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Spending Affordability Advisory Committee submits report for FY 2018 budget

Spending Affordability Advisory Committee submits report for FY 2018 budget

March 3, 2017

Media Contacts:
Paul Milton, Special Assistant to the County Executive, 410-313-4439
Steve Sachs, Chair of the Spending Affordability Advisory Committee, 410-209-0712

ELLICOTT CITY, MD— The Spending Affordability Advisory Committee appointed by Howard County Executive Allan H. Kittleman today presented its annual report, forecasting moderate revenue growth that will require fiscal discipline to keep up with the county’s increasing financial demands.

The 17-page report, which reviews future county revenue levels and other financial indicators for fiscal years 2018-2022, concluded that the county will face significant challenges to both its capital and operating budgets in the upcoming fiscal year as well as future years. Such immediate and long-term challenges emerged from an aging population, a shift in housing development from single family dwellings to multi-family units and likely cuts in federal and state expenditures.

“We have a responsibility to spend taxpayers’ dollars efficiently and effectively,” said Kittleman. “Our prudent approach over the last two years has helped us close a deficit and not only plan for, but also successfully manage emergencies without cutting services. The Spending Affordability Advisory Committee’s work has been critical in implementing this approach.”

Without additional revenue sources or adjustments to projected expenses, county services and capital improvement needs will outpace revenue growth, making current spending patterns unsustainable, the report indicated.

The report cautioned, as it has the previous two years, that should the county provide education funding in excess of Maintenance of Effort (MOE), it could compromise other needs in the county. County funding to Howard County Public School System (HCPSS) is nearly 58 percent of the total General Fund. HCPSS’ FY 2018 request for county funding is $64 million more that its FY 2017 budget. That amount is $57 million more than the county’s $7.7 million MOE for FY 2018.

“Meeting the full request of HCPSS’ request will not only crowd out other agencies but it will eliminate available revenue for other services,” the report concluded. “The committee encourages HCPSS to acknowledge the reality of a limited resource increase and actively look into other options beyond significant funding increases to address service needs.” For FY 2018, the county projects $40.6 million in revenue growth, $23 million less that HCPSS has requested.

Consequently, the report said it was important for community leaders and the government to understand the reality, exercise fiscal prudence and craft policies based on forecasted slower growth, demographic changes and ongoing obligations.

“The County is in solid financial shape but there are some potential storm clouds ahead,” said Steve Sachs, a respected business executive who chaired the 23-member panel. “Part of being fiscally prudent is preparing for these possible problems before they reach us. Our advice is to tighten our belt until the forecasts improve.”

The report projects that revenues for FY 2018 will increase 3.9 percent, or $40.6 million, above the approved FY 2017 budget. Additionally, the Committee recommends the county limit the next fiscal year’s bond authorization to $85 million, excluding a one-time cost of the new Circuit Courthouse project. For future years, the panel projects General Fund revenues will grow 3.3 percent in FY 2019 and between 3.6 percent and 3.7 percent in fiscal years 2020-2023.

The report indicates that Howard County has outperformed the nation and Maryland in economic, employment and population growth over the past decade. The report also expressed concerns on potentially higher service demands and slower tax revenues associated with the changing demographics and housing development patterns in the County. Moreover, uncertainties at the Federal level, including potential reductions in federal spending, will likely impact income, spending and job growth in the region, the report said.

Besides calling for expenditure control, strategic planning and process innovation, the report also offers a list of revenue options to explore that may enable the county to support its growing service needs. These include an ambulance fee, a periodical review of the allocation of transfer tax among different services and a potential increase in the transfer tax to support capital budget needs. In exploring these revenue options, the county needs to make sure it maintains its overall competitive advantage in terms of taxation, the report said.

The Committee met several times between December 2016 and February 2017, listening to and discussing presentations from economists, county agencies and local educational institutions to gain an understanding of the county’s economic and revenue outlook, debt affordability, demographic trends, economic development, long-term planning and operating and capital improvement needs.

In addition to the final report, the Spending Affordability Advisory Committee in January and February also recommended a hybrid approach to building a new Circuit Courthouse.

Howard County is one of just 44 counties among 3,000 in the United States that holds a Triple-A rating from all three bond rating agencies. The Triple-A rating is recognition of the county’s fiscal responsibility and strength.

The complete Spending Affordability Advisory Committee Report is available on-line from the County’s website at www.howardcountymd.gov/Departments/County-Administration/Budget/Spending-Affordability-FY-2018.

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