Counties face more cutting as state income tax payments fall

March 09, 2010|By Larry Carson |

The latest state income tax payments to local governments fell $61.8 million year over year, piling new fiscal woes atop budgets already reeling from state cuts, high snow removal costs and earlier revenue declines.

The declines in payments from the state to county governments at the end of February put an added $29.4 million burden on Montgomery County, which was already facing a projected $761.5 million shortfall by June 30, according to the Maryland comptroller's office.

Prince George's and Charles counties were alone among Maryland's 24 jurisdictions to receive more in the fourth quarter of 2009 than in 2008.

Leaders of Anne Arundel and Carroll counties said they were prepared for the bad news and it won't affect their budgets. Others said the declines will hurt.

"It's very serious, but there's been a lot of bad news this year," said Jennifer Barrett, Montgomery County's finance director. "It makes the gap worse."

Baltimore City, facing a projected $120 million shortfall, dropped $4.6 million in income tax revenues, while Baltimore County, facing a projected shortfall of $138 million, got $16.1 million less from income taxes.

Baltimore County Executive James T. Smith Jr.'s spokesman, Don Mohler, said county officials had no comment.

Talbot County had the largest percentage drop, at 23.8 percent. Other Baltimore-area counties lost smaller amounts. Anne Arundel declined by $2.5 million; while Howard dropped $2.4 million; Harford, $1.3 million; and Carroll, $1.1 million.

Michael Sanderson, executive director of the Maryland Association of Counties, called the timing difficult: "We're in month No. 9 in a fiscal year, so there's not much that can be cut."

George Freyman, assistant director of revenue administration in the state comptroller's office, said the decline reflects the decreased collections and increased refunds produced by the drooping economy. Because the counties based current budgets on more normal years, the changes wrought by 2008's problems are still showing up, forcing the state to hold back more revenues.

"Tax year 2008 stunk," Freyman said - and the latest distribution includes money from taxpayers who got extensions and made payments in October.

While total revenue declined 0.9 percent, distributions to local governments dropped 6.2 percent. However, the relatively small net decline represents "the best performance in quarterly receipts since the third quarter of 2008," and thus may be a sign that the worst of the recession is over, Freyman wrote to local officials in an e-mail.

Anne Arundel County Executive John R. Leopold said his administration expected the decline and is not facing a shortfall because of it.

"Our estimates have been very conservative," he said.

But Howard County's projected shortfall - the result of state cuts, snow removal costs that could near $6 million and reduced income tax revenues - has grown to $20 million, budget director Raymond S. Wacks told the County Council on Monday. County Executive Ken Ulman said finishing the year with a balanced budget "is not going to be easy," but it will be done.

"I certainly understand the state is holding back more for refunds," he said. "We'll get through it." Ulman has not used any of the county's $48.5 million rainy-day fund.

Ted Zaleski, budget director for Carroll County, said the drop is "not any more of a problem than we expected." He said the county is on course to finish the year in the black.

So is Talbot County, said County Council Chairman Levin F. "Buddy" Harrison IV. He said the county has spent some of its contingency fund to stay even.

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