Balancing Howard?s budget is more than estimating revenues in a slumping economy and prioritizing funds to keep schools open and roads paved.
County officials also plan for the worst, setting money aside for disasters and leaving enough cushion to avoid massive spending cuts.
“You want to maintain those kinds of reserves,” said Howard Budget Director Ray Wacks.
Howard?s rainy day fund, officially known as the Budget Stabilization Account, ensures consistent county services in case of an unforeseen economic disaster.
The county charter requires the fund to be at least 7 percent of the total general fund expenditures from the previous fiscal year.
So any surplus must first go in the account.
Surplus, rainy day fund bring county high marks
Millions of undedicated dollars might sound like a lot of money, but leaving a little financial wiggle room just in case is one piece of the policies that have gained Howard recognition for its strong financial picture.
The 7 percent dedication to the rainy day fund helped secure Howard a AAA bond rating from the three rating agencies.
“That is a really prudent use of funds,” said Barbara Ruth Rosenberg, a director at Fitch Ratings.
The cushion also leaves county officialswith some peace of mind in tight budget times.
“You don?t know what economic factors are going to take place,” Wacks said.
“Sometimes they go up more than expected, and they also go down. You have to manage.”
For fiscal 2008, Howard budget officials are projecting about a $13 million surplus.
This is compared with a nearly $23 million surplus in fiscal 2007.
?Fiscal tsunami? of retiree benefits
Budgets statewide are straining to meet the new finance reporting requirement for post-employment benefits.
Beginning in fiscal 2008, jurisdictions had to show the ability to cover future retirees? health insurance.
In Howard, this liability was estimated at nearly $477 million, requiring about $53 million to be set aside each year to pay down this debt.
The fiscal 2008 budget included $14 million to be allocated to this liability.
County administration officials have introduced legislation to create a trust fund to cover these costs and guarantee they couldn?t be spent during difficult financial times.
“We think it?s financially responsible to start setting money aside not too slow and not too fast,” Howard Finance Director Sharon Greisz has said.
This proposal also would help Howard meet the $53 million annual requirement expected to be reached within eight years, according to Fitch Ratings.
Christopher Summers, president of the Maryland Public Policy Institute, a conservative think tank, called the requirement the “fiscal tsunami that will hit Maryland,” which will require local jurisdictions to take a closer look at spending priorities.
“When you start looking at other liabilities, at what point do you then have to look at what critical service areas get cut?” Summers asked.
“It?s very important that fiscal discipline policies start tobe in place” across the state, he added.
Priority for one-time
expenses
Any surplus funds in Howard also must be dedicated to one-time expenses, such as repairing roads, a policy held by many surrounding counties in the area.
The largest single expense was for road resurfacing, for which $17.4 million in fiscal 2008 was dedicated.
In the 1990s, surplus revenues helped cover operating expenses, so when the bottom dropped out, Wacks said, the county was forced to cut back on staff and services.
Surplus funds won?t last forever, so it?s more reasonable to dedicate the money to expenses that also don?t require continual funding, such as police salaries, Wacks said. “So to a great extent, we are not in a crisis in Howard County, because that surplus was used for one-time expenses.”
