteful, is at least not crucial. Now is the time for the mayor and City Council alike to consider what the city can live without.

Readers respond

There is a very effective mechanism to expand the city's revenue streams and reduce the need for additional cuts. My suggestion is to tax nonresidents who work in the city.

There is a viable model on how to capture this revenue for the city. Battle Creek, Mich. taxes 1/2 percent of the gross income of nonresidents employed within the city limits.

At the onset of employment (and annually thereafter), a nonresident fills out an employment declaration form which her/his employer then submits to the city government. Every year in January, the nonresident receives an income tax bill.

The city has regulations and penalties in place to ensure that noncompliance affects the employment status of a nonresident.

Baltimore has thousands of people who live in surrounding counties and Pennsylvania and commute to Baltimore and benefit from the employment opportunities the city provides. Unfortunately, they do not contribute directly to the maintenance of the city's infrastructure and services.

Given our current financial situation, it's time for nonresidents pay their fair share of the city's upkeep via a city tax on their income.

Jack Boyson, Baltimore

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