Schools, Libraries Could Suffer as Counties Face Budget Stress

… Another lean spending year as property value declines catch up with revenues …

baltimoresun.com

By Larry Carson, The Baltimore Sun

5:27 PM EDT, April 10, 2011

Residents of Baltimore’s suburbs could see another year of reduced services, as counties continue to feel pressure on two key sources of revenue: state aid and property taxes.

The fiscal strain could mean reduced library hours in Anne Arundel, more crowded classrooms in Baltimore County and economies like reusing old furniture in a new Carroll County school.

County employees, meanwhile, are facing more pay freezes, furloughs and, for some, perhaps layoffs.

“Fiscal year 2012 is the most serious and difficult challenge the county has faced during my tenure,” said Anne Arundel County Executive John R. Leopold, a Republican in office since December 2006. Anne Arundel employees face 12 days of unpaid leave worth 4.6 percent of their pay,

The state government saw a more immediate effect from the recession, as sales and income tax revenue were hit hard. County governments, which depend more on property taxes, are just now hitting bottom.

“The largest driver of local government revenues is the property tax, and that’s going to be flat for quite some time” because of falling assessments, said Howard County Executive Ken Ulman, a Democrat who is also president of the Maryland Association of Counties this year.

Harford and Carroll counties already have revealed plans that show minimal spending increases, and Carroll’s commissioners want to cut the property tax rate. Some counties are seeing a glimmer of light in rising income tax revenue, while others are still facing serious shortfalls.

Cost shifts

County leaders are grateful they escaped the big hit they all feared — a shift in the burden for paying teacher pension costs from state to local governments. But the General Assembly still added to local government woes with a shift of other, much smaller costs.

For instance, counties must pay the administrative costs for those teacher pensions next fiscal year, and for two years must pick up 90 percent of the cost of running small state assessment offices in each county seat. After that, the local share would revert to half the cost.

State legislators also helped local jurisdictions by adding back $58.5 million in school funding and $13.2 million for local roads next fiscal year, but that won’t make up for the reduction in state roads funding for counties that dropped from $555 million in fiscal 2007 to $134 million in fiscal 2012.

In Arundel, Leopold wants to cut $15 million from schools, and he’s struggling to close a projected $75 million revenue gap despite a variety of belt-tightening moves. He’s hoping slots revenue will begin to flow from the Arundel Mills mall casino by year’s end.

Meanwhile county residents are worried about more cuts. Library patrons in Anne Arundel rallied during March at four standing-room-only meetings to advocate for the 10-library system.

Library spokeswoman Laurie Hayes said that over the past four fiscal years, the system has lost 16 percent of its budget, including 18 jobs and one-third of the money for buying new books and materials. Leopold requested another 10 percent cut in his next budget, a figure that would force all but one of the county’s 10 branches to close on Sundays and possibly eliminate Friday daytime and Thursday night hours.

“A lot of us can’t afford to buy our books at Barnes & Noble and Borders,” said Tracy Gill, of Annapolis, who uses the Eastport Annapolis Neck branch. “The library is essential,” she added because people go there who don’t have home computers, and children do their homework there after school.

In Towson, newly elected Baltimore County Executive Kevin Kamenetz, a Democrat, is sticking to a school board decision to cut 196 teaching jobs to save $15.8 million, and faces other gaps such as a $9 million underestimate for school system health care and more than $7 million in state aid shifts to locals with surplus funds.

“The reality is that the economic recovery has yet to be felt,” said Don Mohler, Kamenetz’s chief of staff. He noted that the county spent $587 million in debt-reducing cash on capital projects between fiscal 2005 and 2010, but just $600,000 is available for fiscal 21012.

Fiscal 2013 looks no brighter, he said.

Still, given the overall fiscal woes, no local leaders were expecting major financial help from the state. Against that background, “we’ve been treated very well,” said Michael Sanderson, executive director of the Maryland Association of Counties.

Generating revenue

“Probably the biggest issue around here is whether anybody is going to buy a house,” Sanderson said. Homes provide the biggest source of local revenue by far through property taxes that are roughly half most local government’s revenues, plus real estate transfer and recordation taxes..

Howard County might be in the best shape, with no revenue shortfall looming, $10 million in cash for capital projects, and income tax revenue ticking up. Ulman said there’s a “good chance” that county employees could avoid unpaid furloughs for the first time in three years when he presents his budget proposal this month, but he made no promises.

“We’re not out of the woods or close to being out of the woods,” Ulman said, though he’s “cautiously optimistic” that things are improving.

Carroll and Harford counties, both run by conservative Republicans, are also still operating frugally. After double-digit drops in major revenue this fiscal year, both project higher income tax returns, and Harford has some surplus funds to spend. Both counties saw small reductions in school enrollments, too, which means they need less money to satisfy the state’s maintenance-of-effort law, which requires that per-student funding remain at least level from year to year. Counties that do not meet that requirement can lose state assistance, and Leopold has asked for a waiver of the rule for Anne Arundel county.

Harford County Executive David R. Craig’s spokesman, Bob Thomas, said, “There are no funds available for [pay] raises. The county’s revenue outlook remains flat.” Harford must absorb a 15 percent increase in employee health care costs.

Despite predictions that fiscal problems will continue, Carroll County’s revenue is projected to rise 5.3 percent in fiscal 2012, and Carroll’s commissioners have discussed cutting 2.5 cents off the property tax rate, which budget director Ted Zaleski said would cost about $5 million. Carroll’s workers have not had furloughs, but also haven’t had pay raises and none are planned next fiscal year either, Zaleski said.

Doug Howard, the Republican president of the five-member Carroll County Board of Commissioners, said the group “felt compelled” to cut taxes “because we ran on that. We just feel like as tight as it is for government, it’s even tighter for our constituents.” The county has cut $8 million in capital projects, delayed $20 million more and has tried to find savings in virtually every program, he said.

The prospects for county revenue are not likely to improve over the next three years. Because of assessment caps that limit the amount of increased home value that can be taxed each year during good times, counties continued to get healthy revenue growth from property taxes — even as values began a downward spiral — while homeowners caught up.

But now that cushion is largely gone. Since property taxes make up roughly half of local government revenue, that has a huge effect.

“Back in 2008, when the state was in freefall, counties were doing fairly well,” said Raymond S. Wacks, Howard’s budget director. “Now the shoe is on the other foot,” and since the state reassesses property only once in three years, counties must expect mostly flat property tax collections until at least 2014.

Baltimore Sun reporters Mary Gail Hare and Raven L. Hill contributed to this article.

larry.carson@baltsun.com

Copyright © 2011, The Baltimore Sun

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