Mayor Brandon Scott will release the first public draft of Baltimore’s fiscal year 2024 budget, officially ushering in the beginning of what will be a historic budget season as the council is equipped with greater spending authority.

The $4.4 billion proposal — with $3.5 billion in operating expenses and about $900 million in capital planning — would be about a 5% growth from fiscal year 2023, which will end June 30.

It includes what the administration called an unexpected $79 million more in education funding than Baltimore spent last year, which Scott called a “gut punch” while stressing the importance of investment in youth and schools at a news conference Thursday morning.

“But we did what we always do. We make the tough decisions to make sure that we’re meeting services while we meet this requirement, because it’s the right thing to do,” the Democrat said.

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The first-term mayor framed the budget as one borne of “hard choices” that creates funding for an office of aging and office of minority and women-owned businesses without a reduction in services or tax hikes.

By law, the council must approve a balanced budget by June 26. In the months before, the council will host hearings on the proposal for each agency, armed with a new power they have not held in more than a century: the authority to move money around the budget, given to them by voters in a 2020 ballot measure.

In years past, the legislative body has only been able to cut money — an authority the council has flexed for political gain in recent years.

Last budget season, the council voted for cuts of $500,000 from the sheriff’s department and $196,000 from the quasi-agency Baltimore Office of Promotion & the Arts, following concerns about policies in both offices. In 2020, then-Council President Scott spearheaded the decision to cut $22 million from the Baltimore Police Department.

City’s school funding contribution set to rise by $79 million

The city’s revenue only grew by $90 million last year; finance officials attribute the smaller-than-usual growth to inflation.

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Usually, the bulk of that additional revenue would go toward investments in salaries or capital projects. But this year, a new school funding law is hitting Baltimore with an unanticipated $79 million bill.

The Blueprint for Maryland’s Future, a sweeping 2021 law adding billions in new money, rewrote the formula that finances state schools. School budgets were previously calculated by the number of students and the district’s wealth; now, the new formula aims to close equity gaps by increasing funding for schools with high concentrations of poverty, in part with infusions of cash from other districts.

Initial estimates for the school funding law predicted that Baltimore would pay about $12 million more in fiscal year 2024 than it did the year before. “That assumption was based on the fact the factors that play into the formula stays constant,” budget director Laura Larsen said.

The state school system previously calculated child poverty by relying on the number of students enrolled in free or reduced cost lunches, but this year, the Blueprint formula calculated the amount of poverty by Medicaid eligibility, Larsen said, noting that this calculation classifies 110,000 more students statewide as poor.

The addition means state aid must go to more poor students, and Baltimore’s local share of the cost has increased. At the same time, the city’s wealth slightly increased, placing Baltimore in a tier of school district that receives about a one-third funding match from the state instead of a 100% match.

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Now, the city is on the hook for a $79 million increase, a sum that Baltimore was not expected to owe until fiscal year 2029.

All in all, Baltimore will pay about $393 million to city schools — about 18% of the city’s general fund budget. The state will contribute more than $1 billion.

The Scott administration plans to partially make up for the unexpected increase by taking $39 million from the supplemental city balance fund, which is typically used to settle unexpected expenses, such as lawsuit settlements. A withdrawal from the fund going into the budget has not happened since the Great Recession, city officials said. The withdrawal will leave the fund with $11 million and without the contribution of a few million the city usually puts in each year.

The fund should not be confused with the rainy day fund, a $158 million pot that Baltimore by law can only put toward unexpected emergencies, such as $8 million for pandemic-related spending in 2020 and $20 million for recovery from the 2015 unrest following the death of Freddie Gray from injuries sustained in police custody.

Officials learned about the new Blueprint tab in early January. “It was a really compressed timeline to realize how we would pay,” Larsen said.

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The budget director said the city will look for ways to maintain its contribution to education in future years through savings. “All options are going to have to be on the table,” she said, noting that this fiscal year does not include or call for city staff reductions.

“We are going to have to look at our 10-year financial plan and roll up our sleeves to make sure we can sustain this investment,” City Administrator Faith Leach said of the Blueprint funding.

Scott said he has been in touch with Gov. Wes Moore and state lawmakers to discuss the toll that the unexpected bill has taken on the budget.

“I am very, very hopeful that we’ll be able to work with him,” he said.

City Council President Nick Mosby called the additional Blueprint payment his biggest budget concern.

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“The city has to become more involved in the overall management and ultimate outcome of this money,” he said.

New positions in Police Department and public works

As City Council president, Scott led the charge to cut $22 million from the police budget in 2020. But as mayor, his administration increased the agency’s budget by $28 million in 2021 and $5 million in 2022. This year, the budget is essentially flat: fiscal year 2023 was $525.1 million; fiscal year 2024′s proposal is $524.9 million.

The department will add five new civilian positions to the police department’s victim services team, which currently operate in the Western and Southern districts. It also funds 20 new positions on the police accountability board, which in 2023 was funded with a supplemental allocation. There is no change to sworn staffing levels.

The budget includes funding for 37 new Department of Public Works positions to fill about 10 new trash and recycling crews. Larsen said this means the agency will be less reliant on pulling crews from other areas, such as street sweeping.

“We’re going to do everything to make sure that weekly recycling comes back,” Scott said.

A snapshot of city life

Income taxes are projected to be up about 3.9% for an increase of $16.7 million. There were about 7,400 fewer income tax filers in Baltimore last fiscal year, most of whom made less than $60,000. But the city saw a rise in incomes overall that offset the loss.

Tourism revenue, which is pulled from hotel tax and parking fees, rose by about 13.4% for an increase of $5.6 million. Finance officials anticipate that hotel demand is expected to meet about 90% of pre-pandemic levels by June 2024.

“Because there’s been a shift in hotel inventory in the city, we’re seeing prices go up, so the higher demand coupled with higher prices is helping our revenue bounce back,” Larsen said.

Parking demand continues to be relatively low, she added. And revenue from traffic cameras is projected to decline by 14.5%. There’s a dramatic drop-off in number of tickets being issued, Larsen said, noting there is a low collection rate — about 50% — on violations in general.

Tickets from Interstate 83 speeding cameras are not included in the revenue, though Larsen noted the cameras were anticipated to collect about 595,000 tickets and instead have collected about 350,000-400,000.

All signs point to an interesting budget season

The council, led by Council President Mosby, has grown more critical of Scott as the mayor enters the second half of his first term.

In recent weeks, they’ve homed in on what they call transparency issues surrounding Scott’s controversial deal with BGE over access to the city-owned conduit and briefly rejected his nominee for city administrator. The committee tasked with voting on mayoral nominations ultimately backtracked and approved Faith Leach as administrator, after Scott aides spent a weekend brokering political favors, including promises of earlier budget briefings.

Mosby noted that residents voted overwhelmingly to give the council more budget authority in a 2020 ballot referendum. “They clearly support more balance of power,” he said.

The Democrat said he has been in touch with different municipal councils throughout Maryland and the U.S. that have similar budgeting oversight, noting that his office has hired Dexter Lockamy to serve as the director of finance and budget.

Mosby said such a position will allow the council to be a partner in progress with the Scott administration while bringing a greater sense of professionalism to managing city finances.

Councilman Eric Costello, who oversees budget hearings as the chair of the Ways and Means committee, said he has met several times with administration members to discuss the 2024 proposal; though he has not received a draft, he has been briefed on budget projections.

“We wanted to be ahead of the curve this year, so as a council we’ve gotten started a lot earlier than we normally would and have been meeting on a weekly basis,” the Democrat said.

Leach said she anticipates that the council will use their new authority.

“I can’t blame them,” she said.

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