I am pleased to deliver today’s budget decisions as the first Chairman of the fourteenth Baltimore County Council. County Executive Smith presented us with a moderate budget. His proposal was fiscally prudent, and it continued our long-standing support for education, public safety and community revitalization. His goal, and ours, is relatively simple: to maintain essential County services and to continue to foster the County’s growth. At the same time, the Executive’s proposal sounds a cautionary note for the future; we share his concern. The budget we adopt today accomplishes our goals with only minor adjustments made to the Executive’s requests. Today we adopt a $2.5 billion operating budget that includes $1.7 billion in general funds, a total spending package within the guidelines established by the Council’s Spending Affordability Committee. The budget contains a 2.4 percent increase in general fund spending over last year’s budget, and a 4.9 percent increase in recurring operating expenses. There are no new taxes levied to fund the budget, the income tax rate is unchanged, and the property tax rate will remain at $1.10 per $100 of assessed value. The revenue stabilization reserve account has a projected ending balance of approximately $84 million (or 5.2 percent of the General Fund budgeted revenue), and the County’s unappropriated fund balance (surplus) is projected to total approximately $160 million. We also adopt a $470 million capital budget and an aggressive capital program for the next five years. Despite our concern about future events outside our control, we recognize that our local economy is strong. We will invest the benefits of that strong economy in our employees, the people who make our government work by providing high quality services to County citizens on a daily basis. County employees will receive the recommended 3 percent cost of living increase as well as longevity and step increases and a salary restructuring plan for many employees; County teachers and other school employees will receive an average 4 percent increase; library employees will receive an average 6 percent salary increase; and police and fire will receive an average 7 percent increase. While we are making reductions in some areas of the proposed budget, we feel it is not prudent to apply these budget cuts to the reduction of the property or income tax rates. We have been advised that future years may bring cuts in state aid to local government. The cost of government programs can easily be shifted from Annapolis to Towson, but from Towson there is nowhere to transfer the financial burden. The County cannot gamble that the State of Maryland will address the fiscal crisis that it faces; the only responsible course of action is to continue to manage well, to limit spending, and to expand our economic base. This budget is reflective of those goals. The most difficult decision we faced during this budget process came in the form of the Administration’s request that we change the County’s retirement system law. The Retirement System is a maturing system with 9,500 active members, 6,400 retirees, and 430 former employees who chose to leave their contributions in the system when they left County employ. The System has been faithfully funded by the County and well managed by its Board of Trustees. It is sound at this time. However, the Administration and the Council have been forced to consider the long-term implications of certain external factors that may adversely impact the funding of the System in the future. These include escalating health care costs, expected cuts in state funding, and a new accounting requirement with respect to the post-employment benefits that the County grants to its retirees. Beginning in fiscal year 2008, new government accounting standards require the County to begin accounting for retiree health and life insurance benefits on an accrual basis rather than the current pay-as-you-go method. It is estimated that the liability for these costs totals approximately $1.8 billion. The bond rating agencies have indicated that they will consider the substantial cost of this liability when evaluating the bond ratings of state and local governments. In order to protect the County’s triple-A bond rating, it is imperative that the County set aside funds to meet its annual required contribution. Accordingly, in July 2006 we established a special reserve fund for this purpose and transferred $103 million to the fund as a down payment on our annual required contribution. This action allows us to use a phased-in approach to address this liability. In this year’s budget, we add $20 million to the fund, fulfilling our first year obligation. If we were to fail to take this action, the County would jeopardize its triple-A bond rating and potentially be forced to pay higher interest on its bonds or to curtail necessary