A Good Debt is Hard to Find
October 8, 2009 Leave a comment
“Incumbents will increase Baltimore County’s debt 25% in five years – $752M in 2005 to $942M in 2010. Authorities forecast our debt to reach $1.36B in 2014! Staggering figures considering our annual General Fund is about $1.6B. In 2010, we’l…l spend 5.6 percent ($90.7M) of the General Fund just to pay our debt’s interest. Incumbent mentality: “Spend lots now and worry about repayment later!” Steve Whisler via Facebook
So I did a google search this afternoon after reading an email questioning Steve’s number for the $1 BILLION debt of Baltimore County. Guess what? Not one single mention of it. In fact, every article I found spoke of the county’s apparent surplus. Even a local reporter had no idea the debt existed. To be honest, I don’t think much in terms of debts and deficits. I’ve become so desensitized to the very terminology; I have a hard time grasping what exactly the numbers mean. The more I get involved in politics locally, the more I begin to understand that those numbers mean my money, my hard earned dollars at work. At work, huh? Doing what? Paying interest on a debt? Can I just say that, in my life, I make it point to not pay interest, outside of my mortgage of course? Credit card companies hate me because I pay my balance off every month and reap the rewards. Basically they pay me to have their cards. So why would I want to pay interest on debt I didn’t incur, I have no idea what it paid for in the first place, and it does absolutely nothing for me or my family? Of course, apparently, Baltimore County has done a pretty good job of covering up the fact that they have debt. I’m not saying it’s a conspiracy or anything, just that in all I’ve read about Baltimore County’s budget, it’s all roses and teddy bears. I wonder if they got the same guys to do their “math” that the O’Malley administration got to do theirs when they said they inherited a deficit (try a surplus, peeps).
Can you blame them though? Our federal government doesn’t seem to mind pounding on the IOU’s, why should the local governments? The apple doesn’t fall far from the tree. The problem is that when that apple falls, it rots on the ground, exposes it’s seed, and sprout up a whole other tree. Debt is like a weed. Once you lose control, you’ve lost it completely. Seriously, they’re only paying the interest? That’s like us paying the “minimum” on our credit cards. Quick math lesson for all politicians: debt does not get smaller unless you pay down the principal, not just the interest.
Here is an email Steve Whisler, candidate for Baltimore County council, sent a local reporter this afternoon.
You’re correct … our county debt is financed thru bonds. As you can see on page III-7 of the budget message, the County Executive and Council can budget up to 9% of the general fund just to pay the interest on our public debt.
They plan to allocate $90,713,840 in 2010 … just to pay the interest on our public debt. It is very important to remember that this figure only pays the interest on our public debt … more would be needed to pay towards the principle balance.
Also, if you look at the FY09 budget message on page 55 of 170 (http://resources.baltimorecountymd.gov/Documents/Budget/080910budgets/fy09adoptmsg.pdf), the county forecasted our 2010 public debt to be $901,805,000. The FY10 budget message now says the public debt will reach $942,842,000.
The county missed the mark by 4.5%!
The FY09 budget message (Page 55 of 170) also forecasted huge public debt figures thru 2014 … and remember the figures you see on this FY09 message are off 4.5% after just one year. One can only imagine how much more the forecasted $1.368B public debt will be if county authorities continue their spending spree.
On page II-5 (16 of 43 in the pdf file), you’ll notice that the county will consume a huge part of the surplus and rainy day fund (RSRA) achieved at the end of Budget Year 2009.
– in 2009, the surplus and RSRA (rainy day fund) was expected to be $199.587,125
– in 2010, it will only be $134,049,483
Since an election is coming up, I suspect that politicians will divert much of the general and capital funds (and the rainy day funds) to satisfy unions, certain voter demographics / precincts, and other special interest groups. One can only imagine the many number of ballot bond initiatives county politicians will create for 2010 to give the illusion they’re bringing home the bacon, so to speak.
In summary, our politicians are on a spending spree.
– The public debt on June 30, 2005, was $752,245,000 (see page 139 of 170 at http://resources.baltimorecountymd.gov/Documents/Budget/080910budgets/fy09adoptmsg.pdf).
– We have increased our public debt by 5% each year … and even if we use the inaccurate FY09 budget forecast (which was 4.5% off after just one year), we’re on a trajectory to nearly double our public debt in just a 10-year period between 2005 and 2014.
– To make matters even worse, the figures mentioned above do not account for the county employee pension plan, whose funding level has dropped from 112% funding in 2000 to just 88% funding in FY10 … even after the county contributed / will contribute massive payments in FY09 and FY10 ($63M and $83M respectively) … and increased current employee contributions to the plan nearly five-fold.
Finally, it is important to compare the public debt (FY10 – $942,842,000 … FY14 forecast $1.368B) to our county’s annual operating fund. We allocate about $1.6B to $1.7B for the county’s general operating fund annually .. and we’re on a path to accumulate debt that is equivalent to a single year’s operating budget!
I hope that you and others in the media call attention to the massive debts that our county authorities are assuming in Baltimore County. The public has a right to know.