A lot of what goes on in the City of Baltimore government has an ad hoc, ill-considered feel to it, and adoption of the city budget for FY 2018 was no exception. Rather than work within the restraints of the “executive budget system” mandated by the city charter, the city council worked around the legal limitations on its power by what politely could be referred to as hostage-taking and extortion. Heaven forbid that council members should try to gain voter approval of a charter amendment allowing them to do what they want to do – that would involve the risk that the voters might tell them “No.”
Baltimore city leaders announced last week that they had agreed on a budget after weeks of acrimonious disagreement between members of the City Council and Mayor Catherine Pugh. The compromise appears reasonable, at least on its face, with $7.58 million in spending shifted in the budget for the coming year, with most of it going to Baltimore’s public schools. That does nothing to change my reservations about the nonsense that went on this year and last and I do not believe that it necessarily bodes well for the future.
The budget process always involves some contentiousness but in the last two years in Baltimore that contentiousness has risen to the level of open revolt by members of the City Council against the mayor. Last year Council President Jack Young threatened to shut down the government if former Mayor Stephanie Rawlings-Blake did not add funding for services to children and youth that he deemed important.
This year the council held programs and projects near and dear to the mayor hostage, threatening to defund the programs and projects unless the mayor amended the budget to fund the Safe Streets program and other programs and projects intended to benefit children and youth that council members wanted funded. Andrew Kleine, the city’s budget director, became a lightning rod for the council’s unhappiness and the council communicated its displeasure at him by voting to defund the entire Bureau of the Budget and Management Research that he supervises.
Although it was never likely that the council would leave funding for the budget office out of the budget as finally approved, Mr. Young believed that voting to defund the mayor’s budget office was necessary to prove to the mayor that the council was not “playing.”
The Baltimore Sun editorial board heaped praise on the council for its asserting itself. That is fine except for the fact that in the process of doing so the council revolted not only against the mayor’s proposed budget but also against the so-called “executive budget system” established by the city charter. The city charter is the “constitution” of the city approved by its voters. Members of the council obviously didn’t like the legal budgetary framework approved by the voters so they have found a way to work around it. Basically, they said to hell with the law.
Under the city’s executive budget system, the council may reduce but not increase the amount of the expenditure proposed by the mayor for a program or project. Consequently, even if the council reduces the expenditure proposed for one program or project it may not use the savings to increase the expenditure for another program or project unless the mayor agrees to amend the budget to do so.
The city’s executive budget system is modeled on the state’s executive budget system, which was adopted in the early part of the 20th century in response to a fiscal crisis. Of the eleven charter home-rule counties in the state, seven (Anne Arundel, Baltimore, Cecil, Frederick, Harford, Howard and Wicomico) have charters that establish executive budget systems similar to the city’s.
Three of the remaining charter counties (Dorchester, Prince George’s and Dorchester) have charters that allow their county council to increase the amount of an expenditure proposed by the county executive for a program or project but not add new programs or projects. The Montgomery County charter allows the county council to add programs or projects to the budget but gives the county executive line item veto authority over the budget as approved by the council.
According to the mayor’s statement part of the deal with the council is that more money will be allotted to the Baltimore City Public School System. State enabling law in the Education Article provides that the city council would have the power to restore cuts made by the mayor to the budget submitted by the school system upon adoption of a charter amendment by the city implementing the power. The city has never adopted such an amendment.
In other words, there is a right way for the city council to do what it seems to want to do, and that is to ask the voters of the city to approve an amendment to the city charter giving them the power to add expenditures to the budget that county councils in some counties have, and the power to restore any cuts made by the mayor to the school budget. I hasten to add that I am not suggesting that a change to the city’s current executive system is prudent – I think a lot more thought should go into giving the city council any more control of the budget.
The city council did gain the approval of the voters in 2016 to an amendment to the executive budget system that requires setting aside a fixed percentage of the city’s revenue each year for the so-called Children and Youth Fund. Ironically, in a post criticizing the idea I suggested that, as an alternative, the charter be amended to allow the council to move money between items of expenditure if the concern was that mayors were not giving sufficient priority to funding programs and services for children and youth.
Dedicating (or “earmarking”) by law a fixed percentage of revenues for expenditure for only certain purposes violates every principle of modern municipal budgeting, not the least of which is the need to retain the flexibility to adjust to crises and changes in circumstances. Also, rating agencies and lenders get nervous if there are legal impediments that prevent revenues from being used to pay the principal and interest on city bonds and that nervousness can translate to higher interest rates charged to the city.
I saw and still see modifying the executive budget system to allow the council to move money around as less destructive to the city’s financial well-being than hard-wiring expenditure levels into the city charter. Time will tell if the Children and Youth Fund turns out to be anything other than a massive boondoggle; rather than allocate the money in the fund through the city budget Council President Jack Young is determined to use the fund for a separate grant-making operation over which I am sure he will exercise considerable control. We’ll see how well that turns out.
A strict executive budget system does tend to tamp down expenditures. The old saw about a camel being a horse designed by a committee applies to a budget put together by 15 members of the city council. Gaining consensus from such a large group usually involves spending a little more money here and there; each member has his or her own idea on how to best spend the available money and that is particularly true because each member, except the president, represents a separate district.
Although I have no idea whether the criticism of Mr. Kleine by certain members of the council was fair, I do pity him a bit. The chief budget officer in any municipal government tends to be a little stingy and that is because he or she is charged with keeping one eye on the creditworthiness of the city or county. If bond ratings slip because of concern over how the city manages its finances borrowing can get a lot more expensive.
I am sure that Mr. Kleine was trying not to use any more of the anticipated surplus from FY 2017 than necessary as a hedge against a shortfall in the FY 2018 budget. For one thing, the police department is nowhere near getting its overtime situation under control. There also is a pension lawsuit that could cost the city considerable money, and the DOJ consent decree is a fiscal wild card. The city could very well face a pinch in the fourth quarter of FY 2018 that would only get worse if revenue estimates prove over-optimistic.
In any event, Mr. Kleine got no thanks for his efforts at fiscal prudence and the comment by Mayor Pugh that “the budget process next year will be very different” came across as a rebuke directed at him. Given that it is the mayor who makes the policy decisions on the budget her remark was not exactly a reassuring sign of leadership.
It has been a dreary two years for the city. I wish I could muster a little more optimism, but this year’s budget circus could be a sign of even more fractious times to come.
June 11, 2017