Budget Year

At last state governments are crawling out of that giganti budget hole created by the recession. While blue skies aren't yet on the fiscal horizon, the dark storm clouds of recent years are dissipating, providing states with enough economic good news to balance their budgets without too much belt-tightening this year."

Baltimore County is bracing for another tough budget year, delaying new construction and improvements to infrastructure while looking for other ways to save. But County Council members and County Executive Kevin Kamenetz's administration say they don't plan to raise taxes to bring in more revenue. The county has not raised property taxes for 23 years, said Kamenetz's chief of staff, Don Mohler. Its income taxes haven't risen for 19. Kamenetz hopes to continue that run, Mohler said.

Gov. Robert L. Ehrlich Jr. offered a glowing account of Maryland's finances during his State of the State address yesterday, saying the state would end the current budget year in June with a $680 million surplus. Since he took office, the governor boasted, "we have resolved a $4 billion - four, with a b, billion dollars - in shortfalls." But the numbers Ehrlich plucked for his speech offer only a partial - and somewhat misleading - view of Maryland's fiscal outlook, lawmakers and legislative analysts said.

Baltimore County will likely pull from its reserves to balance the budget and stay within guidelines proposed this week by the county Spending Affordability Committee. With the county facing a $38.5 million revenue shortfall as it goes into budget deliberations, the committee recommended capping next year's spending plan at $1.63 billion in a report released Tuesday. The committee's guidelines would allow an increase of approximately $36 million over this year's budget, funds that could come from about $147 million in surplus money.

ANNAPOLIS -- Maryland ended fiscal year 1991 with enough money left over to finance the operations of state government for 2 1/2 minutes, Comptroller Louis L. Goldstein reported yesterday.The unappropriated surplus remaining once the books were officially closed on the budget year that ended June 30 was a measly $55,350 -- "smallest in memory," Mr. Goldstein said.The surplus is not even equal to half of Gov. William Donald Schaefer's annual $120,000 salary.According to Mr. Goldstein's spokesman, Marvin Bond, state government spends at a rate of $31.8 million a day, or $1.3 million an hour, $22,110 a minute, or $368 a second.

Harford County Executive Eileen M. Rehrmann, on her first full day on the job, said she was ordering a freeze on hiring and other belt-tightening measures to make sure the county is in the black at the end of this budget year.Rehrmann, citing declining revenue projections, said she was scrapping a proposal by the previous executive, Habern W. Freeman Jr., to build a new $15 million county administration building in Bel Air. Outlining the county's budget situation yesterday, she also said she was asking county agencies to look for other ways to save money before the fiscal year ends July 1."

Although a windfall insurance refund is helping Baltimore close a $31 million gap in its current budget year, the city's budget director is warning that the financial picture for the 1997 budget year, which begins July 1, has not improved.In a memo Friday, Budget Director Edward J. Gallagher told heads of city agencies that they should continue to plan to meet budget targets that include reductions ranging from several hundred thousand to several million dollars."Nothing has changed regarding budget actions to be taken by agencies," Mr. Gallagher said.

It's almost "deja vu all over again" for Carroll budget officials, as estimates of the state's growing shortfall bring the promise of another summer of spending cuts on the county level.And although neither the state nor the county has made any decision on how to deal with what looks like a $240 million deficit for the budget year that began two weeks ago, the cut to Carroll could total as much as $5 million."That's certainly our worst-case scenario, but it is possible," said Steven D. Powell, the county's budget director.

Carroll County's budget deficit nearly doubled last week to $5.3 million, spurring immediate budget cutbacks, reduced work forces and, for the first time, talk of a possibility of layoffs."

ANNAPOLIS -- The Schaefer administration and the Maryland Association of Counties formally threw their support yesterday behind the House speaker's budget-balancing plan.The move could begin to break the General Assembly's deadlock on budget and tax issues.The plan put together by House Speaker R. Clayton Mitchell Jr., D-Kent, attempts to address a current budget year deficit estimated as high as $270 million. Its two most controversial provisions call for another $88.5 million reduction in state aid to Baltimore and the 23 counties, plus a temporary shift of $80 million from the state's Transportation Trust Fund to the general treasury.

