The proposed version is HERE. In this post, I am going to enumerate the general facts and ideas you need to know about the budget process. I will make subsequent posts detailing a snapshot of each department's budget situation, based on the proceedings of the finance committee meetings in which department heads come to explain their requests.*
(*I went to the first such meeting this past Wednesday, covering fire, police, and public works. The meeting started at 7:30 AM, and by 11:30 I was fantasizing a return to the use of wampum and deer pelts in lieu of greenbacks, because then at least then the spending of taxpayer money would be interesting.)
Everyone pay attention! The budget is arguably the most important thing the council does, and there are many chances for error. Here is what you need to know about the budget in general, and a bit about this year's budget.
1. There are actually 2 budgets: the operating budget and the capital budget.
2. The operating budget is for day to day stuff and is funded by property taxes and money from other governmental authorities (like the county or state). The operating budget must be balanced because the city cannot print its own money; however, I looked over the city code and the charter for like 2 and half minutes and could not find a legal requirement for a balanced budget. Even so, it is always balanced (or at least such is the plan).
2. (a) The operating budget is divided into the general fund and enterprise funds. Enterprise funds are basically the fees that are collected (water, dock, transportation, parking, sewer, etc.), and the general fund is everything else. The enterprise funds are supposed to be self-sustaining but in practice they are not--some run surpluses and some run deficits.
3. The capital budget is for big stuff like replacing the bulkhead or building a parking garage. This budget is funded by bonds, and not necessarily in the year of their inclusion in the budget. The taxpayers do not fund this budget directly, but there is a "debt service" item in the operating budget that denotes the paying of the bonds. If you do a search on this site you can find a better description of the bond process.
4. This year's operating budget is $81.3 million dollars (!!!!!), up from $75.1 million last year, which is an 8.3% increase (!!!!). You all will be interested to know that my prediction for the budget was $81.7 million, validating my intensely accurate economic forecasting skills. You will also be interested to know that under the Dean Johnson administration, which was only like 7 years ago, the budget was in the $30 million range.
5. The budget affects you via the property tax. You need to worry about the property tax rate, and the assessed value of your house. When you multiply those 2 things, you get your annual property tax bill.
6. The assessed value of your house is determined every 3 years by the State Dept. of Assessments and Taxation. They tell the city how much your house is worth, and the city bases their taxation on that.
7. There is something called the Homestead Tax Credit, which limits the annual growth of the assessed value of your house. So, let's say that the housing market heats up, and your house is assessed for double (100% more) what it was worth 3 years ago. The city cannot tax you for that total value. The state places a 10% annual maximum increase on assessed property values. Anne Arundel County has further reduced this to 2%. The city has naturally left theirs at 10%.
8. The property tax rate is proposed each year by the mayor in collusion with the Finance Director, Tim Elliot. This year's proposed rate is.............unknown. Unknown!!! How can you have a budget where the main source of revenue is property taxes and you don't even publish the property tax rate?????????????????????????????????? The 2008 rate is $.53 per $100 of assessed value. Our only clue to the proposed 2009 rate comes from the Mayor's state of the city address:
Meeting the needs of these essential programs will require finding new revenue
sources or adding 1½¢ to the current 53 cent tax rate.
9. The single biggest expense for the city is labor: salaries and benefits. Together they comprise 84% of the general fund expenditures. Therefore, negotiating union contracts (or ending union contracts) is of critical importance.
10. There is a useful tool given to taxpayers by the state called the constant-yield tax rate. Once the state figures out the total assessments for a given year, they figure out what property tax rate would result in the same amount of dollars in tax revenue for that year. Since assessments always go up, the constant-yield tax rate is always lower than the tax rate from the year before. If the city wants to establish a property tax rate that is higher than the constant-yield rate, they are required by law to have a public hearing on the matter.
11. The budget that is passed is the best case scenario. Once the budget is passed, there are untold chances throughout the fiscal year to transfer money and use it for things that were not originally funded. To catch these changes and understand them requires a level of access to the process that only the aldermen enjoy, and a surplus of time that only Democrats enjoy (because Republicans have jobs!**)
Ok, those are the facts, at least the important ones. The next post will be an opinion piece outlining my analysis of the budget, and thereby creating a party platform of sorts for normal people concerned with being involved in the budget process. Stay tuned.