FY 27 Proposed Operating Budget

So how can revenues be smoothed out to sustain on-going spending without falling into a

structural deficit in the down years? A solution can be found in the State of Maryland ’s Revenue

Volatility Cap that directs a portion of non-wage income tax revenue exceeding forecasts to the

Rainy-Day Fund and Fiscal Responsibility Fund. At the local level we do not have access to knowing

what percentage of our income tax is non-wage that is typically capital gains, but we do know that our

long-term average for income tax is approximately 6.0%. The committee recommends that when

income tax exceeds 150% of the long-term average, which would be income tax revenue in excess of

9.0%, that the excess revenue is reserved in the fund balance. These funds would be used or released

when income tax is 50% of the long-term average, which is 3.0% or less. This could best be

compared to budget billing for utilities as an attempt to smooth the highs and lows and give the

county the ability to draw on reserves instead of having to make harsh spending cuts.

Finally, while the c ounty’s debt affordability ratios are healthy and in -line with other AAA

rated counties, the Capital Budget in recent years has significantly increased the appropriation of

bonds. While the committee understands the capital needs of the county and the rising cost of

construction projects, there was concern expressed regarding the trajectory of future debt.

I. Purpose

The Spending Affordability Advisory Committee ("Committee") was created by Executive Order

92-2 and further amended by Executive Order 00-04. The Executive Order charged the Committee

as follows:

a. On or before February 15th of each year, the Committee shall submit a report to the

County Executive with recommendations of fiscal goals for the County budget for the next

fiscal year.

b. The report shall contain fiscal goal recommendations for the next fiscal year in the following

areas:

i) Recommended level of County spending for the operating fund

ii)

Recommended level of new debt authorization

iii) Recommended level of unassigned fund balance or retained earnings

iv) Any other findings or recommendations the Committee considers appropriate

In discharging its responsibilities pursuant to the Executive Order, the committee was cognizant of the

need for a report which, when based purely upon the consensus findings and conclusions of the

committee, would be used as a tool by Harford County Government in assisting the budgeting as well

as other processes. The resulting methodology is similar to that which has historically been utilized to

predict anticipated revenue growth. The committee primarily used publicly available data with realistic

and recognized methodology in its analysis.

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