County shortfall at historic levels

The county's budget deficit has quickly grown to what could be the largest financial hole in county history, prompting County Executive John R. Leopold to impose a spending freeze until July.

Financial estimates released yesterday show the revenue gap widened by $15 million since the end of September to $36 million, losses spurred by the poor economy, the sliding stock market and the dismal real estate market.

Mr. Leopold suspended all travel expenses and stopped the purchase of new fire trucks, ambulances, police cruisers or computers until next year, a move that will save about $3 million.

"We continue to receive sobering news stemming from a struggling economy, and this administration continues to take prudent steps to keep our budget solvent," Mr. Leopold said in a prepared statement. He went on to predict next year may be more grim.

"Next year is showing signs of being possibly the most challenging budget year this county has seen," Mr. Leopold said.

The $36 million hole appears to be the largest in county history, according to previous articles in The Capital. County Budget Officer John Hammond also could not recall a larger one.

Even if the deficit does not grow larger, the county will come up 3 percent short of revenue estimates. The last time the county was 3 percent short was in 1992. At that time, the county cut 10 percent of its workforce, cut wages for other employees, forced teachers onto furloughs and collapsed six county departments into three.

More cuts are likely to be on the horizon if the gap widens, and Mr. Leopold says he can't predict whether the revenue drop has hit bottom yet.

"I hope so, but who knows," Mr. Leopold said.

Mr. Hammond said this morning that although November's receipts have not been collected yet, there appears to be another drop in the taxes garnered from the transfer of property.

"Every month I say we hit the bottom," Mr. Hammond said. "I hope I'm not saying that for five years."

Already, Mr. Leopold has frozen most vacant county jobs, eliminated a take-home car program, asked departments to trim their budgets, and declared there would be no performance pay raises for his cabinet.

The new purchasing freeze will suspend the annual purchase of about three fire trucks, five ambulances, 50 police cruisers, heavy equipment and other vehicles used by the public works department, a new human resources computer system and equipment used in elections.

"They (the cuts) are not associated with people, which would require layoffs," Mr. Leopold said. "That's something that I'm not going to do."

In a rare joint statement, Schools Superintendent Kevin M. Maxwell pledged to work with Mr. Leopold to make ends meet.

In the past, Dr. Maxwell regularly locked horns with Mr. Leopold over finances. This spring, Dr. Maxwell accused him of breaking promises to teachers and shortchanging schools, memorably quipping that, "If you want a Mercedes, you have to pay for a Mercedes. And we didn't even ask for a Mercedes. We asked for a Chrysler, and we got a pogo stick."

But as the county braces for the recession, the two have been meeting on a monthly basis, trading and crafting plans for the future.

Dr. Maxwell's spokesman Bob Mosier said the meetings have produced more communication and collaboration. He predicted Dr. Maxwell's next budget will be "very austere."

A fiscal taskforce Mr. Leopold formed earlier this year predicted a cumulative $250 million shortfall over the next four years unless the county dramatically changed its spending plans.

The $36 million gap revealed yesterday stems mainly from the housing industry. Tax money generated when property changes hands is down $23 million from projections - $13 million more than the shortage county budget analysts estimated in October. Revenue from the county's investments are also down by $3 million - $2 million more than budget analysts earlier predicted.

Income from sales tax, property tax, and shared state revenues remained relatively flat. Income tax is expected to come up $7.5 million short and revenue from licenses, permits and other sources is estimated to be down by a combined $2.6 million.