In Annapolis, few words in the English language are as abused as the term "budget surplus. " Case in point: the noises being made in recent days by some public employee unions that a slight improvement in tax revenues ought to end up in the pockets of state workers. Their target is the fund balance — the alleged surplus — left over in the fiscal 2010 budget that ended June 30. It takes time for the state to close out its books, but it appears Maryland will end up $300 million in the black, which is as much as $150 million greater than expected.

Thursday begins the 2011 budget year for Baltimore County. This is an opportune moment to assess where the local economy is headed and whether a course correction is needed. When the housing bubble burst in 2008, the damage was widespread. In order to prevent a complete collapse of the financial system, the federal government lowered interest rates to near zero, bought billions of dollars worth of bad mortgages, bailed out big banks and insurance companies with loans or equity investments and increased its debt burden by over 22 percent to $7.8 trillion in 2009.

A spending committee in the House of Delegates has rejected a proposal that would have eventually transferred about $337 million in annual teacher pension costs from the state to local governments, stalling a Senate-approved plan to help balance Maryland's budget. The House Appropriations Committee recommended on Friday a study of the implications of the cost shift, instead of beginning the effort next year. "A step of that magnitude could only be done after a comprehensive study," said Del. Norman Conway, and Eastern Shore Democrat and head of the spending committee.

Budget analysts for the General Assembly are urging legislators to divert almost $60 million a year that had been intended for the state's Transportation Trust Fund to general use starting in 2013 - a move opposed by the state Department of Transportation. The Department of Legislative Services said the move would "relieve funding pressure on the general fund." The recommendation came at a budget briefing held Wednesday before the Senate Budget and Taxation Committee, where lawmakers questioned state Transportation Secretary Beverley K. Swaim-Staley on her department's plans and priorities at a time of slumping transportation revenue.

As the Maryland Transportation Authority's revenues have declined this year, its costs for construction of the Intercounty Connector have risen to the point where the project now accounts for 53 percent of the agency's budget - forcing delays in other road maintenance projects and making a substantial increase in tolls at some facilities a near certainty after the 2010 gubernatorial election. According to the state Department of Legislative Services, the independent toll authority is facing the same type of recession-related squeeze that has forced the Maryland Department of Transportation to defer about $2.2 billion in projects.

As the Maryland Transportation Authority's revenues have declined this year, its costs for construction of the Intercounty Connector have risen to the point where the project now accounts for 53 percent of the agency's budget - forcing delays in other road maintenance projects and making a substantial increase in tolls at some facilities a near certainty after the 2010 gubernatorial election. According to the state Department of Legislative Services, the independent toll authority is facing the same type of recession-related squeeze that has forced the Maryland Department of Transportation to defer about $2.2 billion in projects.

Maryland tax collectors are taking in money at a pace far greater than expected just weeks ago, creating a financial cushion that will help pay for daunting education, health care and other budget needs during the next two years. Payments with income tax returns came in at $210 million more than anticipated last month, Comptroller William Donald Schaefer announced yesterday. Other tax collections also were higher, and the state has received $250 million more for its $11 billion general fund budget than expected in March, the last time projections were revised, Schaefer said.

Even as his administration plunges forward with a plan to cut hundreds of millions of dollars from the state budget, Gov. Robert L. Ehrlich Jr. said yesterday that the initial pain may not be as severe as some are expecting. "The first round here may not be as dramatic as people think," Ehrlich said. The governor said he and his budget secretary continue to review cost-cutting proposals submitted by agencies. While Ehrlich had previously said he hoped each department comes up with a 7.5 percent reduction in the budget year that begins July 1 - for a total savings of up to $500 million - some of those numbers have been changing.

Gov. Martin O'Malley wants to balance next year's state budget by laying off 700 workers, slashing programs and relying on balance-sheet maneuvers. Facing a $2 billion shortfall, O'Malley proposed yesterday that the state's operating budget shrink by 1.3 percent, to $14.4 billion, which is the first year-to-year decrease offered by a governor in decades. With Congress debating a fiscal stimulus package, O'Malley also assumes that the state will receive $350 million in federal aid to help fill the gap in the budget year that begins in July.

A national economic meltdown has sucker-punched Maryland, according to state revenue numbers released yesterday portending major budget cuts in previously protected areas such as public safety, education and health care. A grim-faced Gov. Martin O'Malley issued an executive order requiring about 67,000 state workers to take up to five days of unpaid leave, and he said a projected $1.9 billion revenue gap in next year's budget could require state worker layoffs.