Montgomery County Executive Sidney Kramer has declared a hiring freeze, halted travel and made other spending cuts as the economic slowdown pinching governments around the Beltway could mean a budget shortfall in Montgomery of up to $68 million.
Kramer administration officials, who earlier had projected a $30 million shortfall because real estate and income tax revenue were lower than expected, announced the immediate cost-cutting measures during a briefing yesterday morning of County Council members.
The hiring freeze was imposed on the county's entire 7,000-member work force, although county officials stressed that there would be exceptions for such essential personnel as police officers, firefighters, corrections guards, school-crossing guards and bus drivers.
All county travel has been curtailed and department heads have been told to delay any major purchases or contracts.
"Grim is the word to describe it. Absolutely grim," council President William E. Hanna Jr. said as county budget officials reported on Montgomery's worsening fiscal situation.
The most optimistic forecast was for a budget deficit of $41 million, but officials said the gap in this year's $1.6 billion budget could grow to as much as $68 million. And 1992 could be worse, with budget officials suggesting a total two-year deficit of $145 million. Even if those deficits prove true, county government would continue to grow; the budget for the fiscal year ending on July 1 is 9.7 percent higher than that of the previous year.
Montgomery's plight mirrors the problems of other jurisdictions in the Washington region.
Prince George's County officials already have limited hiring and spending in a bid to close a budget gap of $36.5 million; Fairfax County officials have directed all agenices to cut spending by 5 percent; and in the District of Columbia, where a budget deficit of $364 million looms, there is the threat of worker furloughs and stiff new taxes.
Maryland officials anticipate a state budget deficit of $270 million and have curbed hiring, travel and the purchase of new vehicles. In Virginia, state officials are wrestling with where to trim $1.4 billion from its biennial budget.
"Look around the Beltway. It's the same thing in Fairfax, Prince George's. It's just now happening here," said Montgomery Budget Director Robert K. Kendal.
Montgomery officials said that because the pace and price of home sales are down, the revenue received from transfer and recordation taxes is already $3.5 million off projections, a drop of 20 percent. If the trend continues, the county could face a loss of as much as $23 million in the current fiscal year.
Kramer said in an interview that there was no way of anticipating the county's problems. "It was a surprise," he said.
However, some of the county's problems are not related to current slowdowns in the economy but stem from faulty assumptions about income tax revenue. The county also reduced revenue when it slashed the property tax rate by 16 cents, a move sparked by a mounting taxpayers' revolt over soaring assessments.
County officials said revenue from tax collections on income earned in 1989, an amount that is not tied to current economic problems, is already down by $25 million, and the county could see an additional loss of $17 million before the end of the fiscal year. Kendal said county officials don't know why their estimates were off, but it appears to be related to the taxes paid by people earning more than $200,000.
The county has a surplus of about $41 million, although most officials are reluctant to use it. The county also can use some money set aside for building projects, which could be delayed or financed through the sale of bonds.
The budget problems did not prevent the council yesterday from spending $1.2 million for 66 new take-home police cars. The council did reject spending $400,000 for additional library books and video equipment and cited the fiscal problems.
Montgomery's schools and other agencies, such as Montgomery College and the Park and Planning Commission, are not affected by Kramer's order, but county officials said they would ask them to make voluntary spending cuts.
School officials said they have had a hiring freeze for most non-instructional staff since July to deal with a reduced appropriation from the county and that increased gasoline costs and larger-than-expected student enrollments make the tight school budget even tighter.
"Montgomery County has never faced anything like this," said council President Hanna.
District of Columbia: $364 million.
Fairfax County: Up to $40 million.
Montgomery County: $41 million to $68 million.
Prince George's County: $36.5 million.
State of Maryland: $270 million.
State of Virginia: $1.4 billion over the next two years.