Howard County’s Budget Director, Ray Wacks, recently briefed members of the County Council and other officials on what they can reasonably expect to spend in FY 2013. His overall message was one of caution as the budget is prepare and debated.
The challenges noted by Mr. Wacks are not unique to Howard County. All counties will be facing these challenges when preparing their budgets for the upcoming year. As reported by the Baltimore Sun:
Property taxes, which make up half of the county’s revenues, are projected to be flat, Wacks said. Coping with the lack of growth in property tax revenues has been an issue the county has struggled with over the past few years, as assessment values declined with the recession.
Though many areas of the economy are starting to improve, Wacks said, the housing market has lagged behind and assessment values are not expected to improve for at least another three to five years.
Although income tax revenues have increased slightly, it is still an area of concern.
Despite the unexpected increase in income tax revenues in fiscal year 2011, which happened across the state, Wacks said income tax revenues are only projected to experience small growth over the next few years.
Together, income tax and property tax revenues make up 87 percent of the general fund.
Federal debt discussions also present challenges for some county governments.
Also affecting the county’s financial prognosis this year is the federal budget debate. If Congress cannot reach a deficit reduction deal, Howard County and other jurisdictions especially reliant on federal spending are at risk of having their credit ratings downgraded. A downgrade would cause the interest rate the county pays on bonds to increase, thus making it harder for the county to pay off its debt.