Cecil County Council Punts, So Far, on Budget; No Public Sessions Before 6/4 Vote

NEWS ANALYSIS

In less than an hour on Tuesday (5/28/2019), the County Council reviewed the complex Fiscal 2020 budget proposed by the County Executive, with few questions, no spending cut proposals and just one advocate of raiding “fund balance” reserve accounts to lower the property tax rate by slightly over a penny—a move that would contradict the executive’s avowed pledge to avoid deficit spending.

But there were indications that a majority of the Council seems satisfied with County Executive Alan McCarthy’s policy to wait until revenues are firmly in hand before allocating spending for certain projects, with the Council given authority to review and OK projects as the budget year goes on.

As in past years, the Council held department-by-department meetings with county department heads to review their spending plans for the past month. But unlike past years’ end-stage budget actions when the Council considered spending cuts and votes by members during a worksession, this time Council President Bob Meffley (R-1) gaveled the session to a close without entertaining any amendments or votes. Instead, he said, Council members would talk among themselves in the next few days and the next step would be “the vote” on the final budget scheduled for June 4.

Council Manager James Massey cautioned Meffley that if three or more councilors met to discuss the budget it would have to be a public session open to press and public. Meffley responded that councilors would talk in groups of no more than two at a time to comply with state open meetings laws.

The politically tone-deaf pronouncement by Meffley gives the public an impression, false or not, of back-room deals on the budget. But there was ample evidence, in plain view at the worksession, that a majority of the Council is not inclined to upset the fiscal applecart and leans toward support of McCarthy’s financial stability initiative, endorsed by the Council earlier this year, to boost emergency reserve funds as part of a program to assure fiscal solvency and improve the county’s bond ratings.

In particular, several Council members suggested they were pleased with how the budget process has played out in the current Fiscal 2019 budget, when certain spending projects were put on hold during the regular budget process but allowed to go forward later in the year when revenues were in hand to pay for them– instead of committing money to projects before it was assured that there would be enough money to cover the costs.

“That money ought to stay where it is,” Meffley said of the reserve fund accounts. If Council members want to cut taxes, they would have to “cut services,” he said, but “the people want services,” such as roads, schools and emergency services such as the Sheriff and ambulances. “The County Executive might pull a rabbit out of the hat like he did last year—or maybe a chicken,” Meffley said.

McCarthy’s “rabbits” released from the hutch under budget amendments in the current fiscal year included $1 million for secure entrances at county schools; $400,000 for late season snow removal and emergency pothole patching of winter-damaged county roads in the spring; $141,000 in extra funds for county Animal Services after that agency deliberately overspent its budget to handle more cats; an extra $400,000 allocation to stabilize a Volunteer Firefighter pension fund and put the account on a path to guarantee future benefits to retired firefighters; and $550,000 for volunteer fire companies’ new equipment, including a fire engine for the Water Witch (Port Deposit) fire company and an ambulance in Chesapeake City. All told, budget amendments pumped $2.49 million into various programs above the initial budget.

The “rabbit” show meant that the county did not commit to spending projects until the money was firmly in hand and the county was assured that revenue projections were accurate, instead of committing in advance to spending and perhaps coming up short on the needed funds to pay for the projects.

County Councilor Al Miller (R-3) said he was pleased with the current budget process, saying, “We’re moving the county forward… I’m all for this budget.”

Councilor George Patchell (R-4), who has been a key player in past Council budget deliberations, had just one concern—the county’s amusement tax that generates a paltry $100,000 a year in revenues but affects small businesses, golf courses and tourism venues. He said he had tried in vain to convince the County Executive to rescind that amusement tax but said he would not pursue a repeal at this time. “But I won’t forget,” he added.

Councilor Jackie Gregory (R-5) proposed no specific program spending cuts but said she wanted to take $1.5 million out of “fund balance” reserve accounts to provide a reduction in the property tax rate, and said “we can afford this; it’s sitting in the fund balance” account, which she called a budget “surplus.” However, a change in county accounting practices earlier this year, which Gregory voted for, contradicts her proposal and shifts what she called a “surplus” into emergency reserve funds that are not to be tapped except in dire fiscal or weather emergency.

Gregory, who has filed as a candidate for re-election in 2020, had no public backers of her idea at the worksession, and Meffley specifically rejected the suggestion.

Councilor Bill Coutz (R-2) asked several questions but did not indicate his overall position on the budget, giving himself political wiggle room before the upcoming final budget vote next week.

County Finance Director Lisa Saxton went into details of the county’s fiscal policies and the recent shift of budget procedures, to boost the so-called “rainy day” emergency fund from 7.5 percent of the county budget to 10 percent, as called for by bond rating agencies and practiced by many other county governments in the state. In addition, the county has re-named another smaller reserve fund, now amounting to 1 percent of the overall operating budget, as a budget “contingency” fund—which is designed to track revenues and expenses so as to provide rapid-response to changing fiscal conditions.

That “contingency fund” provided a cushion during the current budget year to meet fiscal needs and release money as revenues became available. So as revenues rose, that fund was able to be tapped, with County Council approval, for projects such as the fire companies’ equipment and school security.

The new budget proposal by McCarthy provides no tax increases, just as the current Fiscal 2019 budget did not boost property or income tax rates. But in his first year as county executive after winning the 2016 election, McCarthy took a lot of heat by proposing a five-cent increase on the local property tax rate, with the result that the tax bill on a house assessed at $200,000 rose by $100. He also boosted the local “piggyback” income tax rate from 2.8 percent to 3 percent. Those steps produced the first fully balanced county budget in over two decades, with spending and revenues balanced without draining emergency reserve funds.

The proposed new county budget projects a modest 1.2 percent increase in revenues from income taxes, and McCarthy has said the county was being cautious to take into account state and national economic forecasts. Recently, the state Board of Revenue Estimates warned that state revenues could drop by $269 million over the next two years, largely due to reduced income tax revenues.