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Baltimore officials say Rainy Day Fund for budget deficit only

Baltimore will not use its emergency fund for purposes other than closing projected budget deficits, city officials said Friday.

Department of Finance Directory Henry Raymond estimated the city’s Budget Stabilization Fund, also called the Rainy Day Fund, will amount to roughly $145 million by the end of the current fiscal year. Baltimore, he said, should use those funds to close a projected $48 million deficit and try to maintain the balance as insurance against future emergencies.

“The Rainy Day Fund is used as a last resort to resolve a deficit. When we get into the discussion of fiscal (year 2020) we do anticipate ending the year with a deficit, and we may need to use that fund to close the deficit,” Raymond said during a phone call with reporters regarding Baltimore’s budget.

Activists and some city elected officials are advocating using the Rainy Day Fund to pay for initiatives they say will help the city bounce back from the COVID-19 pandemic.

City Council President Brandon Scott, who is running for mayor, released a COVID-19 recovery plan that calls for using the funds to “ease the financial hardships facing our most vulnerable residents.”

Activist groups, such as Baltimore Fair Development Roundtable, are urging the city to use money from the Rainy Day Fund to provide housing and food to the city’s homeless population during the new coronavirus outbreak.

Baltimore faces a bleak financial outlook as a result of closing much of the local economy in order to clamp down on the spread of COVID-19. Revenues to the city’s general fund have tanked. Roughly 30% of the city’s revenue streams, income tax, tourism related taxes, and highway user funds, have been diminished because of the restrictions.

City revenues are down $20 million a month, while expenses, in large part from procuring protective equipment for essential employees, surged by about $5 million a month, Baltimore’s Budget Director Bob Cenname said.

While Baltimore is slated to receive $103 million from the first round of federal stimulus aid approved by Congress, there are limits to how those funds can be used. The money can only be used to cover emergency expenditures related to the COVID-19 outbreak and can’t backfill lost revenue, Cenname said.

“The fact that we built up a rainy day reserve over the years has really protected us during an emergency like this and allows us to have confidence we can continue to provide essential services,” Cenname said.

Raymond said the Rainy Day Fund must go toward closing a projected budget shortfall because Baltimore by law is prohibited from running a deficit. Guarding those funds, he said, also reduces expenses in the future by boosting the city’s bond rating.

“It allows us to borrow funds at a lower interest rate, which reduces our expenses,” he said.

The city also expects revenues to be off in fiscal year 2021, which starts July 1, by $103 million. Cenname said the uncertainty means the city will remain in a “period of belt-tightening for quite a while.”

Mayor Bernard C. “Jack” Young’s administration has contacted unions representing city employees about cost-saving options, including wage concessions, furloughs and layoffs.

“The mayor’s position is that he wants to avoid layoffs at all costs,” Raymond said.

Lester Davis, a top aide to Young, said the unions haven’t responded to cost-cutting options presented by the city.

“We’re still in productive conversations,” Davis said.

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