capital expenditures. We believe County taxpayers would be unwilling to accept either of these results. The Administration has suggested that the County must also review retirement benefits in light of these issues. The world in which retirement programs operate has changed dramatically in recent years, and these programs must be carefully managed in order to maintain a balance between the benefits granted to members and the costs incurred by the employer. Although the System is sound at this time, we need not wait until it is actuarially unsound before making changes; in fact, it would be irresponsible to do so. The County’s annual contribution to the Retirement System and the pension benefit payments from the System continue to increase steadily. Since the creation of the Retirement System in 1945, the life expectancy for a 60 year old has increased by almost 6 years. We know that the sooner an individual retires the earlier he is eligible for retiree health care and therefore the higher the liability to the County. The most expensive period for retiree health care is the period before a retiree reaches Medicare eligibility. Under the current system, an employee may retire at age 60 with generous medical benefits provided by the County. The cost to the County of providing those benefits until age 65, when the retiree becomes Medicare eligible, is staggering. Therefore, the increasing cost of retiree health care has a direct bearing on the other post-employment benefits liability that the County must now fund. It makes sense to address these pension benefit and cost issues at the same time. One option available to the County is to eliminate retiree health care benefits. This Council will not do so. The Administration suggested that the more reasonable option is to alter the provisions of the Retirement System. The Administration presented us with a comprehensive proposal to change the Retirement System in order to offset the effects of these long-term costs. The Administration believes that these effects justify substantial changes to the benefit structure of the Retirement System. However, we disagree with the Administration’s approach as it affects current and former employees. As we reviewed the Administration’s proposal, Bill 42-07, we perceived that there were serious problems with it. Many current and former County employees testified in opposition to Bill 42-07, pointing to unfair provisions. We felt compelled to address their concerns. Therefore, we began a discussion with the County Executive and with the County Attorney and the Director of Budget and Finance. Working together, we have crafted a fair, lawful revision to the Retirement System that is designed to relieve the pressure upon the County caused by the cost of these benefits. The changes we will make to the Retirement System are premised upon a belief that it is fundamentally sound and that its future health can be ensured by altering certain elements of the benefit structure for all employees while making no changes for former employees and retaining for current employees the right to retire at age 60. Today, we enact an amended version of Bill 42-07 that changes the Retirement System, prospectively, for employees hired after July 1, 2007. At our June 18 meeting, we will act upon several bills introduced today that will amend the Retirement System in a lawful and equitable manner for all current and former County employees. The operating budget that we adopt today continues our focus on the provision of essential services to County taxpayers. A defining characteristic of Baltimore County is the confidence of its citizens in our public school system. While there will always be calls for even more funds for the Department, we believe that the Executive’s proposed budget for Education contains sufficient increases in operating funds and in capital areas to allow our system to maintain its standards of excellence. For the Department of Education, our budget provides a total of $736 million in general funds, a figure that represents 44 percent of the total General Fund budget and an increase of $5 million over fiscal year 2007 funding. The Education budget includes: - 165 new positions, including 85 positions to staff the Secondary Academic Intervention Model Academy that will open in the fall;
- 9 additional teachers and support resources for the in-school drop out prevention program at Chesapeake High School;
- 2 new positions for the infants and toddlers program;
- $1 million to fund an additional 23 all-day kindergarten positions;
- $700,000 to expand certain pre-kindergarten programs;
- $2 million for instructional technology resources, including $1.4 million for student assessment;
- $2 million for the Bridge Center for new students at risk of academic failure; and
- $900,000 for gifted and talented programs at nine County middle schools.
