Counties Envision Cutbacks in State Funding
Governments 'Have to Be a Part of the Solution' as Md. Confronts $1.5 Billion Shortfall, Delegate Says

By John Wagner
Washington Post Staff Writer
Sunday, August 12, 2007

Hundreds of county officials from across Maryland are convening this week in Ocean City for an annual conference typically remembered as much for its golf tournament, crab feast and late-night outings to watering holes as for its panel discussions.

But belying this year's merriment is a growing concern that county governments could take it on the chin as state lawmakers confront a $1.5 billion shortfall in the budget they must balance next year.

State aid to local governments has swelled in recent years, now accounting for about 40 percent of Maryland's $15 billion general fund budget. The growth, from less than 32 percent six years ago, has been fueled largely by record state investments in public education. The state also helps counties pay for law enforcement, health programs and other services.

That aid has become an inviting target for lawmakers as they consider increases in the state sales and income taxes, among others, and weigh potentially painful cuts to state services.

Lawmakers are also mindful that in recent years many county employees have enjoyed raises more generous than their state-level counterparts' and that many jurisdictions are sitting on far healthier reserve funds than the state's.

"The counties have received a huge boost in local aid . . . and they're going to have to be a part of the solution," said Del. John L. Bohanan Jr. (D-St. Mary's), a leading voice on the House Appropriations Committee. "That doesn't mean we whack them and do nothing else. But everyone's going to have to step up."

David Bliden, executive director of the Maryland Association of Counties, which is hosting the conference, has started cautioning state legislators against a "shift-and-shaft strategy." State aid is the largest source of revenue for most Maryland counties, and cutting it would leave many jurisdictions with little choice but to raise property taxes, he said.

"If we're simply going to pass the problem on to local communities, that doesn't solve the problem," said Montgomery County Executive Isiah Leggett (D), who said his jurisdiction is facing a $270 million shortfall of its own next year, which could prompt a tax increase even without state cuts.

County leaders have found an ally in Gov. Martin O'Malley (D), who during his seven-year tenure as mayor of Baltimore was an outspoken opponent of proposals to cut state aid to his city and Maryland's 23 counties.

As governor, O'Malley has pledged to do all he can to prevent a "shell game" solution to the state's budget problem. But O'Malley, who is scheduled to address county officials next Saturday in Ocean City, has also acknowledged that he is not the only player in the budget process.

Del. Murray D. Levy (D-Charles), a former president of his county's Board of Commissioners, said he is sympathetic to county arguments. But Levy, who now sits on the House appropriations panel, said: "My advice to the county is to get ready. I think it is unlikely they will escape cuts. That's the way a lot of people in the legislature feel."

At O'Malley's suggestion, Bliden's organization has been gathering worst-case scenarios from county leaders to illustrate the impact that major cuts in state aid could have. Counties were asked how they might meet reduction targets that averaged 10 percent but varied from county to county in a "doomsday" budget scenario recently generated by state legislative analysts.

Montgomery suggested that to meet its target of 24 percent, the county could eliminate 1,230 teachers, 95 police officers, 96 firefighters and 80 correctional officers, as well as close five libraries and 22 recreation centers and reduce spending on programs serving those without health insurance, with developmental disabilities and with other vulnerabilities.

Prince George's, meanwhile, said that to meet its 8 percent reduction target it might be forced to reduce spending on the homeless, mentally ill, at-risk youth and low-income pregnant women. The county might also have to impose a hiring freeze, cancel cost-of-living increases for employees and delay the opening of a library, according to a document submitted by County Executive Jack B. Johnson (D).

Some state lawmakers are quick to dismiss such scenarios as far-fetched and suggest that the consequences of cuts in state aid would likely be far more modest.

"I don't think the cuts are going to be of a magnitude where a prudent county will be damaged," Levy said, noting that the state's budget problems have been widely known for years. "It will be a sock in the nose. It won't be pleasant, but they'll be able to survive."

Last month, Sen. E. J. Pipkin (R-Queen Anne's) blasted Bliden and O'Malley for engaging in the "doomsday" exercise. Invoking a recently ended HBO series, Pipkin said the tactics "resembled the type of arm-twisting used by Tony Soprano and his ilk." The effort is "an arrogant and shameless blueprint for getting locals to back tax increases" at the state level, Pipkin said.

Republican leaders in Annapolis have yet to offer a long-term budget fix but say that in coming weeks they will present options that do not require tax increases on the state level.

Talk of cutting state aid to local governments gained momentum this summer when legislative analysts gave lawmakers options for closing the state's budget shortfall without raising taxes.

Under the "doomsday" scenario they offered, Montgomery, the state's largest jurisdiction, would lose the most aid next year, $155 million, followed by Prince George's, which would lose about $90 million.

Analysts suggested that lawmakers review the state's practice of paying the retirement costs of teachers employed by the counties. Shifting half of that burden to the counties could save the state more than $300 million a year, lawmakers were told. But counties would have to find a way to make up the difference, Bliden argued.

Analysts also suggested tens of millions of other possible reductions in education-related aid, as well as curtailing $44 million in state aid for policing and eliminating $31 million in state grants that help counties recoup revenue from a property tax exemption granted to electricity-generating plants. Anne Arundel, Prince George's and Calvert counties are the biggest beneficiaries of the latter program.

There is no dispute that counties have been more generous to their employees in recent years than the state has been.

Last year, for example, half of Maryland's counties gave employees raises of at least 4 percent, and three-quarters of counties gave their teachers raises of at least that size, according to legislative analysts.

State employees received an average cost-of-living adjustment of 2.15 percent.

Bliden said that county raises have been necessary to attract and retrain key personnel, including teachers, law enforcement officials and firefighters.

"Viewing counties as an appropriate target for cuts because they've treated critical employees fairly is misguided," Bliden said.

There is also little dispute that most counties have healthier reserves than does the state, which is holding onto little more than 5 percent of its revenue, as required by law. Many counties are retaining significantly higher percentages, but Bliden said that is the result of real-estate-driven revenue collections, "and that party's now over."

His group's annual beachside conference has become a major draw for state leaders as well as county officials. Only one session on the four-day agenda deals directly with the state's budget challenges. But state officials, from O'Malley on down, can expect to be cornered on the subject in the convention hall, at the crab feast and at an array of other receptions.

Among other things, they probably will be reminded of the early 1990s, when the state sharply cut county aid to help weather a recession.

"It's neither fair nor digestible to take that hit again," Bliden said.

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