How Do I?
What is Baltimore's budget?
The City’s budget has two major components—operating funds, which cover the everyday activities and services of the government, and capital funds, which cover the large and long-term infrastructure projects of the City. The Bureau of Budget and Management Research (BBMR) oversees the City’s operating budget, managing the budget process—providing analysis and recommendations to the Mayor—and operating expenditures–overseeing each agencies spending to help maintain a balanced budget. The Department of Planning oversees the City’s capital budget, preparing an annual six-year plan of capital projects based on agency requests that is reviewed by the Planning Commission. You can learn more about the capital budget here.
The Fiscal 2021 budget is $3.87 billion, with $3.05 billion in operating and $823 million in capital funds.
How is the operating budget funded?
The operating budget has three fund sources: General Fund, Enterprise Funds, and Grant Funds.
The General Fund is where most funding comes from and is what BBMR works most closely on. These are the funds that the City has most flexibility is maneuvering to meet needs or requests. The majority of the General Fund comes from property taxes (50.2% in Fiscal 2020) and income taxes (18.6% in Fiscal 2020).
Enterprise Funds come from utility fees, such as water, wastewater, and stormwater, which have specific user fee rates that are established by the Director of Public Works. These funds are self-supporting in that the fees received from users go right back into the service and General Fund dollars are not used.
Grant Funds come from federal, State, or private grants. These funds can only be used for specific programs and services and are often time limited.
- What is Baltimore’s budget process?
What is BBMR’s role in agency budget decisions?
The Bureau of the Budget and Management Research (BBMR) operates in an oversight role for agency expenditures, conducting quarterly projections and approving contracts or purchases. BBMR works with agencies to assess budgetary needs, identify efficiencies, and right-sizing budgets to reflect actual spending needs. While BBMR facilitates the budget process and provides recommendations and analysis of proposals, the Mayor and their senior team make all final decisions.
How can I engage in the budget process?
Residents can engage in the budget process at two public events—the Board of Estimates Taxpayers’ Night and the City Council Taxpayers’ Night. These events provide residents the opportunity to share their thoughts and concerns about the budget with the Board of Estimates and the City Council, which may result in changes to the budget. You can learn more about the budget process here.
Our office also offers presentations to community groups, which can provide residents with more information about the budget and the budget process to better inform themselves and their efforts to improve their community and the City at large. You can request a presentation in your community by contacting us at [email protected]. Additionally, we’re working to expand our public participation by increasing our presence on social media, engaging more regularly with residents, and launching web-based tools to collect more direct feedback on the budget.
What are “fixed costs” and how do they impact the City’s ability to fund services?
In general, “fixed costs” are expenses that the City is required to pay by law or contract and cannot be easily reduced in the short-term. The City’s fixed costs include contributions to employee pension systems, health care for retirees, the State-mandated Maintenance of Effort (MOE) contribution to Baltimore City Public Schools (BCPS), payment of debt service on loans and bonds, workers compensation claims, insurance and liability costs, utilities, and fees for solid waste disposal. Fixed costs make up approximately 44% of the General Fund costs, which limits the amount of funds that the City can shift across services to meet funding needs or requests.
However, the City is regularly working to reduce the proportion of funds that are allocated for fixed costs in order to open up more funds. For example, in Fiscal 2019, the City rebid the health care and prescription drug coverage contracts and saved nearly $35 million. These savings could go back into the General Fund to be used for other purposes.
What is the City’s property tax rate and what impacts it?
Baltimore City’s property tax rate is the highest in the State at 2.248%, or $2.248 per $100 of assessed value. There are several factors that contribute to this property tax rate, including aging infrastructure, population reductions, low median household income, property vacancy rates, and tax incentives and exemptions. We provide an overview in our infographic, “What Impacts Our Property Tax Rate?”, and an in-depth analysis in the Executive Summary for each fiscal year.
You can find other local tax rates here.
What has been done to reduce the property tax rate in the City?
In Fiscal 2020, Baltimore City fully implemented the 20 Cents by 2020 program to make it easier for homeowners to stay in the City. This program brings down the effective property tax rate per $100 of assessed value from $2.248 to $2.048 for owner-occupied properties.
Proposals to reduce property taxes are painstakingly considered because real property tax revenues represent about 50% of the funding source for the City’s General Fund. Any attempt to reduce the rate to make it more comparable to neighboring jurisdictions must be supported by either alternative revenue sources to offset reduction in this revenue, or an equivalent reduction in the level of service the City provides. You can learn what impacts the City’s property tax rate here.
How much funding does the City provide to Baltimore City Public Schools?
Baltimore City Public Schools currently operates as a separate entity from the City and about 73% of funding for City Schools comes from the State. Currently, the City is required to contribute to City Schools per a mandated formula calculation called Maintenance of Effort (MOE). In Fiscal 2020, that amount was approximately $275 million, covering the base MOE, retiree health benefits, and teacher pension. The City contributed an additional $100.4 million, resulting in a total contribution of $375.57 million.
What causes high overtime rates for Fire and Police?
There are several reasons why the Police and Fire Departments are currently facing overtime deficits. One reason is that there are staffing models within public safety agencies that require a fixed number of personnel per shift and per vehicle. When there are staffing shortages, overtime is required to fill the gap.
