Exactly one week before gubernatorial candidate and Harford County Executive David Craig was set to release his recommended county budget for fiscal year 2015, the county teachers’ union marched more than 300 teachers, parents and students through the streets of Bel Air on Tuesday evening, chanting and carrying signs in support of education funding.
The march ended at the county council “black box” building on Bond Street, with participants surrounding the building on all sides. Passing motorists honked their horns approvingly.
The demonstration concluded at the start of a scheduled council meeting, where a handful of teachers, including union president Ryan Burbey, spoke in support of higher teacher salaries.
For its part, the school board has requested funding from county government to provide wage increases for all employees next year. However, estimates from the Craig administration as recently as last week indicated that county revenues will be flat. In that case, what are the options for the county to fund higher teacher salaries?
Harford County Public School employees haven’t had a cost of living increase in four of the past five years; teachers and other eligible employees have also not received scheduled raises known as “steps”. Steps are primarily based on longevity or education levels achieved, that are per the teachers’ contract subject to decisions by funding authorities and the board of education.
According to Burbey, the lack of funding for salary increases in recent years has hurt morale, prompted good teachers to leave the system, and made it more difficult to attract top applicants.
As in years past, the school system has again requested increased funding to raise salaries for all, this time to the tune of $13.7 million (subject to negotiations with employee unions). Of that figure, $4.7 million would be needed to provide a step increase for all eligible employees, according to Jillian Lader, HCPS manager of communications.
Also as in years past, state funding will be flat, so the school system has again turned to the county for the money necessary to meet rising costs, including healthcare insurance, teacher pensions, and unfunded mandates, plus desired items such as the salary increase.
Altogether, the school system’s requested operating fund increase for fiscal year 2015 comes to approximately $32 million. By contrast, officials have estimated that county revenues will rise by only a fraction of that amount, or $7.6 million.
If Craig’s recommended budget doesn’t fully fund the requested increase for education, the county council can make up for all or some of the shortfall by taking money from elsewhere in Craig’s proposal.
In extended comments about the pending budget process during the council meeting Tuesday, Council Vice President Dick Slutzky said that few county agencies have budgets that are large enough to be a source of additional funding for the school system, listing among them the sheriff’s office, health department, library and public works. Slutzky asked: “Do we take police cars and deputies off the street? Do we reduce fire service and fire engines in the fire houses?…Do we close libraries? Do we take money from the community college?… We can do that, but it’s a very tough decision that has to be made.”
County Executive Craig could raise taxes and give the money to the school system as part of the budget recommendation he sends to the county council next week. However, Slutzky emphasized on Tuesday that, while the council approves the budget, the county executive alone has appropriation authority to decide where revenue from any tax increase would be spent.
Leaving aside the likelihood of a tax increase in an election year, how much of a tax hike would be needed to fully fund the school system’s requested increase of $32 million?
Approximately 90 percent of the county’s general fund revenue comes from property and income taxes, according to Kathryn Hewitt, county treasurer.
Income tax rates are capped statewide at 3.20 percent, she said last week in a phone interview, while the rate in Harford County stands at 3.06 percent. An increase to the maximum allowed would raise approximately $8 million, Hewitt said. However, she also cautioned that a lag between the time the income tax is collected by the state and remitted to the county means that not all of the increase could be appropriated in the 2015 fiscal year that begins on July 1.
In addition, Slutzky said in a phone interview Wednesday that the estimate he had from sources including the county auditor indicated that the increase would yield $8.3 million, but the state would deduct administrative costs leaving the county with $7 million.
As for property taxes, Hewitt said that each one-cent increase in the rate from the current $1.042 per $100 in assessed value would yield approximately $2.5 million, citing an analysis by the Maryland Department of Legislative Services (see page 78)
Teacher’s union president Ryan Burbey has argued that some of the county’s excess of revenue minus budgeted expenditures each year could be used to fund higher salaries. A union-financed study in 2012 criticized the county for putting that money instead into the county’s fund balance.
Ben Lloyd, deputy chief of staff for Harford County government, wrote in an email Tuesday afternoon that such amounts are not guaranteed from year to year; therefore, they are treated as one-time money. He outlined the county’s method for appropriating the unrestricted portion of the fund balance, which first reserves funds to maintain the county’s credit rating, thereby reducing borrowing costs.
Most of the remainder is appropriated for minor renovation and repair projects, he said. Such funds are known as “PAYGo”, or pay-as-you-go, in contrast with funds that the county borrows for large capital projects by issuing bonds. Lloyd’s email to The Dagger appears below:
“The Appropriated Fund Balance in the current Fiscal Year represents excess unappropriated fund balance at the end of the previous fiscal year, above the 5% reserve designated for credit rating purposes. It is appropriated into the next fiscal year’s budget and treated as one-time funding for that fiscal year, since it is not guaranteed to be there in future years. Most of this one-time money is appropriated toward PAYGo projects.
The county’s PAYGo policy was implemented in July 1984 and is included as part of the Debt Management policies within Harford County’s five year business plan. The five year business plan confirms that PAYGo will continue to be used for minor renovation and repair projects which have an asset life of less than ten years for general county, education, fire, library, college, highways, and certain water and sewer projects.
Appropriating fund balance monies to general government expenditures or to outside agencies turns one-time money into a recurring expense, and creates structural deficits down the road by increasing ongoing expenditures without having an offsetting ongoing revenue source.”
Slutzky noted at the council meeting Tuesday that the PAYGo money used in the fiscal year 2014 budget was $16.7 million, or only about half of the $32 million increase requested by the school board for next year. He added that calls to divert PAYGo money to fund teacher salaries, and borrow the money instead for minor projects would cost more in the long run, since interest payments would add to project costs: “If you need a new door on your house, are you going to pay that out of your checkbook or are you going to put it in a formula for your mortgage and pay it over 20 years?”
In addition to the appropriated portion of the unrestricted fund balance used as one-time money, the leftover unassigned portion also serves a purpose, according to the following email from Sherrie Johnson, public information officer for Craig:
“It is critical to have funds available in case of emergencies, unforeseen expenditures, or lower than expected revenues. The unassigned fund balance at the end of FY 2013 of $6.9 million represents only 1.4% of the county’s General Fund appropriations, and only .8% of the total approved budget for all funds of Harford County Government.”
County Executive Craig plans to release his recommended FY2015 budget on April 15.