BALTIMORE, MD (March 20, 2013)—Today, Mayor Stephanie Rawlings-Blake and the Department of Finance presented the City of Baltimore’s Fiscal 2014 Preliminary Budget Plan. The Budget closes a projected $30 million deficit with minimal service impacts by relying upon fiscal reforms outlined in the city’s first Ten-Year Financial Plan, Change to Grow. The 10-year financial plan includes a bold set of major reforms to help grow Baltimore by 10,000 families by eliminating a $750 Million structural budget deficit; increasing neighborhood infrastructure investments; and reducing homeowner property taxes by more than 20% over the next ten years.
The proposed reforms in the Fiscal 2014 Preliminary Budget Plan include increasing civilian pension contributions, creating a state-mandated storm water utility, vehicle fleet restructuring, employee leave reform, and previously-enacted health benefit changes, which are now generating an annual full-year savings of more than $20 million. The budget also proposes a 2% cost-of-living increase for employees to offset new pension contributions, provides a one-time funding surge of $10 million to support demolition of vacant homes, and increases capital investment in neighborhood infrastructure—including street resurfacing and recreation center upgrades—all while cutting the effective property tax rate for city homeowners to $2.168 per $100 of assessed value, representing a ten cent (4.5%) cut since Fiscal Year 2012.
“The Preliminary Budget represents a significant step forward in implementing major fiscal reforms, as we proposed in the Ten-Year Financial Plan,” Mayor Rawlings-Blake said. “Implementing the ten-year plan, starting with this year’s budget, will require tough trade-offs and major changes to past practices, but doing so will help us make smart investments that reward the future and help get Baltimore growing again.”
The Preliminary Budget Plan represents a 0.5% increase in General Fund expenditures over the previous fiscal year and reduces General Fund budgeted positions. The budget was built in the spirit of the mayor’s vision for growing Baltimore’s population by 10,000 families and is focused on the following Priority Outcomes:
- Provides $42 million for the Mayor’s Better Schools Initiative to modernize city school buildings, more than doubling city government’s contribution school construction and renovation, over historic levels.
- Funding sources include proceeds from the beverage container tax, state formula aid leveraged by the city, a general obligation bond allocation and casino lease and table games revenue.
- Fully funds the city’s contribution (Maintenance of Effort) to the Baltimore City Public School System at $202.1 million—a $500,000 increase over Fiscal 2013. The city’s teacher pension contribution grows from $12.9 million to $16.4 million.
- Keeps all library branches open and maintains current hours of operation to improve third-grade reading and support life-long learning.
- Begins a transition of the city’s four daycare centers to year-round Head Start centers that will help 2,000 children prepare for kindergarten and combat summer learning loss.
- Replaces earmarked grants in the Education Grants service with $500,000, to be administered by the Family League of Baltimore, for evidence-based programming to improve educational outcomes.
- Continues the Mayor’s aggressive efforts to hire new police officers and funds an outside review of police overtime usage.
- Maintains funding for the Crime Camera Management service to support the operation of more than 600 cameras across the city.
- Maintains funding for Youth Violence Prevention.
- Fully Funds EMS services. Over 80% of 911 call demand is for medical emergencies.
- Helps improve response times using new technology to track the location of medic units.
- Transitions firefighters to a three-shift schedule, subject to union negotiation and arbitration. The new schedule will help maintain emergency response times and generate savings to improve firefighter pay, replace fire apparatus, and upgrade aging firehouses.
- Reduces the police aviation fleet from four helicopters to three, saving the city $1.2 million.
A Growing Economy
- Reduces the effective property tax rate for city homeowners to $2.168 per $100 of assessed value, representing a ten cent (4.5%) cut over two years, since Fiscal Year 2012, under the mayor’s 20 Cents by 2020 initiative.
- Supports the mayor’s Vacants to Value program by increasing baseline capital funding for blight elimination and providing a one-time funding surge of $10 million for demolition.
- Provides $10 million in capital funding to meet the goal of resurfacing at least 200 lane miles in the city’s neighborhoods.
