WASHINGTON Feb 11 Less than a week after
releasing an independent study that found Baltimore could face
financial ruin within a decade, Mayor Stephanie Rawlings-Blake
on Monday outlined a plan for fiscal stability during her annual
state of the city address.
The 10-year projection completed by Public Financial
Management Inc (PFM), a Philadelphia-based consulting firm,
found that if Baltimore maintains its current course, it will
have a deficit of $30.3 million in the fiscal year starting in
July. Over the next decade the city would accumulate a deficit
of $744.8 million.
At the same time, the report projects that the city's
reserves would likely disappear within three years.
"We cannot build a foundation of a growing city on the mud
of a fiscal swamp," Rawlings-Blake said. "The status quo is
unacceptable and the price of inaction is clear."
Hit by a sharp decline in population, Baltimore - a port
city once dependent on manufacturing - has fallen into fiscal
decline. For the last three years, the city has had to close
millions of dollars in budget gaps through layoffs and
furloughs, while increasing taxes.
The budget problem stems primarily from flat revenues - the
result of lagging property tax collections, weak economic
conditions and slow growth in state aid. Employee costs,
meanwhile, are set to rise quickly and will likely swamp those
meager revenues, PFM said.
The mayor proposed a plan that included reforming public
employee benefits, switching new employees to 401(k)-like
retirement accounts, create efficiency within government
bureaucracy, negotiating new contracts with firefighters,
increasing pay-as-you-go infrastructure financing and charging
trash collection fees.
"We all know Baltimore cannot simply hike property taxes to
improve our financial situation," she also said, adding that she
would not use tax increases to balance the budget.
Using a more "optimistic scenario," PFM said the deficit
over the next nine years would equal $325 million. Under a
"pessimistic" one that shortfall swells to $1.3 billion.
In the public imagination, Baltimore is the home to the
Ravens NFL franchise - recent Super Bowl victors - and is
closely linked to the HBO crime drama, "The Wire," which
portrayed the city as a post-industrial, drug-infested
Other cities in Maryland weathered the 2007-09 recession
better because federal contractors and technology companies
wanted locations close to the federal government in Washington,
Many U.S. cities are grappling with growing pension and
healthcare costs for their retirees and employees. Pew Center on
the States recently estimated U.S. cities' total pension
shortfall is at least $99 billion. The underfunding has of late
pushed some cities toward bankruptcy and forced many to pull
budget dollars from other areas.
The PFM study found that as of fiscal 2011, Baltimore had an
unfunded liability of $3.2 billion for all of its promises to
retirees. Its pension shortfall is about $1.1 billion, and
healthcare and other benefits beyond monthly pension payments
are underfunded about $2.1 billion.
Rawlings-Blake said she would release details of her
financial plan soon, but presented the tenets of her pension
Along with having new employees enroll in retirement
accounts similar to those in the private sector, known as
defined-contribution plans, she is seeking to have public safety
workers put into plans that are a hybrid of defined-contribution
and traditional pensions. She also said elected officials should
have pensions in line with regular government employees.
Baltimore, she said, is the only city in Maryland that does
not require employees to contribute to the retirement system,
adding she will soon ask workers to pitch in.
"We must rebalance the way we compensate our hard-working
employees by reforming outdated, unsustainable benefits and
instead invest in better wages up front," she said.