Before Baltimore County Executive Johnny Olszewski Jr. announced the proposed county budget for the next fiscal year, I had my doubts what kind of county executive he was going to be. I was worried that he would be an amicable play-it-safe politician with one eye on the governor’s mansion rather than a genuine leader intent on turning around a county showing serious signs of decay.
The budget includes a 37-cent increase in the local income rate, the addition of a development impact fee and small increases in other taxes. It demonstrates that Mr. Olszewski has the political courage to increase revenues to back up his campaign promises to preserve the quality of public facilities and services, especially schools. And that’s a big deal, especially in Baltimore County. Good for you, Johnny O.
There has been no increase in the county property tax rate since 1988 and in the local income tax rate since 1992. Without an increase in at least one of the rates the county faces a grim financial future. It already has begun the descent into mediocrity.
Make no mistake about it, Mr. Olszewski inherited a financial crisis. The county’s current revenue stream is inadequate to repair or replace aging and deteriorating infrastructure and to meet unfunded liabilities. Early last year the county’s own Spending Affordability Committee warned that the storm clouds already had gathered.
Committee members criticized the late county executive Kevin Kamenetz for failing to put together a long-term plan for funding needed capital improvements, retiree health care, and upgrades to the county’s sewer system necessary to comply with a federal consent decree. I share the cynical view that the absence of such a plan was deliberate, to try to obscure from voters the unsustainable path that the county was on. And, to be perfectly blunt, waiting until Mr. Kamenetz was at the end of his eight-year tenure in office to sound the alarm said little about the bravery of committee members.
Collapse of the Ponzi scheme
For years, the county relied on new development to generate additional property tax revenue. Unlike comparable counties, however, Baltimore County lacks a development impact fee imposed on new construction to offset the costs of expanding the capacity of infrastructure such as schools, roads, and water and wastewater facilities to handle the demands of the new construction. Consequently, general tax revenues are used to pay for the expansion.
That leaves less money for other purposes, including routine repair and replacement of existing facilities. The result is a fiscal Ponzi scheme. That scheme, which strongly favored builders and developers, is now collapsing and the full weight of paying for unmet needs will fall on ordinary taxpayers.
Digging out of a deep hole
Financial crises tend to compound themselves for both individuals and governments. As the county approaches the limit on money that it may borrow to pay for capital improvements, it faces a potential downgrade of its bond rating as concerns grow about its creditworthiness.
A reduction in bond rating means that the county would have to pay more interest to lenders. That increases the costs to the county of borrowing money and means fewer capital projects. To avoid that, the county must rely more heavily on “pay-go” financing; in other words, paying for improvements from current revenues. As of now, the revenue to do that is not there.
There was never a chance that Mr. Olszewski would find enough money by scrubbing the county budget for possible savings. Former county administrative officer Fred Homan was a master at robbing Peter to pay Paul within the county budget. Many county services have been cut to the bone, and maintenance and other expenses already deferred far too long.
County public schools are vulnerable. Middling teacher salaries and overcrowded classrooms in deteriorating buildings eventually will trigger an educational death spiral in which talented teachers and principals leave for greener pastures.
In December, Mr. Homan appeared at his last meeting of the Baltimore County Council after serving 29 years first as the county’s budget chief and then as county administrative officer. He warned council members about the financial difficulties ahead.
“What you face now going forward is going to make a very significant difference in not only the fiscal situation of the county, but the lives of citizens of the county,” Homan said. “I wish you the best.”
Gee, Mr. Homan, thanks a lot.
The least painful way to proceed
Increasing the local income tax rate is the least painful way to proceed. Increasing the local income tax rate has little if any effect on low-income residents, including seniors on fixed incomes who own their own homes. Instead, it shifts the burden of a tax increase to wage-earners more likely to have children in the public schools. That’s only fair, because spending on education consumes about 51 percent of the county’s operating budget.
County citizens share some of the blame
A succession of Baltimore County politicians mortgaged the future of the county to protect their own political ambitions. While county executives like Mr. Kamenetz bear most of the blame, the shortsightedness of an electorate with an anti-tax sentiment approaching religious fervor has been a big part of the problem. Those citizens can take the short ride into the city if they want to see what happens when a jurisdiction allows infrastructure to degrade too far.
The choices about the way forward are stark, with the trajectory of the county’s financial health and quality of life trending sharply downward. At least we now know that Mr. Olszewski has the guts to try to dig Baltimore County out of the hole dug by his predecessors.
The ball is now in the court of the county council. How many profiles in courage will we find there?
[Published as guest commentary by Maryland Matters on April 16, 2019 but not posted to my blog until December 18, 2019. The date of posting that appears above was backdated to place all posts in the order in which they were written.]