Friday, January 30, 2015

Baltimore's 2015 Fiscal Cliff: The Coming Storm (2 of 3)

Baltimore, where I've lived for most of the last 20 years, and have owned a home for the last 11 years,  has survived the recession.  That is to say Baltimore is not Detroit.  The reasons for this are legion but I believe the most three significant positive drivers are as follows:

1.  Baltimore is a city whose residents have a "grass roots" positive mentality and culture. 
2.  Baltimore is significantly bolstered by its proximity to Washington DC.
3.  Baltimore has enjoyed, for the bulk of the last 40 years, a friendly legislature and governor.

Despite these factors, Baltimore remains a very poor city with very serious problems.  Here's a look at the present - why hasn't Baltimore prospered in an era of heavy state and federal funding?

1.  Failure to grow employable or college-ready students in public schools. 
2.  Ineffective Laws on Violent Crime. 
3.  Prohibitive Tax Rates. 
4.  Environmental Disasters.

It's clear that unfortunately, "more money" and "more laws" are not the only solution to Baltimore's problems (if only it were so). Simultaneously, some realities have been operating in the background that bear some serious consideration in the name of figuring out "what is Baltimore to do?"  My next essay on the topic will examine those, as a legislative and fiscal preview to 2015 (and FY16).

1.  State fiscal disaster.  Outgoing Governor O'Malley recently announced that after eight years in office, his administration is leaving behind a $1.2 billion structural deficit.  That's a minor amount for a nation, but an inexplicably high number for a state government.  As a result, incoming Governor Hogan will have to slash the state budget by roughly 20% for two years just to keep the state's credit and bond ratings intact.   Significant amounts of those moneys (hundreds of millions of dollars) would have come to Baltimore directly (grants and allocations in state budget) and indirectly (grants to city-based nonprofits, budgets of state agencies located within the City).   Many planned projects, both social and capital, simply will not happen in the next two years as a result.

2.  State's loss of political interest.  Baltimore City's Democratic Party could not deliver the City's vote (92% registered Democrats) for the most recent state election (roughly 33% voted, and only 68% for the state Democratic ticket).   The main reason according to polled voters:   the lack of economic recovery in the City over the 8-year period of Democratic rule (the state has elected two Republican governors in the last 40 years - including 2014).    This tells the state's new Republican administration that while there's little they can do to produce big votes from the City, there may be little they can do wrong by reducing state spending in the City.

3.  State fiscal cost/benefit.  The new Republican administration is taking this all to mean that the hundreds of millions of state dollars flowing to Baltimore City have not led to meaningful improvements in City life.   Both truth and fallacy exist in that line of thought - it's so much money that it's impossible to generalize what funding is a "success," what "requires more time and money," and what is a "failure" without devoting reams of paper and thousands of hours to properly study it all.   But lacking time to study it all, the likely short term result is that the funding will be sharply reduced.

4.  First City agency audits in history.  To the significant objection of City agency directors, Baltimore City agencies will begin their first external fiscal audits since....well, since ever.  The largest agencies in the City have never been audited.  After citizen outcries, the City's Parks and Recreation department was audited in 2012.  The auditing firm reported that fiscal mismanagement was so severe and systemic that the audit itself could not be completed.   Let that sink in for a minute.  There was no audit finding because insufficient financial records exist on which to base the audit paperwork.   I bet that money's being spent well!

As a result, an angered City Council passed a law authorizing and requiring city agency audits starting in 2015.  Three major city agencies will be audited in 2015, and almost everyone acknowledges that the results of the audits will show significant findings that result in criminal charges.   In 2016, the Mayor's own Office of Finance will be audited.  Again, the result will likely be politically shattering.  Impacts will be described in better detail in Part 3 of this series.

5.  Environmental Compliance deadlines.  Baltimore City, paved well before even the most archaic American stormwater or trash laws were in place, serves as a singular point source of trash, water pollution, air pollution, and vector (rat, bed bug) production.   Until well into the 1990s, regulatory agencies at the state and federal level ignored these issues as "irreconcilable."  City agencies said, "Too bad, we don't have any money, suck it up, it's just trash/rats/sewage/bed bugs."  However, as city advocates, activists, and non-profits began suing those agencies to enforce their own regulations against the City, assessments were made of the true impacts of these problems.  Those were groundbreaking and unsettling.  Legal action against the City ensued.

In 2002, the US EPA successfully signed a "consent decree" (a legal contract) with Baltimore City, requiring a comprehensive overhaul of the City's sewer system by 2016.  In 2013, the City pleaded to the EPA that it could not meet the 2016 deadline.  EPA agreed to push the deadline to 2019, with Baltimore's pledge that it would surely be able to raise more funding in 2015-2019 than it had in 2002-2013.  Of course, political fortunes in the meantime have made that impossible.

In 2010, the US EPA was forced to enforce its own Clean Water Act, requiring a vast cleanup of pollutants (trash, nutrients, sediment, bacteria) from Chesapeake Bay waterways.  Watershed Implementation Plans were due from local governments by December, 2012.  Baltimore City submitted theirs for review in January, 2015.  Can you see where this is headed? Reviews of what the City has submitted to MDE and EPA thus far indicate that not only did Baltimore not meet the majority (in pollution reduction) of its goals for the 2014 year, but in all likelihood, Baltimore will not meet its 2014 goals by 2020, primarily as a result of its failure to raise enough money in enough time to put enough contractors to work (bureacracy plays a part in this, but it's largely a fiscal issue).   The entirety of Baltimore's watersheds are required to be "cleaned" by 2025.  This was always an impossible goal without significant political interest, which is lacking in Baltimore.  Federal action - of the most intrusive and expensive kinds - will result.  We'll discuss that in Part 3.

Two weeks ago, US EPA approved a trash TMDL (pollution limits) for trash entering Baltimore City's Patapsco River.   Again, this plan involves city action (money), monitoring, and potential fines and federal takeovers if the city fails.   With the fiscal cliff looming, what will happen?

In summary, the fiscal outlook for Baltimore's 2015 (FY16-FY17) looks bleak if not disastrous.  The combination of a governor suddenly not looking for City votes, a record-breaking deficit left by the outgoing governor, increasing federal and state demands for cleaner water and air, and politically explosive fiscal audits of previously "untouchable" city agencies will lead to a break in political strength away from the City's historic core of political power.  In Part 3, we'll take a closer look at how that might shake out.

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