Amidst inflation, rising interest rates and an uncertain economy, Howard County’s Spending Affordability Advisory Committee (SAAC) released its fiscal 2024 annual report, recommending the county take a balanced approach to rein in spending and increasing government services. Howard County Executive Calvin Ball accepted the committee’s recommendations.
Ball noted that the county needs to consider its prestigious AAA Bond rating and competing requests for new projects alongside increasing critical needs.
“We face important decisions about our shared priorities as a community in the upcoming budget cycle and beyond, and we look forward to considering these SAAC recommendations during the development of our budget choices over the next few months,” Ball said in a press release.
In the report, the committee noted that the county will revert to its historical levels of moderate annual growth and should plan accordingly. Growth due to temporary factors during the pandemic due to federal stimulus is receding, and economic drivers such as inflation will produce unpredictable revenue. The committee projected that future growth will stay close to, or even drop below, the historical trend of 3.2% growth on average, and thus, recommended the county cautiously develop fiscal planning. The report also noted that an escalated demand for enhanced government services will put long-term pressure on the county’s finances.
The county’s projected revenue growth for fiscal year 2024 is $72.8 million, but the requested operating expenditures growth was $192.4 million, leaving a $120 million fiscal gap – a gap that needs to close. SAAC recommends that expenditure requests from all parties be reduced significantly to reconcile the projected revenues.
“County government should continue to engage in candid dialogue with all its stakeholders to manage expectations and prioritize needs over wants. It should urge all entities to develop plans based on fiscal realities and the impact of increasing pressures on existing infrastructure,” the report states.
Borrowing across the country has also become more expensive due to rising interest rates. The committee recommended that the county reduce its overall debt ceiling and control existing debt. “An interest rate of 1 percentage point translates to about $600,000 or more in annual debt service payment from the annual operating budget and about $12 million more in total payments over 20 years based on prevailing bond terms,” the report stated.
The report noted that members of the Board of Education for Howard County proposed a County funding increase of $112.8 million for the school system, but the request is unattainable. Howard County’s slower pace of population and income growth, driven by a diminishing supply of developable land and an aging population directly contends with the demands of the public school system.
“This committee notes that HCPSS is already among the top 10 of all big school districts in the country in terms of per pupil spending and that the per pupil spending amount has increased by 19% in just the last three years. The reality is that the significant increase in the Board of Education’s proposed budget, if fully funded, would consume far more than the projected growth in total county revenues. This is not a healthy balance for the county at-large and would result in deep cuts in all other critical public services,” the report stated.
Leonard McClarty, a member of SAAC, and President/CEO of the Howard County Chamber of Commerce said that because Howard County is full of noteworthy amenities and features, residents have high expectations.
“It is well documented in the 2023 report and other publications that Howard County is full of noteworthy amenities and features,” he said in a press release. “These community attributes cause residents to have extraordinary expectations, yet we are reaching a place where our needs and wants will conflict, leading our elected officials and community leaders to have serious debates as to how we grow in the future.”
To address the competing interests, the committee recommended that the county limit its operating spending to no more than a 5.6% increase; bond authorization issuance should not exceed $60 million; and a spending review should be commissioned to consider the school and general services spending limits based on projected resources.
“As we transition from a county of significant growth to one of moderated growth, and expanding, diverse needs, we will need to balance our investments in different ways to support this community,” said Steve Poynot, SAAC Vice Chair in a press release. “This year’s committee did a tremendous job of taking in a lot of different data points and coming up with recommendations that support that balanced approach. Although we have many challenges in front of us, this community is strong and together we will find ways to meet those challenges.”