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November 27, 2002

Much Ado About A Real Big Problem

John W. Ashbury

We are in for tough times. If you donít believe me, ask the governor. Or, perhaps, the county commissioners.

In recent days both the governor and the county commissioners have taken steps to address what is perceived as a major shortfall in revenues in both this yearís budget and next.

Governor Parris N. Glendening announced last week that he was suspending state employee bonuses for all those making more than $60,000 a year. He also told state officials to begin collecting the full amount of state withholding taxes. And he dipped again into the rainy day fund, from which he had already taken more than one-half a billion dollars.

All these measures, and more, are designed to meet a $498 million deficit in the current state budget. However, state fiscal officials say the deficit is $590 million. Leaves a hole for the new governor to make up, doesnít it?

On the local front, County Manager Doug Browning told the Board of County Commissioners, including those who will take office on Monday, that new monies for next year will only be $17.2 million more than this year. He said property tax revenues will increase only $9.9 million; income tax revenues will jump only $4.4 million; and the fund balance from last year is only $9.8 million. But other sources of revenues will decline, leaving a total of only $17.2 million to play with.

Fixed costs will increase in such areas as health insurance, debt service, employee salaries, etc. In debt service alone the county will be spending an additional $5.1 million.

So with the prospects dim, the commissioners divided up the prospective pool of funds as follows. The Board of Education will get $159 million from the county, down from the staff recommended $160.8. The county commissioners will get $161 million, down $1.2 million from staff recommendations. And Frederick Community College will get $9.6 million, down $200,000.

All of this is preliminary. It is only a mark to shoot for. And the new commissioners can change all of it at their first meeting next Tuesday.

But Commissioner Jan Gardner was so upset by the decisions, that she stormed out of the hearing room, slamming the door behind her. Her objections may have been well founded, but her actions do not bode well for the next four years when she is likely to find herself on the short end of numerous 3-2 votes - like those last week.

What makes all of these machinations almost useless is the state deficit for next year, currently estimated at about $1.5 Billion.

When last the state faced a shortage of funds, the governor and General Assembly reduced the allocations to the counties, forcing them to make the tough decisions rather than themselves. That was in the early 1990ís. Times got better quickly, but those dilemmas scared every local politician around at the time.

Should this happen again, county employees, as well as those at the BOE and at FCC, can kiss any pay raise goodbye. The commissioners cannot dictate how the school board dispenses its funds, but the pressure will be intense to hold the line on salaries, and provide the necessary funds for the classrooms.

This yearís budget negotiations in the Spring got down-right nasty between the BOE and the commissioners. It will get a whole lot worse if the state cuts back any of its funding to the county.

And in this mix will be the Thornton Commission monies the county is slated to receive in Fiscal Year 2004. (Weíre in FY 2003 right now.) These funds are supposed to enhance the education of the children. And, although there is already heavy lobbying to put it all into salaries for members of the Frederick County Teachers Association, this action would not necessarily enhance the education of the children.

The stateís problems are far greater at this point that those facing the commissioners, the BOE and FCC. Governor-elect Bob Ehrlich must immediately address that projected deficit for next year.

He is getting advice from all sorts of circles, but one will get high priority - The State Department of Fiscal Services. Already officials there are suggesting the following cutbacks:

(a) eliminate all raises for state employees; cut state employee salaries by one percent; increase state employee contributions to their health insurance; and lay off 1,000 employees.

(b) Hold the line on aid to higher education.

(c) reduce services to the mentally ill.

(d) hold back $100 million in aid to the counties; make local jurisdictions responsible for future increases in teacher retirement; cut one percent in general aid to the counties, community colleges and health departments.

(e) raise the top income tax rate to 6 percent (those making over $100,000 per year).

(f) increase the sales tax to six percent.

(g) increase the state property tax from 8.4 cents per hundred of assessed value, to 14.4 cents per $100, a 71.4 percent increase. And

(h) double the tax on alcohol beverages, which hasnít changed since 1955 for liquor, and since 1972 for beer and wine.

All of these measures will not be passed by the General Assembly and/or signed by the governor. But some of them will, and we will have to hold our breath until early April to find out which get the nod.

Thomas Paine wrote in December 1776 that "These are the times that try menís souls." He was right, of course, for his day. But with the fiscal prospects so dim in the coming months, those times may have returned - for different reasons.

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