A national recession may inhibit the revenue growth of Washington area governments, but probably won't place any upward pressure on spending except in the District, where welfare and other public payment programs may soar, according to a recently released report.
While many economists grope to determine whether there is a recession already and if not when it will appear, the report prepared for the Center for Municipal and Metropolitan Research said that "the effect of a severe national recession on local government finances is hard to predict because it is unclear how a recession will affect the overall local economy."
While commending the six major local jurisdictions -- the District, Alexandria, and Montgomery, Prince George's, Fairfax and Arlington counties -- for good fiscal management during 1977 and 1978, the report also warns of hard times, particularly for the District and Prince George's County.
Some Washingtonians boast that the area is recession-proof because of the presence of the federal government and all of the local jobs it produces. But the report said, "This has not been entirely true. In the 1974-1975 recession, unemployment increased sharply in the area, especially in the District . . . construction activity lagged, and vacancy rates in office buildings increased.
"While none of these symptoms should translate directly into a major loss of local government revenue or an increase in demand for local services, it should be noted that fiscal year 1976, a year that began at the depths of a recession, was not a good one financially for local governments," the report continued.
The District, however, is the only jurisdiction that could experience spending problems because it is the only area government with direct major spending responsibilities such as welfare, Medicaid, food stamps, public hospitals, subsidized housing and other costs which generally increase in hard times, the report said.
"Some of the other governments are partially involved in such programs, but the portion of their total spending attributable to them is so small that the local budgets are unlikely to be materially affected by any change in service demand," the report said.
In Princes George's County, the TRIM amendment to the county charter limiting the total of collectible property taxes to $142 million might cause a rapid depletion of the county's surpluses if demand for public services were to increase, the report said. The amendment would prevent the county from raising taxes to fund any increased demand.
"It may be possible to work out a careful program of selected revenue increases, together with expenditure restraint, that will enable Prince george's County to meet its needs while maintaining its health," the report said.
The report concluded, however, that "the relatively strong financial condition of the governments at the end of 1978 should enable them to survive a moderate recession without undue strain or peril to their financial health."
Generally, the six jurisdictions have benefited from higher revenues from income taxes, rising property values and a decline in the school-age population reducing the need for education expenditures, the report said.
The governments also "maintained their fiscal health while ap- parently meeting the needs of residents and businesses," the report added. "Welfare payments generally kept pace with inflation, and the area was able to absorb the fiscal burden of the new Metrorail system."
But because of usual political considerations such as tax cuts despite spending needs and balancing budgets with windfall revenues, "There can be no assurance that because local governments are presently in good fiscal health, their future fiscal health is assured."
Nevertheless, in 1977 and 1978 the major area governments maintained a good overall balance between revenues and expenditures, the report said. "This two year performance follows a poor showing in 1976."
Particularly heartening was that revenues surpassed expenditures for the District in 1977 and 1978. "The city's expenditures had exceeded revenues in six of the eight years prior to 1976," the report said.
Fairfax County "is budgeting very close," the report added, "and has shown an imbalance in two of the latest three years, but the size of the 1978 imbalance is so small that it is not significant."
The rate of increase in expenditures for all the governments rose from 8.1 percent in 1977 to 12 percent in 1978, while revenues dropped from 14.8 percent to 11.6 percent, "not a desirable trend," the report added.
In another area, all of the local governments except Alexandria have improved their overall liquidity in the past few years, the report said. The local governments also experienced an overall increase in unrestricted reserves from a $50 million deficit in 1976 to a $52 million surplus in 1978, "a remarkable improvement resulting from the healthy excess of revenues over expenditures in 1977 and 1978 . . . "
All of the regions except Prince George's have been creating new debt faster than they have been repaying the old, the report said, resulting in a 15.2 percent increase in total debt outstanding from 1976 to 1978.
On the whole, the report looks favorably upon local governments, but it attributes their success to two factors beyond their control: a prospering economy and a decrease in school enrollments.
The economic boom "has fueled an exceptionally strong growth in local government revenues,' for example, 14.8 percent in 1977 and 11.2 percent in 1978, the report said.
The most direct effect of the boom is the growth of the property tax base. In addition, total income in the jurisdictions has risen.
The District, however, has been unable to capitalize on all of its economic growth, the report said. Although income earned in the District increased by 19.5 percent, not taxable income increased by only 11.5 percent because the city can tax only the income of residents, the reports said. On the