- Adds $5 million in capital funding to upgrade recreation centers, pursuant to the mayor’s plan. Also includes $1.2 million to continue operation of eight afterschool centers and $300,000 for equipment at four new centers that will open in Fiscal 2014.
- Provides a one-time enhancement of $260,000 to improve client access to the city’s home weatherization service, which will assist 1,000 residents to make their homes more energy efficient.
- Maintains funding for the YouthWorks Summer Jobs Program, which will partner with private and nonprofit employers to give more than 5,000 young people meaningful work experiences.
- Continues increased General Fund support for the Baltimore Development Corporation to support economic development and job creation, fully funds the Small Business Resource Center, and expands the Emerging Technology Center incubator program.
- Enhances Live Baltimore’s Live Near Your Work program to attract new residents to the city.
- Maintains funding for key cultural institutions, such as art museums, the Baltimore Symphony Orchestra, and the Baltimore Office of Promotion and the Arts.
- Funds a new food desert strategy that will connect urban farmers to convenience stores and create new jobs.
A Cleaner and Healthier City
- Invests $5 million in capital funding for technology to accelerate the city’s transition away from an outdated mainframe platform. During Fiscal 2014, the city will begin to centralize its IT resources under MOIT to reduce duplication and promote a coordinated strategy for modernizing service delivery.
- Provides funding to carry out a new charter requirement for periodic audits of city agencies.
- Creates new accounting positions to improve internal controls and respond to citywide audit findings.
- Implements the recommendations of management research studies to make the city’s employee training unit financially self-sufficient, conduct elections more efficiently, strengthen grants management, and improve the dockmaster service.
- Invests in four new Innovation Fund projects that will modernize parking management, make city buildings more energy efficient, and improve city vehicle safety.
Ten-Year Plan Implementation Detail:
- Begins operation of a new stormwater utility. Funded by a state-mandated user fee, the utility will enable the city to meet state and federal water quality requirements, expand green space, and improve flood control. The new stormwater fee will be partially offset by a two cent property tax reduction.
- Provides funding to open a new women’s homeless shelter to replace the Guilford Street shelter, resulting in a net increase of 50 beds.
- Increases funding for Urban Forestry, which will allow for additional safety-related tree pruning. This service has realized efficiencies from new unit cost contracts and is piloting a proactive pruning program.
- Maintains funding for 1+1 trash and recycling collection, graffiti removal, and street and alley cleaning. The Ten-Year Financial Plan calls for the establishment of a solid waste enterprise. In preparation, the city will pilot the use of municipal trash cans and use managed competition to make the bulk trash service more cost-effective.
- Enhances funding for Baby Basics, a prenatal health literacy program that reduces risks of poor birth outcomes for low-income mothers.
The Fiscal 2014 Preliminary Budget contains a number of initiatives proposed by the mayor as part of the Ten-Year Financial Plan.
Structural Budget Balance
Employees’ Retirement System (ERS) Reform: The Fiscal 2014 Budget includes changes that would ensure greater affordability and sustainability in the civilian employee pension system. There are three key changes.
- Targeting employee contributions of 5% for all current active ERS members, to be phased in by 1% annually, Fiscal 2014 – Fiscal 2108
- Eliminating the variable supplemental benefit
- Establishing a defined contribution (DC) retirement savings plan for future hires, which is consistent with the 401(k) model prevalent in the general labor market, and increasingly in many public sector employers
- 2% Cost-of-Living Adjustment (COLA): The Fiscal 2014 Budget includes a 2% COLA across all unions, pending negotiation. Benchmarking with other public sector employers suggests that the city should rebalance its portfolio of wages and benefits by directing compensation dollars more toward wages, while continually focusing cost containment efforts primarily on benefit programs. The 2% wage increase is offset by 1% increase in civilian employee pension contributions.
