Hewitt questions recurring big county budget surpluses

Says money should be returned to St. Mary's taxpayers

Wednesday, July 1, 2009

According to the audit of fiscal 2008, which ended June 30, 2008, the leftover funds were $37.4 million. But $24.8 million were listed as designated, so the county commissioners referred to only $11 million in leftover money during that budget preparation.

"The problem I'm having is continually seeing this" year after year in the audits, said Hewitt, who owns Hewitt's Service Center in Lexington Park. Hewitt ran against Francis Jack Russell for president of the county commissioners in the 2006 Democratic primary and spoke this year at the budget public hearing about fund balances.

Hewitt said he is not calling attention to what he calls "buffer budgeting" for political reasons but because the state of the economy. "I've laid off employees who worked for me for a long period of time, which I feel terrible about," he said, and has hired younger, part-time workers.

Retirement accounts have been devastated in the stock market and people have lost equity in their homes as the housing bubble burst. "It's tough for a lot of people," he said. Of the county commissioners, he said, "Don't they see what's going on out here?"

In fiscal 2007, there was a $41.4 million fund balance; $30 million was called designated. In fiscal 2006, the leftovers totaled $45.5 million, with $31 million spoken for. There were similar fund balances in the two years before that, too.

"That money is taxpayer money," Hewitt said.

The commissioners have the option each year to return undesignated funds to taxpayers, but that was not a realistic option in the current budget cycle because of cuts in revenue coming from the state, said Elaine Kramer, chief financial officer for county government.

Predicting how much money the county is going to take in from property, income and real-estate recordation taxes is a tricky task in any budget year, she said.

"Each one has its own story," Kramer said.

For what comes in from property taxes, "We rely on what the state gives us," she said. The state makes calculations about local property taxes in February, but the actual billings don't come until August, after county officials have adopted a budget for the fiscal year that begins today, July 1.

In the past 10 fiscal years, property taxes have come up short of that state calculation by $402,055 in fiscal 2004 and were $6.7 million more than expected in fiscal 2008.

What causes that fluctuation? "I don't think we have the answers," she said. "You hate to do it based on anecdotal information. That's resulted in some large variances in a couple of years."

Local income taxes, which are filed with the state income tax, come back from Annapolis in multiple bursts throughout the year. In fiscal 2001, $1.9 million less than budgeted by the county government came in. In fiscal 2005, $4.4 million more came in than expected.

The flow of money from the recordation tax on real-estate transactions kept increasing for years, but the county finance department was hesitant to forecast continually skyrocketing numbers. Actual revenues kept coming in much higher than expected until the housing market bubble burst.

If finance had budgeted the figures as high as they were coming in, eventually the recordation tax would come in under budget and cuts would have to be made, she said.

The greatest discrepancy was in fiscal 2006 when $6.7 million was budgeted and $11.3 million came in.

Reacting to the allegation of buffer budgeting, she said, "You have to live it," going through each budget cycle.

A recent state law requires public agencies to build a trust fund to pay for retiree health benefits. Actuary estimates put the total for St. Mary's County government at around $70 million. There is about $24 million there now, and it has a total of 30 years to reach maturity.

During fiscal 2008, St. Mary's County government was required to pay $4.6 million into the trust fund. The commissioners agreed to pay $10 million.

Taxpayers now are putting in more money for the trust fund than will taxpayers in the future. "The people paying in — it's a generational inequality," Hewitt said.

"There was no public hearing on that $10 million" for retiree costs, he said.

Kramer said the county does save money each year by putting in more than required because future payments will be smaller.

She pointed out that an entire batch of taxpayers paid nothing into the retiree trust fund until recent years because there wasn't one.

There are about 700 county government employees now and there were about 170 active retirees as of August 2008.

jbabcock@somdnews.com