Pr. George’s County revenue projections dip as calls for spending rise

May 25, 2023

Prince George’s County Executive Angela Alsobrooks (D) plans to plug a $60 million hole in her next budget with rainy-day funds to avoid raising taxes even as she faces calls to increase county spending.

Alsobrooks is adopting the stopgap measure as a deadline looms for county leaders to agree on her $5.4 billion budget for the year that begins July 1. That plan relied on projected revenue that fell short this month.
Creating an accurate economic picture has been a moving target for state and local officials, who have been vexed by a fluctuating economy and have had to adjust their predictions mid-cycle now that they are without injections of federal coronavirus relief money that bolstered revenue in recent years.
“We’re in a triple witching house,” said Michael Sanderson, the executive director of the Maryland Association of Counties. “It’s a weird economy many of us have never seen. Has it been strong because of federal intervention and businesses being propped up with grants? How much has strength been an illusion that’s about to disappear as federal support evaporates?”
In Maryland, Gov. Wes Moore (D) faced plummeting sales tax receipts after assuming office with a surplus. California Gov. Gavin Newsom (D) closed a budget shortfall of $32 billion with $33.7 billion of budgetary reserves. New York officials had initially predicted a $17.3 billion surplus but had to revise their plans as the predicted surplus became an expected cumulative deficit of $22.2 billion over the next three years.
Although the Prince George’s County Office of Management and Budget did consider the pandemic and the sunset of coronavirus spending in its initial projections, a slogging economy and worsening revenue trends were not captured in initial projection data, said Anthony McAuliffe, the deputy communications director for Alsobrooks.
“New pieces of data continue to come in that factor into revenue projections,” he said, citing fluctuating returns on capital gains taxes.
The state of Maryland’s rejiggering of its own numbers could be the “canary in the coal mine” alerting more counties to reexamine their numbers, said Sanderson, whose nonprofit association promotes efficient government on behalf of elected officials and governments.
Sanderson said government leaders typically want to avoid dipping into reserves because that can affect a jurisdiction’s bond rating, or credit score, especially if they habitually use such money to cover expenses.
At the end of fiscal 2022, the county had $625 million of reserve funds.
Prince George’s had a Triple-A bond rating in 2022, meaning the county has high creditworthiness and a low likelihood of defaulting on its financial obligations.
When he was county executive, Rushern L. Baker III kept that bond rating in mind as the county’s cash reserves reached a notable low in 2015 after county officials had withdrawn money to cover budget shortfalls, snow removal and economic-development incentives. He proposed a fiscal 2016 budget with steep spending cuts, higher property taxes, and higher hotel taxes and fees.
The county’s needs have grown since. But decades-old rules — the Tax Reform Initiative by Marylanders — prevent the county from increasing the residential property tax rate and limit what leaders can do, generations of politicians have said.
Alsobrooks in March decried her options in the face of state education mandates that she said prevented the county from meeting other pressing needs, such as providing more affordable housing and facilitating economic development.
Months later, on the day she announced her bid to succeed U.S. Sen. Ben Cardin (D-Md.), the grass-roots advocacy organization Progressive Maryland held a news conference alongside other activists pressing Alsobrooks to fund social justice initiatives. Advocates called for Alsobrooks to fund a guaranteed basic income, an incentive program for crime-prevention security cameras, senior housing assistance, rental assistance, and the small-dollar-match Fair Elections Program created by the county council in 2018.
The total cost of those programs — some of which were implemented by members of the populist-leaning council majority — is $15 million. To say there is no money in the budget to support those programs is an “illusion,” said Larry Stafford, the executive director of Progressive Maryland, on the day of Alsobrooks’s campaign kickoff.
The shortfall is barely a 1 percent dent in the budget, Stafford told reporters, noting that $5.4 billion is an increase from the $4.34 billion budget that was adopted last year.
Although 1 percent might not seem a lot, the amount should not be trivialized, Sanderson said.
“We might be talking about a big difference in public parks or a big difference in being able to [fix] potholes, and snow removal, or all the other things that local governments do,” he said. “It may only be one percent of the budget, but an awful lot of every year’s budget is just [continuing] to pay the employees who were there the year before and [continuing] to run most of the same programs you did before.”
The chances of the county’s using reserves to fund items championed by liberal activists are low as the county executive seeks to be frugal, McAuliffe said.
“It is not ideal to dip into reserves to fund new programs and is not sustainable long-term,” he said. “Using reserve funds to fund new programs, when we already have to use them to cover the shortfall and support government services, would be fiscally irresponsible.”
You could read more of this Washington Post article here.