The Calvert County Board of Commissioners were given a presentation of the budget shortfalls for the next four or five years. Tim
Hayden, Director of Finance and Budget, and Joan Thorpe, Deputy Director of Finance and Budget, presented a forecast for 2017 and the financial challenges the board faces.
The most significant fiscal challenge is retiree health benefits, known as OPEB (Other Post-Employment Benefits). The budget is not currently structurally balanced as annual expenses are greater than annual revenues.
Department of Finance and Budget Director Tim Hayden explained how, since FY2008, a convergence of a reduction of state revenues to Calvert—totaling $5.8 million—and an increase in state shared expenses—totaling $5.2 million—have created an $11 million “negative variance.”
While a joint memo from the Department of Finance and Budget’s leaders noted “the Dominion Payment in Lieu of Tax (PILOT) agreement will provide significant funding to the county,” the county still faces challenges meeting accounting standards for Other Post-Employment Benefits.”
“What if you don’t get that Dominion money?” Commissioner Pat Nutter [R – District 2] asked. “I have a hard time acting like that money is there.” Nutter remarked that the county is one federal judge’s ruling away from losing the momentum of the project.
The county government’s financial officers noted the even with the Dominion PILOT expected to kick in during FY 2018, “the budget will still face challenges. We will still only be able to fund half of our required OPEB funding.”
Any meaningful changes to the OPEB benefits need to be made on the Board of Education (BOE) side because the BOE makes up almost 80% of the expense.
The current projected revenues for FY 2016 are $233.13 million while the projected expenditures total $239 million. The options presented for closing the gap were use of fund balance, county government employee furloughs, reductions in the county government workforce and tax increases.
It was noted that furloughs would be a first in Calvert County Government history. Staff has estimated that even 10 employee furlough days would not plug the current budget gap.
Regarding the strategy of increasing the property tax rate, Hayden pointed out that Calvert’s formula of $0.892 per $100 of assessed value has not changed in 28 years. Calvert has the fifth-lowest property tax rate in Maryland. At the current rate the revenue yield is projected at $98.4 million. Increasing the rate to $0.992 per $100 of assessed value would increase the yield by $11 million.
After going well over a generation without a hike in the property tax rate, Hejl conceded with the realities of 2015 “we have to look at it.” Hejl stated he was opposed to “closing services” and “laying off a whole lot of people.”
“You have to look at everything,” said Nutter. “You have to give tax raise a thought.”
There are no easy answers to a solution. The county is spending savings on operations and bonding paving. Since 2014, they have used reserves to balance the budget. The commissioners will present their budget to the public at a hearing scheduled for May 19. June 2 is the day the commissioners must finalize the FY 2016 budget.
Margit Miller / Calvert Beacon