- Fire Suppression Schedule: The Fiscal 2014 Budget includes the negotiation of a new shift schedule for fire suppression personnel. Currently, firefighters work a four-platoon system with two 10-hour day tours and two 14-hour night tours. Under the new proposal, and consistent with many fire departments nationwide, firefighters would work one 24-hour shift, followed by 48-hours off. This new framework is subject to arbitration. Movement to the 3-shift model would result in a net reduction of 300 positions (to be achieved by attrition) and higher pay for remaining employees, while fully maintaining fire suppression coverage.
- Fire and Police Employee Retirement System (FPERS) Reform: In 2010 the city adopted a series of reforms for current FPERS members to improve the long-term sustainability of the system. To build on these critical reforms, the Segal Group was engaged to evaluate and develop options for “new hires.” Potential areas for further adjustment include tightening eligibility and vesting criteria, reforming the Deferred Retirement Option Plan (DROP), and adopting a hybrid defined-benefit/defined-contribution (DB/DC) approach. Although no savings are built in to the Fiscal 2014 Budget, reforms will need to be adopted if savings are to be realized beginning in Fiscal 2015 and beyond.
- Targeted Homeowners Tax Credit: The Fiscal 2014 Budget includes the continuation of the mayor’s Targeted Homeowner Tax Credit. This credit will reduce the effective property tax rate by 20 cents by 2020.
- Parking Tax: Beginning in Fiscal 2014 the Parking Garages and Lots Tax rate is scheduled to decline from 20% to 19%. The Fiscal 2014 Preliminary Budget proposes to maintain the rate at 20%, which is a $1.3 million revenue increase over the baseline. The current rate is consistent with other large Eastern cities and is one of the few revenue streams supported by a significant number of commuters and visitors.
- Taxi Cab Excise Tax: The Fiscal 2014 Preliminary Budget assumes$1.3 million annually from a new excise tax on taxi trips ($0.25 per trip). In lists of fare levels by major U.S. cities, Baltimore typically ranks below other large Eastern cities. This tax would also allow the City to capture additional revenue from nonresident commuters and visitors that utilize city streets and transportation.
- Billboard Tax: The Fiscal 2014 Preliminary Budget assumes $1 million of revenue for an excise tax on outdoor advertising—an activity that is generally not a public benefit and is, in some cases, considered a public nuisance. As a benchmark, Philadelphia has a 7% tax on billboard revenues, and the state of New Jersey has a 6% billboard tax.
- Capital Infrastructure Projects: The Fiscal 2014 Capital Budget includes a onetime inflow of $30 million for capital projects, including transportation projects ($10M), Vacants to Value blight elimination ($10M), MOIT upgrades ($5M), and recreation centers ($5M).
- Stormwater Enterprise: State legislation enacted in April 2012 mandates that the city and other large Maryland localities establish a watershed protection program beginning July 1, 2013. The city plans to establish a fee-supported stormwater enterprise, which will remove the cost of stormwater remediation from the General Fund budget. This shift will be partially offset by a 2-cent reduction to the city’s current property tax rates.
Addressing Long-Term Liabilities
Retiree Pharmacy Coverage Sunset: Under the terms of the Affordable Care Act, by 2020 a standard Medicare Part D plan will feature a 75% federal subsidy after deductible for pharmacy coverage. As a result, supplemental city coverage to fill the Medicare “donut hole” will no longer be needed. The city will be able to recognize the impact of this plan change by reducing its annual contribution to the OPEB trust fund.
Federal Funding Issues:
On March 1, 2013, the $85 billion federal sequestration went into effect. Preliminary agency estimates indicate that sequestration could reduce state and federal grant funding by $10 – 15 million. These cuts will impact a variety of city services, most significantly in the areas of public health, housing, job training, homeless services, and public safety. City officials are working closely with their federal counterparts to get more specifics about the cuts and will communicate with affected clients as details become available.
More information about the Fiscal Year 2013 Preliminary Budget, the budgeting process, and materials about Outcome Budgeting can be found at:
To learn more about the mayor’s Ten-Year Financial Plan: Change to Grow, visit: