Cecil County Budget: Virus “Crisis” and Revenue Uncertainty Shape Budget; County Exec Avoids Raid on Emergency Funds

April 4, 2020


Cecil County Executive Alan McCarthy admits putting together the Fiscal 2021 county budget was a bit like being in a hurricane bunker while hoping that the COVID-19 pandemic that has wreaked havoc with the state and local economy won’t overwhelm the fiscal safety measures he installed over the past three years that could help the county weather the storm.

“I must say it is by far the most difficult budget my staff and I have ever put forward,” McCarthy said Wednesday (4/1/2020) in presenting his proposals during a Facebook live teleconference. “We are in the midst of a crisis none of us has ever experienced before.” He said that he and his staff had to rewrite the budget substantially in the past two weeks, as the COVID-19 pandemic unfolded and Gov. Larry Hogan took escalating steps to shut down most businesses in the state, leading to his most recent “stay home” order to all but essential services workers.

The new county budget proposal freezes property tax rates and income tax rates at current levels and the county executive has included a new property tax credit for senior citizens to give them up to a 20 percent break on their property tax bills. But other than a necessary 8.5 percent increase in spending for rising health care costs for county employees and contract-required pay boosts for law enforcement and paramedic employees, the operating budget—which is financed by annual property and income tax revenues—is lean and pretty much at a standstill.

That is because the new county budget essentially freezes the amount of expected revenues from the county’s share of the “piggyback” income tax collected by the state, despite the fact that Cecil County has created over 4,000 new jobs with the expansion of new businesses and employers here during the past three years. No one knows how long the virus-caused business shutdown will last and how long employees will be out of work.

The one thing county revenue forecasters do know is that the state Department of Assessments and Taxation has calculated that property tax revenues for the county will rise by about $4.5 million, due to the state’s re-assessment of property values and the growth of new businesses opening up operations in Cecil County. The state re-assesses existing properties’ value on a rotating basis every three years, with one-third of properties in the county revalued every year, and new business projects get put on the tax rolls after they are built. In addition, the state calculates estimates of the “personal property taxes” paid by businesses, which actually reflects tax income based on business inventory and equipment “property.”.

When no one has any idea of what the pandemic will do to income tax revenues—along with the delay in state and federal filing deadlines until July instead of the usual April 15 date—property tax revenues are about the only reliable economic forecasting tool left in any budgeter’s toolbox.

The county’s property tax rate was increased one time by five-cents three years ago, to 1.0414 per $100 of assessed valuation (with the result that the tax bill on a house valued at $200,000 rose by $100 a year), and has remained frozen at that level ever since. The county’s “piggyback” income tax rate rose from 2.8 percent to 3 percent and has remained at the same level ever since… Those steps produced the first fully balanced county budget in over two decades, with spending and revenues balanced without draining emergency reserve funds.

McCarthy also pushed legislation through the County Council to bolster emergency reserve funds, steps that could ultimately provide life preservers in the current economic storm. He boosted the “rainy day” fund from 7.5 percent to 10 percent of operating budgets and converted the former “unassigned fund balance” account (which had become a slush fund for past county leaders to boost spending without fully accounting for the costs). Instead, he created a budget realignment account that tracks incoming revenues closely and that can then be released, with Council approval, mid-year to meet special needs, such as purchase of fire or emergency equipment or needed road paving and repairs after a rough winter.

The new budget proposed by McCarthy does not tap into those reserve funds, and he said it would be irresponsible to do so now. “Without knowing the full financial impact of the pandemic, it would not be responsible to open up reserves to balance a budget when we are uncertain of the long-term impact caused by COVID-19,” McCarthy said in introducing his new budget.

But McCarthy did not rule it out in the future if emergency conditions warrant: “Depending on how bad this COVID pandemic occurs, we basically have considered that, but I am hoping that we will not have to do it. But, if necessary, we will.”

(Gov. Hogan has already moved ahead with steps to tap state emergency funds and boost virus-related spending. He got a supplemental appropriation of $10 million from the General Assembly and authorization to tap the state’s “rainy day fund” by up to $50 million.)

The ink was barely dry on McCarthy’s budget proposal before the usual suspects in the county’s social media echo chamber began posting photo-shopped images and unsubstantiated claims that the budget included “tax increases.” It doesn’t. If a new business opens up, as so many have in the county in the past three years, that does not raise anyone else’s property taxes. And those revenues allow the county to continue support for police, schools and other essential services without passing on additional costs to all taxpayers.

But never let the facts get in the way of a partisan meme. The new budget will be reviewed by the County Council in an election year, with two Council members seeking re-election and another member challenging McCarthy and several other candidates in the Republican primary, now scheduled for June. One councilor seeking re-election has ignored her actual election opponent and has run a campaign as though she was running against McCarthy.

