One Year After Dire Fiscal Forecasts, County Leaders, Budget Officials Are Optimistic About Economic Recovery

Photo by Danielle E. Gaines.

In 2020, politicians and county staffers attended a virtual Maryland Association of Counties summer conference amid growing concerns that the COVID-19 pandemic could stifle county growth and cut into county budgets for years.

“We didn’t know what was going to happen with COVID,” Ted Zaleski, the director of management and budget for Carroll County, said. “We didn’t know how bad it was going to be, we didn’t know how it was going to impact things. It seemed perfectly reasonable to think that it was going to have an impact, but how do you quantify that?”

Those gloomy estimates and predictions from last year have changed: At the in-person 2021 summer conference in Ocean City, which began Wednesday and ends Saturday, budget officials painted a more optimistic picture of county revenues as the state recovers — and said federal stimulus funding helped local jurisdictions avoid disaster.

Andrew Schaufele, director of the state’s Bureau of Revenue Estimates, said at a panel Thursday that he was stunned at how quickly the state’s revenue rebounded to a level similar from before the pandemic.

“Effectively one year after COVID, we’re seeing the exact same revenue picture as we were before COVID,” Schaufele said. “That, to me, is still startling.”

Schaufele said he initially expected the state’s recovery from COVID to drag on for years, akin to the state’s slow recovery from the Great Recession. Instead, the state has seen a rapid V-shaped recovery, he said. Billions in federal stimulus funding and the state’s high vaccination rate are to thank for that fast recovery, Schaufele said.

“The stimulus has done its job,” he said. “It’s gotten into the hands of the people that needed it.”

Various federal stimulus efforts have passed Congress since the onset of the pandemic, from the early CARES Act to the more recent American Rescue Plan Act. All told, state and local governments in Maryland have received billions in federal aid funding since the beginning of 2020. At an address to conference attendees Thursday, U.S. Sen. Chris Van Hollen (D-Md.) said it’s important to allow counties flexibility over how they spend federal relief funding.

“You’re on the front lines, and you should be receiving funds to support your communities and receiving them directly in as flexible a way as possible,” Van Hollen said.

Zaleski said stimulus funding “made all the difference” in averting disaster at the county level, but added that now there is a new question for county budget directors: What does a full recovery look like, and when will that happen?

Schaufele added that low-wage jobs have been the slowest to rebound after the pandemic. That mirrors a nationwide trend in which the pandemic had a disparate impact on low-wage workers, and according to a report by the Brookings Institution, those workers have more barriers to re-entering the workforce.

Schaufele said he’s “upbeat” about the pace of growth over the next year or so, but expects post-pandemic growth to eventually slow. He cautioned county budget officials against assuming that present growth rates, spurred on by federal stimulus funding, will continue indefinitely.

Current revenue estimates in Anne Arundel County exceed what county officials budgeted for the 2021 fiscal year, county budget officer and policy advisor Chris Trumbauer said. County officials budgeted for $589.2 million in income tax revenue for the 2021 fiscal year, he said, but that figure now is estimated at $630.2 million.

Anne Arundel also saw a boost in recordation and transfer tax revenues because home buying has continued at an unexpectedly high pace, Trumbauer said. Although revenues from sales tax, licenses and permits and investment income are all slightly lower than estimated, the county’s operating revenue is $47.9 million higher than expected, he said.

The county was left with a $114.2 million fund balance for the 2022 fiscal year, Trumbauer said, and used a large portion of that funding for pay-as-you-go capital budget expenditures, as well as its retiree health benefits trust and rainy day fund.

Anne Arundel County Executive Steuart Pittman (D) said the extra cash from tight budgeting and federal stimulus funding means county officials can fund initiatives to end homelessness and aim for an equitable recovery.

“Between the savings that we generated by being conservative last year and the federal money, we are able to really assist in the recovery,” Pittman said. “To me that means that we’re filling holes in the safety net, like never before, that people have been falling through during the pandemic.”

Pittman wants to focus on boosting social services and affordable housing as the county looks to recover from the pandemic. He said the pandemic also highlighted the need to restore funding to local health departments, which never recovered fully from the Great Recession.

“I’ve always believed that it’s the foundation of the economy, the bottom, that we need to pay attention to,” he said. “I think the pandemic forced us to do that.”

As to uncertainty over the highly contagious delta variant, Pittman said counties are now better equipped to deal with the spread of COVID-19 thanks to vaccines.

“We had to implement further restrictions in the fall because we projected hospitalization rates to go so high that it would cripple our health care system,” he said. “We don’t have to do that now because they’re not projecting hospitalization or things like that because so many people are vaccinated.”

Likewise, Baltimore County Executive John A. Olszewski Jr. (D) said his county’s financial outlook is “night and day” from where it was a year ago. He said federal funding and a better-than-expected recovery have meant that the county can invest in education, social services and more.

“We did a very basic budget that focused on the priorities of education, public safety and serving our residents,” Olszewski said, of last year.

“But fast forward one year and we have a budget that not only put the largest [maintenance of effort] increase in the county’s history towards education, but we’re doing things like tree equity programs, bringing back bulk trash [pickup], which was a longstanding campaign promise, and doing all sorts of other capital and human capital investments across the county,” he said.

Warren Deschenaux, former executive director of the nonpartisan Department of Legislative Services and longtime authority on the state budget, said the future is still uncertain for the state’s and counties’ bottom lines. He said fighting COVID-19 will be key to sustaining the economic rebound.

Deschenaux said counties should use the unexpected cash to invest in one-time projects rather than relying on them for ongoing expenses, and look at boosting rainy day funds. He also urged county officials to invest in things with “enduring value” like broadband.

“Whatever you’re planning, whatever you’re expecting, there’s always something,” he said.

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