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Baltimore faces major COVID-19 budget crunch

Map using cellphone data shows the decrease in foot traffic in downtown Baltimore since March 22. The loss of visitors to the Inner Harbor area has hammered the city's budget. ( Map courtesy Tectonix LLC)

Map using cellphone data shows the decrease in foot traffic in downtown Baltimore since March 22. The loss of visitors to the Inner Harbor area has hammered the city’s budget. ( Map courtesy Tectonix LLC)

Baltimore faces a deficit of $42.3 million in the current year’s budget stemming from the COVID-19 outbreak, which has rendered the preliminary budget proposal for the coming year irrelevant.

Now the city is scrambling to figure out how to close the gap in the fiscal year 2020 budget while simultaneously piecing together a budget for fiscal year 2021, with at best uncertain projections regarding the impact of the coronavirus on revenue.

“We don’t know how long this will last or what our budget will look like when (it’s over),” Mayor Bernard C. “Jack” Young said during a phone call with reporters Monday.

The city initially projected to finish fiscal year 2020, which ends July 1, with a surplus of $26.4 million. The coronavirus outbreak, however, wiped out about $68.7 million in expected revenues, according to city budget officials.

The primary culprit of the budget woes are precipitous drops in revenues related to tourism, such as the hotel tax. Losing revenue from income tax because of layoffs and furloughs in the private sector also will pummel city finances.

Last week the depth of the challenges facing the city’s tourism industry and the associated impact on government finances first became public last week.  Al Hutchinson, president and CEO of Visit Baltimore, said his organization expected to lose $7 million in hotel tax revenues through April, May and June based on Smith Travel Research projections.

The city has cut back on some services, such as graffiti removal and bulk trash collection, in response to the coronavirus outbreak, and those actions reduced expenditures. More drastic measures, such as laying off non-essential city workers, are not on the table Department of Finance Director Henry Raymond said.

Baltimore officials presented the preliminary fiscal year 2021 budget to the Board of Estimates Wednesday. Those figures, however, are meaningless as the city projects revenues to drop $100 million.

“It’s mostly irrelevant because it’s going to change so drastically,” Budget Director Bob Cenname said.

As a result city officials are scrambling to make what Cenname called “significant revisions” to next fiscal year’s budget while staying on track to submit it to City Council, as the City Charter requires, by May 6.

That task is made more complicated by uncertainty in how the COVID-19 outbreak will play out.

Even the $100 million revenue decline is an optimistic forecast Cenname said, predicated on many of the current social distancing restrictions lifting at the end of the first quarter.

“The real wild card is the income tax,” Cenname said.

Baltimore departments do have a head start on potential budget cuts.

Last year, in a bid to prepare to pay for added education costs from implementing Kirwan Commission recommendations, Young ordered all departments to prepare to cut 5% from their budgets across the board.

Raymond warned on Monday those cuts were just “planned scenarios,” and that they only totaled about $70 million. Those cuts wouldn’t be applied equally across all departments, he said.

Young has previously called on the federal to provide the nation’s cities a bailout similar to the stimulus package provided to corporations in the wake of the COVID-19 pandemic.

“So there’s a number of things that we need, and we need a president that is going to look out for the entire country and make sure that we’re all made whole,” Young said.

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