The Council will get its chance to cut spending in the budget, as it begins review of the proposal beginning in the next few days. If past is prologue, don’t expect them to come up with substantive, or even written, amendments proposing specific changes. Rhetoric is easier.

Highlights of the proposed budget, which covers the fiscal year beginning on 7/1/2020, include:

SCHOOLS: Cecil County Public Schools (CCPS) would receive operating funds from the county of $86.3 million, an increase of over $1.4 million above the current year. Since student enrollment has been declining, the county could have reduced its allocation and still complied with the state-mandated “maintenance of effort” law that requires a county to provide at least as much per pupil funding as in the previous year. However, Cecil County’s Fiscal 2021 school aid will amount to $2 million, or 2.4 percent, above the “maintenance of effort” requirement.

The county will continue some capital budget construction projects already underway, which use long-term bond funds, state aid and grants allocated to major construction projects. Work will continue on the new Chesapeake City elementary school now under construction on the Bohemia Manor campus. Several maintenance and improvement projects will also proceed, including a cooling tower on the Bo Manor middle and high school buildings, replacement of a boiler at Leeds elementary, and a major upgrade for HVAC systems at Cecil Manor elementary.

One new $1.3 million capital project is also listed: an artificial turf athletic field at Rising Sun High School. Over the past several years, the county has taken over responsibility for the CCPS athletic fields, placing them under joint management with the county’s Parks and Recreation program, and upgrading formerly rutted natural grass fields to artificial turf. Three other high school turf fields have already been completed.

LIBRARIES: The final construction work on the new North East county library will continue, with $3 million in capital funds to finish the project in time for the scheduled opening in December. However, the budget does not provide any funds to staff the much-expanded facility, which will also house the library system’s administrative offices that are being moved from Elkton. The $18 million project, which was the top priority of the statewide library system and heavily supported by state and federal grants, will open on time but McCarthy said he would have to work closely with the library leadership to see how staff might be re-allocated to support the new facility.

LAW ENFORCEMENT- Cecil County Sheriff Scott Adams had requested three new law enforcement positions but the new budget did not grant that request. However, the budget abides by negotiated labor contracts with deputies and corrections officers to receive 1.5 percent cost of living increases 7/1/2020 and step increases on the anniversary of their service date.

EMERGENCY SERVICES: Paramedics, county employees who staff Advanced Life Support ambulances, will receive a 1.5 percent payscale upgrade effective July 1 and a 1.5 percent COLA in January, as provided by previously negotiated collective bargaining agreements. In the capital budget, the county’s long-term project to upgrade emergency communications systems under the “P25” program enters its final stages and the budget includes $1 million for the completion and linking emergency service components, including Union Hospital, into the system.

VOLUNTEER FIRE COMPANIES—The budget provides $847,000 for the volunteer “length of service” retirement fund, a $200,000 boost as part of the county’s moves over the past two years to turn the fund into a fully supported pension fund. In the past, the program, which provides modest retirement payments to volunteer firefighters and ambulance crews, was only funded on an annual appropriations basis and benefits were not guaranteed.

The fire companies presented to the county government their unified equipment requests that set their priorities for purchase of new equipment countywide. The new budget provides $575,000 to pay for the fire companies top three priorities: new basic life support ambulances for Rising Sun and Perryville, at a cost of $125,000 each, and a fire engine for Singerly at a cost of $325,000.

Requests for four other additional ambulances—for Rising Sun, Charlestown, North East and Singerly—were deferred and not included in the budget at this time. McCarthy said he would ask for supplemental appropriations later in the year if sufficient revenues are available, as he did in previous budgets.

The county payments for the equipment aid is included in the operating budget since they are one-time payments and the equipment is owned by the local companies. In the past two years, the volunteer companies ultimately got all of the equipment aid they wanted, although some equipment requests were delayed for several months until county revenues became available.

McCarthy said he would do the same in the upcoming budget if revenues become available. But, he added, the current uncertainty in the economic climate makes it unclear if revenues will rebound later in the fiscal year, which begins on July 1.

CASINO IMPACT AID—The Hollywood Casino in Perryville, the first in the state to open, provides “impact aid” to the county and the town of Perryville under a state-initiated program. But the casino was ordered closed by Gov. Hogan as part of COVID-19 emergency measures and it is unknown when the casino will re-open and be able to resume local aid payments, which are based on revenues the casino obtains from gamblers on video lottery terminals (VLT’s).

Under a recently-approved three-year plan for using VLT aid for local projects, the county had planned to use $200,000 for expansion of broadband internet services in the county, which are spotty or non-existent in many areas, $200,000 for an update to the county’s planning and topography maps, and $200,000 to rehabilitate a soccer field at Cecil College. However, due to the uncertainty of upcoming VLT aid, McCarthy said the projects would-be put-on hold for now.

However, McCarthy recently re-programmed previous VLT aid to the county’s economic development programs to create a new grant program to help small businesses in the county cope with the economic impact of the COVID-19 virus.

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