ELLICOTT CITY, MD – Howard County’s Spending Affordability Advisory Committee’s (SAAC) released its Report for the Fiscal Year 2025 (FY25). The Committee is tasked with making recommendations to the County Executive on revenue projections, General Obligation bond authorizations, long-term fiscal outlook and County revenue and spending patterns. To read the full report, click here.
I’d like to thank the members of the Spending Affordability Advisory Committee for the time, effort, and insight they provide to our budget process. As we face an uncertain economic climate, it is important to consider these SAAC recommendations during the development of our FY25 budget this spring.
The report finds that while Howard County continues to be well-positioned for the future, it will need to adapt to a “new norm” of slower revenue growth as population and residential development ease. Additionally, Howard County will need to budget accordingly as its annual revenue growth rate returns to norms of three to four percent, following two years of unprecedented strong budget growth. In the prior two fiscal years, this growth was primarily attributed to temporary factors such as capital gains and federal aid provided to avert the economic and fiscal impacts of the COVID-19 pandemic. In the current fiscal year, income tax distributions decreased by $43 million from the same period last year, signaling a return to normalized and more predictable growth in the foreseeable future.
The report also highlighted the historic growth in school funding Howard County has administered over the previous few years, which accounted for more than half of total County spending annually. In future fiscal years, this level of funding growth to public education must be balanced with support for critical Howard County services and long-overdue deferred maintenance. This balance is needed as school enrollment declines and Howard County’s population continues to age. The SAAC advises a more balanced approach to fiscal planning, allowing for a more sustainable growth in spending across Howard County services.
Our report recommends a balanced fiscal approach that prioritizes capital projects that address ongoing maintenance needs and backlogs, as well as service needs that keep us a full-service county for all Howard County residents. I'm grateful for the collective expertise of the Spending Affordability Advisory Committee, as well as the collaboration in making these recommendations.
During the last two months, the Committee has been briefed by economists, financial experts, business representatives, multiple Howard County agencies and local educational institutions on economic outlook, revenue projects, capital needs and operating budget requests. Based on this information, the Committee recommends:
- Developing a budget below projected General Fund revenues of $1.44 billion, excluding one-time resources, for FY25 (an increase of only approximately 3.7 percent from FY 2024). This represents a normalization of annual revenue growth and follows recent peak performances, driven by inflation and one-time federal funding contributions in prior years;
- New authorized General Obligation bonds issued in FY25 should not exceed more than $70 million and that the County should strengthen its debt control continuously; and
- A revenue projection of 3.3 percent growth, on average, during FY 2026-2030. The County should commission a long-term spending review, which considers both school and general services spending limits based on projected resources as community buildout approaches, in line with the HoCo By Design plan.
In the report, the Committee urged elected officials to make hard choices in collaboration with stakeholders to match expenditures with resources and develop a balanced and sustainable budget. Key recommended strategies include:
- Not fully spending projected revenues in FY25 on recurring items and limit the addition of new recurring expenditures;
- Keeping capital budget and long-term planning in line with fiscal reality and debt capacity;
- Assessing needs versus wants and prioritizing infrastructure maintenance;
- Developing sustainable long-term spending plans based on less than the projected average revenue growth of 3.3 percent in the next six years; and
- Collaborating with all stakeholders to close a sizable funding gap over the next six years.
“The final week of report-writing brought home the wisdom of ‘not counting your chickens before they’re hatched’ as the County was notified of an 11 percent drop in year-to-date income tax revenues over FY 2023,” said Ellen Flynn Giles, SAAC Committee Member. “This surprise ‘hit’ forced the Committee to re-examine and adjust recommendations agreed on just days before. Therefore, as we continue our transition post-COVID into a slow-growth economy, with both aging infrastructure and population, we must come together as a county, spend prudently and plan cautiously for the future.”