September 30, 2009
The Current Fiscal and Economic Crisis:
On August 26 the Governor announced $210 million in State funding cuts to Maryland’s counties, including $5.5 million in direct cuts to Charles County. These cuts merely resolved the State’s budget deficit entering fiscal year 2010, which began on July 1st. They did not address the continuing revenue shortfalls at the State level that are expected to continue through the remaining nine months of this fiscal year and beyond.
The Governor’s cuts to Charles County included a direct cut of $405,000 in local police aid to the Sheriff’s office and a 2.5 percent cut in the pay of our sworn law enforcement officers, and draconian cuts in State funding for the Charles County Health Department on the threshold of a possible flu epidemic, and severe cuts to the College of Southern Maryland.
Last week, the Board of Revenue Estimates reported that State tax receipts will come in nearly $683 million lower than anticipated during the current fiscal year. It is not certain at this time whether more State funding cuts will be handed down to the counties this fall, or will be delayed until the Maryland legislature reconvenes in January. But there is little doubt that more State funding cuts are coming, and that all Maryland counties, including Charles County, will be expected to absorb them.
The bad news doesn’t end there. It is projected that the Governor and the legislature will have at least $1 billion less revenue to work with when they begin to write next year’s fiscal year 2011 State budget. The proposed transfer of responsibility for funding teacher pensions, from the State to the counties, is still alive and expected to get serious consideration. If approved, this single item could cost Charles County more than $15 million in the first year, and would escalate dramatically in future years. Federal stimulus money that the Governor used to fill budget gaps this fiscal year will begin to dry up in fiscal year 2011. In January of 2011, when the newly elected legislature convenes in Annapolis, the top budget priority will be to address Maryland’s structural deficit, which experts say is about 15 percent of the total State budget, or about $2 billion. And in a few years the State will resume its practice of keeping some of the income tax revenue that belongs to the counties, unless the plan can be derailed by our legislators. Last year the Governor confiscated $12.5 million of Charles County’s income tax revenue from this source to balance the State budget.
The recession has also reduced revenues at the County level, with decreases posted in almost every revenue category except property tax. The County Commissioners have not increased the property tax rate for five years, and have maintained the Homestead Tax Credit, a 7 percent cap on how much a homeowner’s property tax can increase in a single year. The State is responsible for assessing the value of property, and because this determines the amount of tax payments at the current rate, many homeowners are frustrated and bewildered by the size of their tax bills in these difficult times, when most property values are still depressed. It goes without saying that raising local taxes is not an option.
Under these circumstances, with more deep budget cuts looming at the State level, when we may still be years away from the end of the current fiscal crisis, it would be highly irresponsible for us to spend our cash reserves, leaving us without the means to address unexpected emergencies ahead. Such a decision would also threaten Charles County’s extremely favorable bond rating, which delivers lower interest rates on the long-term capital financing we need to build new schools, roads, public facilities and infrastructure. For example, a drop of one grade in our bond rating could add as much as $1 million to the cost of our proposed new high school. While it would only take one bad decision to jeopardize our bond rating, it could take years to restore it to its present level.
Even after the recession ends, State and local revenue shortfalls will linger on, as the economy recovers and we begin to experience renewed economic growth. I fully expect the Charles County Commissioners to be managing the impact of these fiscal challenges for several years to come.
Additional State funding cuts will require cuts in County spending, and may include cuts in County services at a time when many of our citizens need more help from their government, not less. This is a time of great difficulty and hardship for many of our citizens. Obviously, the Charles County Commissioners did not cause the national recession or the State fiscal crisis. We did not have a hand in the Governor’s decisions about which agencies and programs to cut, or how much money to take from the counties. We weren’t consulted on those decisions. We adopted a balanced budget for the current fiscal year. But when these State cuts are handed down to us, we must act to maintain a balanced County budget and essential County services.
In carrying out this responsibility, we have no alternative but to ask the agencies the County funds to share the burden of these cuts. It is very difficult to ask the Sheriff’s Department or the Board of Education, whose missions are so critical to our success as a community, to reduce their budgets. Yet public safety and education account for 75 percent of the County’s annual spending. It would be both unfair and impossible to ask the local agencies that deliver the remaining 25 percent of the County’s vital services to absorb the full weight of the State funding cuts. While I understand the desire of advocates for teachers and law enforcement officers to shift the burden of these cuts elsewhere, this is not a realistic alternative, especially during a recession when many of our citizens are in need of the services that other County agencies provide. Thus far, because of our conservative management of the County’s finances, we have been more fortunate than other counties and cities in the metropolitan Washington area which have had to reduce services and lay off local government employees.
The 2010 Election:
These are some of the challenges we face. This is a time when we need to focus on managing the fiscal crisis we are in, not on politics and political campaigns. This is clearly the worst and most challenging economic recession in our lifetime. In my 35 years of public service, there has never been a greater challenge to our country, our State and our County than we are experiencing right now. It requires our undivided attention.
The preoccupation with the next election, barely two and a half years into this four-year term of office, is premature and misguided. The filing deadline for candidates in Maryland’s 2010 election is almost nine months away. And as elected Commissioners we have a County government to run for the next 15 months. But some people think we should be in a perpetual campaign cycle, starting a new campaign only months after the last election. That’s neither practical nor healthy for our country, or our County.
There’s a difference between campaigning and governing, and now is the time to govern. It takes time to develop and implement new policies to meet the changing needs of our community. In 2006, I presented clear goals and positions on the key issues, and the voters spoke, electing me decisively. I need the coming year to achieve more progress on the goals I set when I ran for this office: Strengthening our growth management policies, putting new transportation projects on track, investing in our future prosperity by investing in a strong capital improvement program, building our local economy, keeping the County on a solid financial footing, and steering a steady course through this national, State and local fiscal and economic crisis. I have promises to keep, and the needs of my constituents come first.
What the people of Charles County deserve in this critical period of our history is straight talk backed up by decisive action that is not clouded by political considerations. Our personal ambitions are not important right now. Our personal interests must take a back seat to the County’s interests. Making the right decisions in the public interest should be our only concern. We can’t afford to spend the next year distracted from our duty, maneuvering for political advantage. The work in front of us is too important. We will need to make some tough decisions in the next eight months, not political decisions, not decisions in our political interest, but decisions in the public interest and in the County’s interest.
There has been much speculation about my plans for the 2010 election, and what office I will be seeking. For the reasons I have stated, I do not intend to announce my election plans until next spring, after the Governor and the Maryland General Assembly complete their work on the State budget in April, and after we have adopted the County’s budget for fiscal year 2011. Our preliminary budget schedule shows this happening on May 11, 2010.
Until then, I will be working for the people of Charles County at the 60-hours a week pace that I set the day I took my oath of office as a County Commissioner, devoting my time and energy to helping the County manage this fiscal crisis, doing exactly what I said I would do before my election, and keeping the promises I made to our citizens. From next May until the primary election in September and the general election in November, there will be plenty of time to declare my intentions, file my candidacy, and campaign successfully for the office where I believe I can be of greatest service to our community.
I am confident that, if we make the right decisions in the coming years, Charles County will emerge from this recession stronger, more competitive, and more prosperous than ever.
Gary V. Hodge
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