An issue that continues to concern the Council is the number of students attending school outside their assigned district (i.e., non-resident students). Over the years, the Department has revised its internal policies and implemented stricter penalties to decrease the number of students who are fraudulently enrolled in the County’s schools. These efforts have resulted in the identification of an increased number of fraudulently enrolled students annually. Yet compliance with Departmental policies can be easily sidestepped, and the Department continues to ignore the common sense advice our County Auditor has offered with regard to the residency documentation problem that is at the core of the issue. In March 2006 the Council directed the County Auditor to perform an audit related to student eligibility for enrollment based on residency. However, the Department has refused to allow the Auditor access to these records. Presumably, the Department would like to resolve the problem of non-resident students fraudulently enrolled in our County schools. If that is the case, we hope the Department will cooperate with the legislative branch of County government. We have long urged the Community College of Baltimore County to streamline its management, and the College reports that progress has been made in implementing an executive restructuring plan. The new structure concentrates College-wide authority and responsibility among five leadership positions and is consistent with the goal of a single college. The result is $290,000 in savings that have been reinvested in support and faculty positions. We applaud the College for this effort. Our police and fire departments are at their strongest levels ever in terms of authorized positions, equipment, and training. We intend to maintain our public safety agencies at these levels. The resources and benefits we are providing today constitute our continuing commitment to making Baltimore County a safe place to live and work. Our budget decisions for the County’s public safety agencies include: - Six additional police officers for Community Action Teams in the Cockeysville, Franklin, Parkville and Wilkens precincts as well as an additional school resource officer for the Secondary Academic Intervention Model school in White Marsh and six additional officers for the Parkville Precinct;
- $45 million to replace the County’s emergency communications system;
- 25 additional correctional officers for the county detention center, including a "gang coordinator" who will work with the County Police Department to identify gang members;
- $100,000 for the Sex Offender Compliance Enforcement in Maryland Program;
- $2.45 million to finance the renovation of the Reisterstown Volunteer Fire Station and the construction of a new Lutherville Volunteer Fire Station; and
- $1.5 million for the Attended Status Incentive Program for volunteer fire companies.
As a part of our effort to expand the County’s economic base and continue the revitalization of existing communities, we are appropriating $19 million to the Economic Development Revolving Financing Fund. This fund is used to provide financial assistance, in the form of loans and grants, to existing and prospective businesses in the County. We are giving the Department of Economic Development significant latitude with these and other funds that it manages in recognition of several development projects that are currently in the planning stages. Additionally, we anticipate that the Department will play a major role in the Base Realignment and Closure (BRAC) process as it affects the County in the next few years. It is estimated that BRAC will generate 3,900 new jobs, 3,600 new households, $18 million in property taxes and $10 million in income taxes. Responding to the implications of BRAC is a major challenge as well as an opportunity for us. We want the County to be prepared. Today, we also adopt a capital budget in excess of $470 million, much of which is devoted to school projects. Included in the capital appropriations are: $171 million for school renovation and construction projects including: - $2.7 million for land acquisition for future sites;
- $18.9 million for systemic renovations at Perry Hall, Old Court, Cockeysville, Pikesville, Deer Park, and Pine Grove Middle Schools;
- $13.9 million for planning and additions at Hillcrest, Dogwood and Cedarmere Elementary Schools and Catonsville Middle School; and
- $76 million for systemic renovations at all County high schools.
- $33 million for capital projects at the Community College of Baltimore County, including $1 million for a dental hygiene lab on the Dundalk campus and $4 million for the new library at the Catonsville campus;
- $3 million for Green building improvements to the community centers in Randallstown and Dundalk and the Perry Hall Library;
- $2.4 million for artificial turf at Northwest Regional Park and the Essex campus of the Community College of Baltimore County, as well as $793,000 for new lighting for athletic fields in Arbutus, Cockeysville and Dundalk;
- $20 million to resurface roads throughout the County;
- $6.5 million to improve and complete work on Joppa, Forge and Chapel Roads;
- More than $5 million for the Cherry Hill Road extension and replacement of the Painters Mill Road Bridge, and
- $1.4 million for traffic calming projects on residential streets in neighborhoods.
These are some highlights of the decisions we have made today in adopting the budget for fiscal year 2008. During our deliberations, a number of other specific matters came to our attention that warrant a brief comment. These comments are set forth in Section IV of this Budget Message. I want to thank my colleagues and all of the Council staff, especially the County Auditor’s Office, for their hard work and consistent advice. The citizens of Baltimore County are blessed with a strong economy and with strong, experienced leadership. We look forward to working with County Executive Smith in this term of office to continue to address the needs of the citizens of Baltimore County as fully and fairly as possible. Respectfully submitted, 
S. G. Samuel Moxley
Chairman, County Council | 
Courthouse 