The Baltimore Police Department has taken a number of steps to minimize these costs, including negotiating a more efficient schedule, directing more call for service to telephone reporting, better utilizing light-duty officers, and reducing staffing requirements for non-core specialized units. The new contract with the Fraternal Order of Police (FOP) puts into effect a new schedule that should provide more consistent coverage and less reliance on overtime--we expect to see $5 million of overtime savings in Fiscal 2020. The contract also includes pay increases and Patrol incentive pay, which should help with recruiting efforts to fill vacant Police positions that result in the need for overtime coverage.
BBMR is working with the Fire Department to review Fire’s scheduling practice. There has been growing demand for medical services, which has put extreme pressure on the agency. They are working to reduce this impact by implementing the community paramedicine program, which works to minimize repeat calls, and the two-tier model, which sends appropriate resources based on the call (e.g., either a Basic Life Support unit or an Advanced Life support unit).
What has caused the Police budget to increase so much since Fiscal 2012?
Prior to Fiscal 2013, the City budgeted pension and building rent costs centrally, which made it unclear to agencies and the public how much was being spent per agency on these areas. In Fiscal 2013, these costs were allocated to the agencies, which resulted in budget increase of approximately $54 million. Since Fiscal 2013, the budget for Police has grown mainly from increased personnel costs due to pay raises and hiring of new positions, as well as changes from contract negotiations with the Fraternal Order of Police (FOP). In Fiscal 2018, the budget increased due to costs from compliance with the Department of Justice consent decree. When Police spending has exceeded budgeted amounts, the City has been required to use other surplus revenues to cover the costs.
What is Activity 095-Unallocated Appropriation?
Unallocated appropriation is a placeholder for anticipated funds or grants that agencies expect to receive during the fiscal year, but have not yet been awarded when the budget is drafted. Agencies can only spend money that has been “appropriated”, or budgeted, in the Ordinance of Estimates, the official budget submitted to the Board of Estimates and City Council. Budgeting unallocated appropriations ensures agencies can access funds quickly once funding has been received and approved by the Board of Estimates in order to get started on projects. If agencies do not receive the funding, they cannot spend these funds.
What are utilities and how do they relate to the City’s budget?
The City has Water, Wastewater, and Stormwater Utility Funds, also known as enterprise funds. The Water and Wastewater Funds were established in Fiscal 1979 and the Stormwater Fund in Fiscal 2014. The Director of Public Works is required to establish water and wastewater (sewer) rates charged to users that are enough to keep the systems self-supporting.
Almost all utility fund revenue comes from user fees, such as monthly water bills; the City sells water to the surrounding counties, including Baltimore, Anne Arundel, Harford, Howard, and Carroll Counties. Baltimore and Ann Arundel counties utilize and pay into the City’s Wastewater Fund. The Stormwater Fund allows for the City to budget and plan for the capital and operating costs associated with the City’s stormwater management system; it also funds the City’s mechanical street sweeping operations. These funds are self-supporting, which means that the services provided under these funds do not use City General Fund dollars.
Learn more about the utilities from the Department of Public Works.
How does the City assess the impact of its budget investments?
The Mayor’s Office of Performance and Innovation (OPI) and BBMR have collaborated in a rigorous review process of agency performance measures and management. Each agency has performance measures that are used to assess the efficiency and effectiveness of their services. These measures are audited by the Comptroller’s office every two years and are reviewed by the agencies, OPI, and BBMR to ensure they accurately reflect the work within the agency.
What financial standards influence how the budget is developed?
When developing the budget, the BBMR works with the Mayor and their senior team to identify budget priorities. While we work with the Mayor and agencies to meet these priorities, we also have a few key things that guide our work as we go through the budget process.
First, the City Charter mandates that the budget be balanced by agency at the end of each fiscal year, so we are always trying to make sure that agencies are accurately budgeting and planning for the upcoming year.
Second, we work to ensure that the City and resident receive a high return on investment through efficient and effective service provision.
Third, we want to ensure that the City is fiscally responsible and healthy. We do this by maintaining a high bond rating, which is like City’s credit score; ensuring that we have a rainy-day fund, so there is access to funds in case of emergencies; and assessing our debt ratio, which is the rate that we’re borrowing compared to the amount of money that we have.
Finally, we are always aware that the economy could change, and we could face major bumps ahead, so we ensure that our planning and budgeting accounts for possible future challenges to keep the City on a strong fiscal path.
How do homeowner tax incentives impact the budget?
The City has created several tax incentive programs to help offset the City’s high property tax rate for residents. Choosing where to live is a complicated decision based on a variety of factors such as housing choices, transportation options, and family considerations, among others. We are currently analyzing the impact of the City’s tax credit portfolio on the City’s finances to ensure that there is a net financial return for the City, as well as examining who it is receiving these benefits through an equity lens.
What happens to surplus revenue?
The City can have a General Fund surplus when City revenue receives exceeds City spending. If the City generates a General Fund revenue surplus, funds are set aside for any known outstanding risks, such as legal liabilities, or are spent on one-time projects. This is different than the City’s Rainy Day Fund, which is the fund that the City can only use for unanticipated emergencies, such as natural disasters and civil unrest. Due to the impacts of COVID-19 on the City’s budget, the Rainy Day Fund will be used to fill a budget deficit in Fiscal 2020.